A property manager prepares an annual operating budget that includes money set aside for roof repairs, painting, and other expected upkeep. What is that set-aside commonly called?
Correct Answer
B) Maintenance reserve
A maintenance reserve is the amount an operating budget sets aside in advance for repairs and upkeep the owner can anticipate, such as roof work and periodic painting, so the money is on hand when the work comes due. The management fee is the manager's compensation, commonly a percentage of collected rent. A vacancy and collection loss allowance is a deduction from projected gross income for units that sit empty and rent that is never collected, not a fund for repairs, and debt service is the mortgage payment on the property.
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Related Concepts
In a cooperative (co-op), the building is owned by a corporation, and residents purchase shares of stock in the corporation that entitle them to a proprietary lease on a specific unit. Residents are shareholders, not property owners.
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Community property is a system where property acquired during a marriage is owned equally by both spouses.
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