IREM ACoM cheat sheet

NOI = effective gross income − operating expenses; it excludes debt service, capital expenditures, depreciation, and income taxes.

Cap rate = NOI ÷ property value (or price); rearranged, value = NOI ÷ cap rate, so a 50 bp cap-rate expansion on $120,000 NOI lowers value from $2,000,000 at 6.0% to $1,846,154 at 6.5%.

Cash-on-cash return = pre-tax cash flow ÷ equity invested; it measures leverage-adjusted current yield, not total return.

Operating expense ratio = operating expenses ÷ effective gross income; compare against the submarket benchmark for the same property type and age cohort.

Effective gross income = potential gross income − vacancy and credit loss + other income (parking, laundry, signage, fees).

Physical vacancy is unleased space; economic vacancy adds rent loss from concessions, delinquencies, and below-market leases, so economic vacancy always equals or exceeds physical vacancy.

A sinking fund deposit = replacement cost ÷ (compounding periods per year × years of useful life), funding capital reserves that NOI ignores.

Reserve adequacy test: annual capital reserve should approximate 2–5% of effective gross income for conventional multifamily, with higher percentages for older or equipment-heavy assets.

Highest and best use requires four tests - legally permissible, physically possible, financially feasible, and maximally productive - and must be re-tested whenever zoning or demand conditions change.

Lease classification: net lease shifts taxes, insurance, and CAM to the tenant; gross lease keeps them with the landlord; modified net splits defined items.

Recoverable expense base year: tenant pays only its pro-rata share of expenses above the base-year amount; a base-year stop limits the landlord's exposure to inflation.

Pro-rata share = tenant's rentable square feet ÷ total rentable square feet of the building; confirm whether the denominator uses gross or rentable area per the lease.

CAM reconciliation compares estimated CAM collected monthly against actual audited expenses; over-collections are credited, under-collections billed, subject to the lease's audit and cap provisions.

Expense caps are usually cumulative and compounded annually (e.g., 5% per year, compounded); non-cumulative caps reset each year and are more favorable to tenants.

Escalations: fixed bumps are predictable; CPI escalations shift inflation risk to the tenant but may include floors and ceilings; porters' wage or operating-expense escalations track actual costs.

Tenant improvement allowance is landlord capital funded at lease commencement; amortize it into effective rent to compare competing deals on a net-effective-rent basis.

Effective rent = face rent − value of concessions (free rent, TI, moving allowances) amortized over the lease term; use it, not face rent, for lease-vs-renew decisions.

Percentage rent = (tenant sales − natural breakpoint) × overage percentage, where natural breakpoint = base rent ÷ overage percentage.

Lease abstract fields to verify: commencement and expiration, renewal options, termination and co-tenancy rights, exclusives, radius restrictions, assignment/sublet consent, and holdover penalties.

IREM Code of Professional Ethics core obligations: protect the public, act with fidelity to clients and employers, avoid conflicts of interest, and maintain confidentiality of client information.

Disclose conflicts in writing before accepting an assignment; a referral fee, ownership interest, or family relationship with a vendor is a conflict requiring disclosure and, where required, written consent.

Never commingle client or tenant security deposits with operating funds; trust funds belong in a designated trust account with reconciled records.

Confidentiality survives termination of the management agreement, except where disclosure is legally compelled or required to prevent a crime.

Advertising and solicitation must be truthful and not misleading; do not claim credentials, designations, or performance results that cannot be substantiated.

Fees may not be split with unlicensed persons for services requiring a license; compensation must be disclosed to all parties to the transaction.

When a client's instruction conflicts with law or the Code, the manager must decline the instruction, document the refusal, and escalate to the client in writing.

Ethics complaint process: file a written complaint with the governing body; remedies range from reprimand and required education to censure and expulsion, with appeal rights.

Fair housing and non-discrimination obligations apply to advertising, screening criteria, and service delivery; inconsistent criteria across applicants is evidence of disparate treatment.

Debt service coverage ratio (DSCR) = NOI ÷ annual debt service; most lenders require 1.20x–1.25x for stabilized commercial property.

Loan-to-value (LTV) = loan amount ÷ appraised value; a binding constraint is whichever is lower between the maximum LTV loan and the loan supported by the minimum DSCR.

Maximum loan from DSCR = (NOI ÷ minimum DSCR) ÷ annual mortgage constant, where the mortgage constant = annual debt service ÷ loan amount.

Mortgage constant = monthly payment × 12 ÷ loan amount; it exceeds the nominal interest rate whenever amortization occurs.

Debt yield = NOI ÷ loan amount; it measures lender risk independent of interest rate and is often the binding test in low-cap-rate markets.

Equity dividend rate = cash flow after debt service ÷ equity; it rises with leverage when the cap rate exceeds the mortgage constant and falls when it does not.

Break-even occupancy = (operating expenses + annual debt service) ÷ potential gross income; the cushion above current occupancy shows tolerance for vacancy.

Net present value discounts after-tax cash flows plus net sale proceeds at the required return; accept a project only when NPV is positive at that discount rate.

IRR is the discount rate at which NPV equals zero; compare IRR to the equity hurdle, and note that IRR assumes reinvestment at the IRR itself.

After-tax cash flow = NOI − debt service − capital reserves − income tax; depreciation is a non-cash deduction that shelters taxable income but reduces basis.

Fully loaded employee cost = base wage + payroll taxes (FICA, unemployment) + benefits + workers' compensation + training and turnover cost; budget 1.25–1.40× base wage as a planning range.

Headcount planning ratio: units per maintenance technician varies by asset type and age; document the basis rather than applying a single industry-wide number.

FLSA classification depends on salary level, salary basis, and duties tests; misclassifying a non-exempt employee as exempt creates back-pay liability for overtime.

Overtime for non-exempt staff is 1.5× the regular rate for hours over 40 in a workweek; bonuses and commissions generally must be included in the regular rate.

Interview questions must tie to bona fide job requirements; avoid questions about age, marital status, disability, national origin, religion, or pregnancy.

Document performance issues contemporaneously with dates, specific conduct, and prior coaching; progressive discipline is warning, written warning, suspension, termination.

Termination decisions should be reviewed for consistency with written policy and with treatment of similarly situated employees to reduce discrimination and retaliation claims.

On-call and emergency-response time may be compensable depending on the employee's freedom to use the time; consult applicable wage-and-hour rules before setting a policy.

Safety program basics: OSHA-style hazard assessment, documented training, incident reporting, and periodic inspection reduce both injury cost and liability exposure.