NAA CAPS common mistakes
NAA CAPS · Understand the traps and how to avoid them.
Treating CAM (common area maintenance) reconciliation as a simple subtraction of budgeted from actual expenses, and refunding or billing the difference without first applying the lease's pro-rata share, gross-up, base-year or expense-stop, and exclusions (capital items, management fees, owner's income tax, leasing commissions).
Candidates memorize the formula 'actual minus budget equals adjustment' from generic accounting study and under-read the lease clause that controls what is recoverable and how the tenant's share is calculated. The exam scenario deliberately includes non-recoverable items and a gross-up for below-occupancy years.
What to do instead
Build a four-step reconciliation habit: (1) classify each expense as recoverable or excluded per the lease abstract; (2) gross up variable expenses to the occupancy level the lease specifies (commonly 95%); (3) apply the tenant's rentable-to-rentable pro-rata share; (4) apply base year or expense stop before computing the adjustment. Practise on a scenario with one excluded capital item and one gross-up to confirm both are handled.
Calculating NOI by starting from net income after debt service, or by including capital reserves, tenant improvements, and leasing commissions in operating expenses, which understates or overstates NOI and distorts the cap-rate valuation that follows.
Candidates conflate cash flow to equity with property-level NOI, and forget that NOI is unlevered and before capital items and debt service. The exam often gives a full income statement with a mortgage payment buried in it.
What to do instead
Use a fixed NOI skeleton every time: effective gross income (gross potential rent minus vacancy and collection loss plus other income) minus operating expenses (taxes, insurance, utilities, repairs, management, payroll) equals NOI. Exclude debt service, income tax, depreciation, capital reserves, TI, and leasing commissions. Then apply value equals NOI divided by cap rate, and sanity-check the result against price per square foot.
Reading a lease abstract and answering questions about rent escalations, options, or expense recovery from memory of the narrative rather than locating the operative clause, so the answer reflects the summary sentence instead of the controlling definition or exhibit.
Time pressure pushes candidates to skim the abstract once and answer from impression. Lease questions on this exam hinge on defined terms (rentable vs usable area, commencement date triggers, expense-stop definitions) that appear in a different section from the summary.
What to do instead
Adopt a clause-first method: for every lease question, name the clause type you need (base rent, escalation, operating expense, option, assignment) before reading the answer choices, then scan the abstract for that heading. Write the controlling number and its unit next to the question before evaluating options. If two answers differ only by a defined term, re-read the definitions section.
Building the operating budget bottom-up from last year's actuals with a flat percentage increase, ignoring the lease roll schedule, known vacancy, and market rent assumptions, so the revenue line does not reconcile with the leasing plan.
Candidates default to trend-based budgeting because it is fast and familiar, and they treat the leasing assumptions as a separate exercise. The exam tests whether the budget ties to the rent roll and the leasing pipeline.
What to do instead
Budget revenue property-up: start from the current rent roll, subtract scheduled move-outs by month, add signed new leases at their commencement dates, then layer speculative leasing at market rent with a realistic absorption lag and downtime between leases. Reconcile the total to the leasing plan and to the rent roll at year end. Show vacancy and collection loss as explicit lines, not a plug.
Applying a market cap rate directly to a property's in-place NOI without adjusting for below-market rents, near-term rollover, or capital needs, and presenting the resulting value as the investment recommendation.
The cap-rate shortcut is easy to compute and feels authoritative. Candidates skip the normalization step and ignore that a going-in cap rate reflects current income while value depends on future income and risk.
What to do instead
Normalize NOI first: adjust in-place rents to market on rollover, deduct a market-based reserve for capital and leasing costs, and note any non-recurring income. Then compare the going-in cap rate to comparable sales and to the market, and test sensitivity by flexing exit cap rate and rent growth. State the assumption set alongside the value.
Classifying a risk as insurable and stopping there, without identifying the uninsured gap (deductibles, sublimits, exclusions such as flood or pollution, business interruption waiting periods) or the contractual transfer available through lease indemnities and insurance requirements.
Candidates equate 'we have insurance' with 'risk is managed' and answer the compliance question at the policy level. The exam tests the risk-treatment hierarchy: avoid, reduce, transfer, retain.
What to do instead
For each identified risk, write four lines: likelihood, severity, treatment (avoid/reduce/transfer/retain), and residual exposure after treatment. Check the lease's insurance and indemnity clauses against the policy's exclusions and deductibles, and name the retained amount explicitly. Practise on flood, environmental, and tenant-default scenarios.
Answering fair-housing and reasonable-accommodation questions by applying the 'same treatment for everyone' rule, thereby denying a requested accommodation or asking for medical documentation the law does not permit.
Candidates apply general anti-discrimination logic and miss that accommodation requests are an exception requiring individualized assessment and an interactive process. Fear of preferential treatment drives the wrong answer.
What to do instead
Memorize the accommodation workflow: request (any form, any words), interactive dialogue, verification only when the disability or need is non-obvious, reasonable accommodation unless it imposes undue financial and administrative burden or fundamentally alters the program, then document. Never charge a fee or impose different terms for an assistance animal. Apply the same workflow to unit transfers, parking, and lease modifications.
Evaluating a capital expenditure on payback alone, or on IRR computed with a single discount rate, without comparing it to the hurdle rate, the hold period, and the alternative of doing nothing or selling the asset.
Candidates reach for the simplest metric under time pressure and forget that payback ignores time value and cash flows after the cutoff. The exam scenario usually includes a hold period shorter than the asset life.
What to do instead
Compute NPV at the firm's hurdle rate, IRR, and simple payback, then state which one governs the decision and why. Check that the analysis horizon matches the planned hold, include residual value or sale proceeds at exit, and compare against the status quo. If IRR and NPV rank alternatives differently, follow NPV for value maximization and explain the scale or timing difference.
Handling a team performance or staffing question by choosing the most punitive or most accommodating option, rather than diagnosing whether the gap is a skill, will, or systems problem and matching the intervention to it.
Candidates answer leadership questions from personal instinct and pick either discipline or training reflexively, skipping the diagnostic step the question is testing.
What to do instead
Diagnose before acting: clarify the expected standard, check whether the employee knows it (skill), is motivated and accountable for it (will), or is blocked by process or tools (systems). Match the intervention: coaching and practice for skill, clear expectations and consequences for will, process redesign for systems. Document the conversation and the follow-up date in every case.
Separating the property manager's operating role from the asset manager's ownership role by answering questions as if one person performs both, so recommendations mix tenant-level service decisions with portfolio-level hold/sell and capital allocation decisions.
Candidates with on-site experience default to property-management framing, and candidates from finance default to asset-management framing. The exam tests whether you can place a decision at the correct level.
What to do instead
Before answering, ask: whose decision is this and whose money is at stake? Property management owns day-to-day operations, tenant relations, and the operating budget. Asset management owns the business plan, hold/sell analysis, capital allocation, and portfolio strategy. State the decision owner explicitly, then describe how the two levels communicate through reporting and variance review.