NAA CAPS key terms

A property's effective rental and other income minus operating expenses, before debt service, income tax, depreciation, and capital expenditures. It is the core measure used to value income-producing real estate and to test operating performance.

A valuation ratio calculated by dividing a property's net operating income by its purchase price or value. It expresses the yield an all-cash buyer would earn and is used to compare assets and infer market pricing.

Potential rental income plus other income, reduced by vacancy and collection loss. It is the realistic revenue base from which operating expenses are subtracted to reach net operating income.

Total operating expenses divided by effective gross income, expressed as a percentage. It shows how much revenue is consumed by running the property and helps benchmark efficiency against similar assets.

Annual pre-tax cash flow divided by the equity cash invested. It measures the current income return on an owner's actual out-of-pocket capital rather than on total property value.

Net operating income divided by annual debt service. Lenders use it to confirm that property income comfortably covers loan payments; a ratio at or above the lender's minimum is required to close.

The loan amount divided by the property's appraised value or purchase price. It indicates leverage and lender risk; higher ratios mean less owner equity and typically stricter loan terms.

Net operating income less debt service and capital reserves, before taxes and depreciation. Positive cash flow funds distributions and reserves; negative cash flow requires owner contributions to keep the property solvent.

Funds set aside from operations to pay for future replacement of major components such as roofs, paving, and mechanical systems. Reserves protect against surprise assessments and are often required by lenders and owners.

A long-range analysis that inventories major building components, estimates their remaining useful life and replacement cost, and projects the funding needed. It supports budgeting and defensible reserve contributions.

Sale price divided by gross annual rental income. It is a quick screening tool for comparing similar properties, though it ignores vacancy, expenses, and financing differences.

Comparing actual financial results with the approved budget to identify and explain differences. Managers use it to spot overspending, revenue shortfalls, and trends early enough to take corrective action.

A forward-looking annual plan of expected income and expenses for a property, usually built line by line from leases, contracts, and historical data. It becomes the benchmark for variance reporting.

Occupancy measured by rent actually collected rather than units physically occupied. It captures vacancy, concessions, bad debt, and non-revenue units, giving a truer picture of income performance.

The percentage of units or rentable square feet currently leased or occupied, regardless of whether rent is being collected. It is a leasing metric that must be read alongside economic occupancy.

The share of units vacated and re-rented during a period. High turnover raises make-ready and leasing costs and can signal pricing, service, or resident-satisfaction problems that management must address.

The process of cleaning, repairing, and preparing a vacated unit for the next resident. Efficient make-ready scheduling shortens vacancy days and directly protects rental income.

Scheduled, recurring servicing of building systems and equipment to prevent failures and extend useful life. It reduces emergency repairs, supports warranty compliance, and stabilizes operating expense budgets.

A written or digital authorization and record for a maintenance task, capturing the request, location, assignment, labor and materials, and completion. Work orders document service history and support expense tracking.

A summary of the key business terms of a lease, including parties, term, rent, escalations, options, and expense responsibilities. Abstracts let managers and buyers analyze a rent roll without reading every document.

A schedule listing each unit or space with its tenant, lease dates, square footage, rent, and concessions. It is the primary operating report for leasing status and the starting point for income projections.

The annual process of comparing estimated common area maintenance charges collected from tenants with actual expenses and billing or crediting the difference. It requires accurate expense records and lease-specific allocation rules.

The contract defining the manager's authority, services, reporting duties, fees, and termination terms on behalf of an owner. It sets the scope of fiduciary responsibility and the limits of spending authority.

Compensation paid to the management firm, commonly a percentage of collected income or a fixed monthly amount. Fee structure should align manager incentives with owner goals such as occupancy and net income.

The legal obligation to act in the owner's best interest with loyalty, care, and full disclosure, avoiding self-dealing and conflicts of interest. Breach can create liability and license discipline.

A required written notice explaining whom a real estate professional represents and the duties owed to each party. Clear disclosure prevents misunderstandings about loyalty and supports informed consent.

Federal law prohibiting discrimination in housing sales, rental, and financing based on protected characteristics such as race, color, religion, sex, disability, familial status, and national origin. It governs advertising, screening, and reasonable accommodations.

A change in rules, policies, practices, or services needed so a person with a disability can use and enjoy housing. Requests must be evaluated individually and generally granted when reasonable and necessary.

A structural change to a dwelling or common area, at the resident's expense where permitted, that allows a person with a disability full use of the housing. Approval cannot be unreasonably withheld.

The federal agency setting workplace safety standards, including hazard communication, bloodborne pathogens, and recordkeeping. Property operations must maintain training, labeling, and injury logs to stay compliant.

A standardized document describing a chemical's hazards, safe handling, storage, and first-aid measures. Employers must keep current sheets accessible to workers who use or may be exposed to the product.

A written record of an injury, property damage, or near miss, noting time, location, witnesses, and immediate response. Timely, factual reports support claims handling, insurance defense, and safety improvement.

Shifting potential financial loss to another party through insurance, indemnification clauses, or hold-harmless agreements. It is a core risk-treatment strategy alongside avoidance, reduction, and retention.

A document evidencing that a vendor or tenant carries specified coverage, limits, and additional insured status. Collecting and tracking certificates before work begins prevents gaps in protection.

Selecting, contracting, monitoring, and evaluating outside service providers for cost, quality, insurance, and compliance. Strong vendor programs protect service levels and reduce liability exposure.

A formal solicitation asking vendors to submit scope-specific pricing, qualifications, and terms. Competitive proposals create documentation for cost reasonableness and defensible vendor selection.

A measurable metric tied to a strategic objective, such as occupancy, collection rate, or response time. Well-chosen KPIs focus teams on outcomes the owner actually values.

A structured, periodic evaluation of an employee's results, competencies, and development needs against agreed goals. Reviews should be documented, specific, and linked to coaching and compensation decisions.

A graduated response to performance or conduct problems, typically verbal warning, written warning, and final warning before termination. Consistent documentation protects fairness and reduces legal risk.

The default employment arrangement in most U.S. states allowing either party to end the relationship at any time, with exceptions such as illegal discrimination or retaliation. Policies should not inadvertently promise fixed terms.