MT361 Unit 10 Fourplex Property Management Plan Example

A Fourplex Managed From Three States Away: An MT361 Unit 10 Property Management Plan

[Student Name]

Purdue University Global

MT361: Foundations of Real Estate Practice

Unit 10 Property Management Plan

[Instructor Name]

[Date]

The building, owners, rents and the state of Calder are composite; the federal rules and guidance cited are real.

The Owners' Goals

The Delgados, a composite couple, have owned and managed a 1924 brick fourplex in Maple Ferry for eleven years. They are moving to be near family three states away and have asked Larkspur Realty's management division to take over. They named three goals: steady income, a building kept in good repair, and no phone calls about routine matters. Every later choice in this plan is measured against those three.

The Management Agreement

The manager acts as the owners' agent, so the duties the course traced in the sale apply here too, and accounting most of all: every dollar collected or spent on the owners' behalf must be recorded and reported. The agreement's key terms are a repair limit of $750 per item without the owners' approval, except emergencies; a fee of 8 percent of collected income; and a leasing fee of half a month's rent for each new lease. The agreement runs for one year and renews unless either party gives sixty days' notice.

Market Rent From Nine Doors

The four units are two-bedroom apartments renting at $1,050, $1,075, $1,100 and $995. A survey of nine comparable two-bedroom units within a mile, similar in age and condition, sets market rent at $1,095. Three units are close to market. The fourth, at $995, is $100 below, because its tenant has lived there for nine years without an increase. The plan proposes raising that rent to market at the next renewal, with the written notice the lease and Calder's rules require, and the manager will speak with the tenant before the notice arrives.

From Gross Rent to Net Operating Income

At market rent, gross potential rent is four units at $1,095 for twelve months, $52,560. A 6 percent allowance for vacancy and credit loss, reflecting one turnover of about a month a year plus occasional late payment, reduces that to $49,406. Laundry income of $1,440 brings effective gross income to $50,846.

Operating expenses total $27,289: property taxes of $7,420; insurance of $3,350; owner-paid water and sewer of $3,180; repairs and maintenance of $4,160; the management fee of $4,068; leasing fees of $1,095 for an expected two new leases; common-area electricity of $720; lawn care and snow removal of $2,296; and reserves of $1,000. Expenses equal about 54 percent of effective gross income, typical for an older building where the owner pays water.

Net operating income is $23,557. At today's rents, with the $995 unit unchanged, effective gross income would be $49,042, the management fee would fall to $3,923 and net operating income would be $21,897. Bringing the under-market unit to market is worth about $1,660 a year to the owners. Ling and Archer (2021) define net operating income as income after operating expenses but before debt service and income taxes, which is why the mortgage payment does not appear in this budget.

The rent survey comes before the budget because every line of the budget depends on what the units can actually earn.

Screening Written Before the First Vacancy

Screening criteria are written down now and applied to every applicant in the same order: verified gross income of at least two and a half times the monthly rent, two years of rental history without an eviction judgment and a credit report reviewed for unpaid housing debt. Applications are processed in the order received. Requests for an assistance animal are handled as reasonable accommodation requests under the Fair Housing Act, whatever the building's pet policy says, following HUD's guidance on how to assess them (U.S. Department of Housing and Urban Development, 2020). Writing the criteria before any vacancy means no applicant is judged by rules invented for them.

Lead Rules for a 1924 Building

Because the building was constructed before 1978, every new lease carries the federal lead-based paint disclosure and the EPA pamphlet. Repainting or repairs that disturb more than small areas of painted surface, generally more than six square feet in a room or twenty square feet outside, go to a firm certified under EPA's renovation, repair and painting rule (Residential property renovation, 2024). The reserves line includes a share for that work, since a 1924 building will need it.

Maintenance by Season

Spring brings gutter cleaning and a roof inspection; summer, exterior paint touch-ups by a certified firm; fall, a furnace service for each unit and a check of the boiler; winter, snow removal under the lawn and snow contract. Each tenant has a single number for repair requests, and emergencies such as no heat or a burst pipe are handled the same day without waiting for owner approval.

Money Handling

Rent and security deposits are held in the brokerage's trust account, separate from its own funds. Deposits are held and returned under Calder's rules, with an itemized statement of any deductions. Owner draws are made on the fifteenth of each month after expenses are paid.

Monthly Reporting

Each month the owners receive one statement showing income collected, expenses paid with invoices attached, the trust account balance and a short note on any repair over $250 or any lease event. That single statement is how the plan meets the third goal: the owners hear about the building once a month, by email, unless something requires their decision.

References

Ling, D. C., & Archer, W. R. (2021). Real estate principles: A value approach (6th ed.). McGraw Hill.

Residential property renovation, 40 C.F.R. pt. 745, subpt. E (2024).

U.S. Department of Housing and Urban Development. (2020). Assessing a person's request to have an animal as a reasonable accommodation under the Fair Housing Act (FHEO Notice FHEO-2020-01). U.S. Department of Housing and Urban Development.