Property Management
What is 'operating budget' versus 'capital budget' in Illinois property management?
AThey are the same thing; both cover all property expenses
BThe operating budget covers routine recurring expenses; the capital budget covers major long-term improvements and replacements✓ Correct
CThe operating budget is for residential properties; capital budget for commercial
DThe operating budget is prepared annually; capital budget every 5 years
Explanation
An operating budget projects routine income and expenses for a property over a period (typically one year)—rents, management fees, utilities, insurance, routine maintenance, and property taxes. A capital budget plans for major expenditures that improve or extend the property's useful life—roof replacement, HVAC upgrades, major renovations.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Math Concepts
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