Property Management
A Michigan property manager preparing an operating budget for a rental property should include all of the following EXCEPT:
AProperty management fees
BMortgage principal payments✓ Correct
CMaintenance and repair reserves
DInsurance premiums
Explanation
A property operating budget covers operating expenses (maintenance, insurance, management fees, taxes, utilities). Mortgage principal payments are not operating expenses — they are debt service (financing costs) tracked separately.
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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.
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