Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

In the first step of budgeting, what should be used to forecast income?

1. The projected economic climate

2. Last year's income as a starting point

3. The current rate of return

4. Competitive market analysis

The correct answer is: Last year's income as a starting point

Using last year's income as a starting point is a common and effective strategy for forecasting income in the budgeting process. This approach allows property managers to establish a baseline based on actual historical performance, which can provide insights into seasonal trends and regular operational income. By analyzing the previous year's financial data, you can identify patterns in revenue generation and potentially adjust for anticipated changes in the coming year, such as occupancy rates, rental increases, or shifts in market demand. This method also contextualizes the income forecast within the property’s recent financial performance, making it a practical tool for setting realistic income goals. By starting with known quantities, property managers can methodically incorporate any expected economic changes, competitive landscape shifts, or adjustments in operational strategy in subsequent budgeting steps to refine their income projections. In contrast, while other options contribute valuable insights, they do not provide the same level of specificity and historical grounding that last year's income offers as a baseline. For instance, projecting the economic climate or conducting a competitive market analysis can provide context but may not directly reflect a property’s unique historical performance.