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

What is the purpose of a lease-up budget?

1. To cover regular maintenance costs

2. To forecast annual property tax expenses

3. To account for initial marketing and operational expenses until stabilized occupancy is reached

4. To manage emergency repair funds

The correct answer is: To account for initial marketing and operational expenses until stabilized occupancy is reached

A lease-up budget is specifically designed to account for the initial marketing and operational expenses that are incurred during the period leading up to stabilized occupancy in a property. This budget is crucial for new developments or properties that are undergoing significant changes, as it outlines the financial resources necessary to attract tenants, promote the property, and manage operational expenditures during this transitional phase. Unlike regular maintenance costs or property tax expenses, which are ongoing and predictable once the property is established, the lease-up budget focuses on the unique financial needs that arise at the beginning of a property's rental lifecycle. It allows property managers and owners to plan effectively for costs that contribute to bringing rental units up to full occupancy. Additionally, while managing emergency repair funds is important for any property management strategy, it does not specifically relate to the unique challenges faced during the lease-up phase. In summary, option C accurately reflects the primary purpose of a lease-up budget, as it encapsulates the financial considerations necessary for successful property leasing operations until a level of occupancy is achieved that stabilizes revenues.