Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 1

Who typically gets paid first from property income?

1. Management Fees

2. Utilities and Payroll

3. Other property expenses

4. Reserve account payments

The correct answer is: Utilities and Payroll

In property management, the priority of expenditures from property income reflects the operational necessities required to maintain the property and ensure its continued functionality. Utilities and payroll represent critical ongoing costs essential for the day-to-day operations of a property. Without payments for utilities, such as water, electricity, and gas, the property cannot provide essential services to its residents. Furthermore, payroll is crucial for compensating staff who manage and maintain the property, ensuring that services and support are available for tenants. These expenses must be covered to keep the property running smoothly and maintain tenant satisfaction. As a result, paying utilities and payroll typically takes precedence over other types of expenses, ensuring that the basics are met before distributing funds to management fees, property expenses, or reserve account payments.