Preparing a budget for your property can be a challenge. It’s really a best-guess estimate on your expenditures for the upcoming year. You need to be able to track and control current income and expenditures through your property management accounting as well as accurately forecast what you need to allot for the upcoming 12 months. Then of course, you need to meet or beat the numbers.
The importance of your budget can’t be stressed enough. It drives your maintenance routines, capital improvements and can have a direct effect on property values as well as the quality of life for your tenants.
Here are some strategies to help keep you on track.
1. Know Your Market
The first step to any budgeting is research. Without this knowledge of market conditions, the budgeting process can start off on the wrong track. A firm understanding of economic forecasts as well as demographic and economic changes in your market will give you a window into the factors that will affect rental prices, leasing and retention. You must be able to confidently predict revenue before allotting any budget.
2. Know Thyself
Pull up reports on your buildings’ histories. A property’s past can give you a whole lot of insight into issues that may pop up throughout the year. Noticing constant repairs to the HVAC system can reveal that it might be time for an investment in an upgrade. Preventative maintenance is often less expensive than waiting until your boiler bursts to replace it. Analyze your building portfolio and look for reoccurring repairs and maintenance patterns. This will enable you to prioritize upcoming maintenance projects and any areas of capital investment.
3. Get Full Transparency
You know that expression “the left hand doesn’t know what the right hand is doing”? Using property management accounting software that integrates into your operations as a whole allows you to connect the dots between all departments.
A good property management accounting solution helps you track, manage, reconcile and report, but it will also be connected and pull in data from things like your maintenance portal where you can instantly turn maintenance requests into work orders into P.O.s and then match and compare to the final vendor invoice. This will give you not only more insight into the big picture, but also help you drill down into the minutiae to more carefully control costs.
4. Reduce Delinquencies
Late rent payments slow cash-to-the-bank. To deliver on your budget and accomplish your goals, good cash flow is required. Educate your tenants about the benefits of signing up for automated payments. Ensure that there is a system in place to remind tenants of upcoming rent due.
5. Expect the Unexpected
Of course, you need to allot for ongoing maintenance and inspection expenses as well as one-time expenses, like repairing a roof or giving the front lobby a more updated look. That’s a given. But, always have a contingency plan! When you least expect it, there will always be something that requires an emergency repair or some sort of unanticipated expense. It’s better to have a reserve or contingency fund for these situations. If the fund is not used during the year –lucky you! – you can opt to apply it to the next year’s budget, or use it to invest into those little “extras” that will add value to the property and make tenants and owners happy.
Bonus Tip: Ongoing Adjustments
Every month, property managers can compare the budget to actual revenue earned in rent and ancillary income and spent on expenses. Adjustments can then be made to ensure that the building owner doesn’t experience any unexpected financial pressure. Using property accounting software will allow you to easily generate reports to compare what was predicted with the current reality.
How Property Vista Helps You Budget
Property management accounting software, like ours, helps your company keep its financial records accurate and your accounting practices consistent and transparent. With all the data verified and centralized, you’ll be able to measure the health of your properties and make the necessary changes to spark interest, secure better tenants and raise the profile of both your properties and your business. Check out pricing and arrange a demo here.
