RCRE - New Year, New Budget

Dylan and Mike discuss why budgeting is so important and how to review your revenue and expenses.

The reason for budgeting is to create accountability for you and your property management team. By creating budgets that both agree on you can create a game plan and prevent expense creep. You will continue to improve by constantly monitoring your budgets.

The first step to budgeting is reviewing the current year’s performance. This will allow you to create a baseline and understand how the property is performing. This will also allow you to also reset your underwriting assumptions going forward.

Next you need to review your revenue nd see how the nature of the expenses. For revenue can you improve your rents to market rents or can you improve your occupancy. Can you increase other income by charging fees such as Pet Fees or Move-In Fees?

When reviewing expenses can you reduce the fixed, seasonal, or variable expenses? You can do this through negotiating and reaching out to your vendors. Review the rent roll to see how many move-outs will occur per month so you can see your turn costs. This will also allow you to create better baselines for renewals.

You need to compare your actuals and budgets with your initial proformas. This is important so you can see your investors’ returns.

Budgets are a tool that allows you to start the conversation on ways to improve the performance of the property.

Expert Pro Tip: Review your market assumptions and see if they appear reasonable with your performance. Example: Expenses per Unit.

Contact Information:

MikeT@RandCRE.com

Dylan@RandCRE.com

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