As a property manager adherence to your building or complex’s budget is an area of focus in performance reviews and a key profitability metric. If you’re too far under budget, you may be seen as stingy, negligent to the needs of your tenants and the building to some extent. If you’re over budget you must answer for all of the unexpected or over-priced services you’ve approved that year. Since maintenance and repairs are such a large part of every property manager’s budget, we’ve compiled a list of 4 tips to make your budgeting process less stressful and keep your performance on target:
Conduct Regular Inspections
Performing regular inspections of your property and building can give you valuable information for your budgeting process, allow you to identify and correct problems before they get worse and save you money in the long run. It is much easier to repair a small leak than an entire water-damaged wall, after all.
Partner with a property maintenance company that has excellent communication and systems for documenting any causes for concern in terms of the building’s structural integrity. They should be able to give you this feedback promptly and in some cases facilitate minor repairs. This has the added benefit of ensuring that your building’s curb appeal remains high (consistently) and lets your tenants know you care about the space they pay to be in.
Plan a Contingency Fund
Unfortunately, people have not yet developed an accurate way to predict the future. Unexpected circumstances always arise, whether it’s Mother Nature throwing you a curveball or a problem of the man-made variety. When planning your budget you should always expect the unexpected and allocate an amount of funds to be held in reserve to deal with these inevitable emergencies. You will be thankful that it’s there when an ice storm brings a tree down into your parking lot don’t have to go over budget for the maintenance.
Make Data-based Estimates
A common way that budgets are created is by increasing them at a fixed percentage year over year, every year. While in theory this works to mitigate the impact of inflation and the increasing age of the property, in practice it can leave gaps in your budget that you will later be accountable for. That’s why we recommend not stopping there.
Review your building’s performance and history, then use the documented information to influence your budget. Perhaps last year 23 air conditioning units out of 50 failed, and caused an additional $1000 dollars of water damage and clean-up on top of the replacement cost of each unit. The total cost of replacing the remaining 27 units will be a onetime expense of $10,000, but if the units continue to fail you’ll be looking at an additional $27,000 of damages incurred if you allow them to deteriorate one by one. If you identify this pattern early you can make room for the units’ replacement in your annual budget and avoid spending the extra money.
Patterns found over time in your building’s history will improve the accuracy of your budget and also save you time and headaches in the long run.
Prioritize Communication and Documentation
While property managers do try to plan for every contingency and keep a healthy reserve fund, sometimes the worst does happen and it must be handled. Practicing open communication and documentation between the property manager, maintenance crew and the building owner can help to avoid misunderstandings.
Rather than proceeding with a large repair and later presenting the owner with a massive, budget-breaking invoice after the fact, communicating probability in advance can help them see why amendments to the budget might be necessary.That’s why it’s beneficial to partner with a maintenance company who provides regular documentation you’ll be able to keep on file. Also, having the owner sign off on the estimate and work order mitigates the risk of you or your property company being on the hook for a large bill if they renege on a verbal agreement when seeing the final cost.
While the old adage “If you fail to prepare, prepare to fail” may seem cliché, in the realm of property management it couldn’t be more true. Having a fact and research based budgetary plan is key to being able to handle the disasters if and when they arise. By encouraging open communication between management and ownership, most of these problems can be taken in stride.
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