The Budget Season Blues (Continued…Third & Final Segment)
The third and final installment of our exhilarating series on the “B” word…
That’s budget for you non-real estate people.
This is…The Budget Season Blues, Part III
A much longer excerpt in honor of Halloween
Trapped at Your Desk? Think “Budget Season, Budget Season, Budget Season!”
By: Nicholas A. Dunlap, CPM
Saving Money is Making Money
Next up: accurate budgeting of personnel and utility expenses, debt service and property taxes. Include any performance related bonuses, pay raises, staff additions or temporary staffers. Debt service should be checked by referring to the original loan documents or by calling the lender to confirm any varying terms. Utility expenses are easy to budget in that you can call the provider directly to inquire about any looming cost increases for usage over the year.
The Rent Raise: A Landlord’s Best Exercise
Maximizing the income is pivotal as it directly relates to the value of the asset. Knowing the market and the rent comps in the marketplace and whether they have any new amenities, new developments or any concessions offered that will compete with your property is paramount. A good time to do this homework is during your property tour prior to preparing your budget. Consider the state of the local economy and whether jobs are being added or subtracted and look also to the single-family market. Even with low interest rates and depressed home values, it remains cheaper for many apartment tenants to pay rent than pay a mortgage. Remember to budget an accurate vacancy rate as well. Always err on the high side.
2012 includes a bit of wildcard for us all in that the Presidential election in November could result in a number of potential scenarios that could shake-up the economy, but for now, we will leave that speculation to the political handicappers.
Please stay tuned for my bi-monthly column “Cover Your Assets” that runs in the Journal of Property Management.