Budget season is upon us! There are few things in life as predictable as budget season! In addition to predicting the recurring expenses for your property, including payroll and utilities, your budget should include projections for capital improvements, lease ups, acquisitions and renovations. But do you ever wonder if you’re forgetting anything or wish you had a handy list you could double check against? Read on for best practices specific to the apartment industry.
Property owners across the country may be feeling the pinch this year, with the eviction moratorium coming to an end this fall and the losses from tenants who have not been paying rent. Budgeting is a time consuming and challenging process, but planning a successful budget is possible, even with the unknowns many property owners are facing this year. Here are some considerations to keep in mind as you prepare your 2022 budget for next year.
Budgeting Best Practices
1. Before committing to a budget, do your research. Make the most of your prep time by gathering all relevant information, including market conditions and economic forecasts for your market. Changes in marketing, demographics and economics can impact leasing and retention of existing tenants.
2. Accuracy is essential. As any property owner knows, the closer you come to making your budget, the better. Coming in under budget can be detrimental as it may appear you asked for money you didn’t need. On the other hand, coming in over budget due to poor planning can make it hard to get any additional funds approved.
To ensure your budget is as accurate as possible, consider all aspects of your capital projects and get bids on everything, even the seemingly small components of a project.
With details in mind, oftentimes, property owners put signage on the backburner, but if you are building or remodeling a facility, interior and exterior signs are an important part of the project, and planning for signs late in the project could delay your project timeline and impact your cost.
3. Stagger improvements over time. Planning renovations well in advance allows you to stagger those improvements over a period of time to help reduce the impact on your budget and avoid unexpected expenses. These funds are commonly known as “replacement reserves” and can include expenses for:
- Improvements to common areas including paint, flooring, parking lots and driveways.
- Repair or replacement of major building systems including HVAC, windows and roof.
- Upgrades to individual units.
4. Hold regular budget review meetings. Use your annual budget as a framework for operating expenses and hold regular (at least quarterly) budget review meetings with property managers to ensure budget goals are well executed and all expenditures are keeping in line with the budget.
Whether you’re planning capital improvements and renovations to a property or preparing an acquisition budget for the takeover of a new property, contact FSGS and get us involved in the early stages. Our experienced team will work hard to provide accurate due diligence quotes on acquisitions and help streamline the process. With FSGS, you have nothing to lose but the inaccuracy in your capex budgets. We offer free budget estimates. We do the work and give you a number. All you have to do is contact us for help.
Ready to get your free budget estimate or learn more about how we can help? Give us a call today at 972-267-3100.
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