There's no sugar coating it, this is budget season. Everyone I know in Property Management is knee deep thinking about 2017. I read the Journal of Property Management, and a recent article about budgeting, Project What You Expect caught my attention. The main take away for me, reflecting my own bias, is that a budget is a "living, breathing document." Back in the day, it was common practice to spend September and October reading our crystal balls and sending tomes of paper purporting to declare to our clients rosy leasing projections and reasonable operating expenses, resulting in copious cash flow. Then we would explain variances throughout the year. A valuable lesson I learned goes something like "Keep It Real."
Now that I'm in a position to organize the budget process, I am applying that valuable lesson. Our budget format is a constantly updated excel document that gets updated with every lease renewal, move in, move out, and rent increase. There's a tab for Property Managers to list any cash outlay not considered an operating expense. The operating expenses themselves don't change all that much from year to year, so by capturing the tenant income changes and one time expenditures, we can pretty much take a look at the budget any time and get an idea of the cash flow for the next few years. What we don't do is budget leasing. That violates my Keep it Real rule. If we budget leasing, it's just a guess, and guesses don't pay the bills.
To read the JPM article, click HERE
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