Financial Management Plan

Financial Management Plan

Posted on 01. Sep, 2011 by in Business

If you’re actively seeking new clients (and who isn’t) writing a solid management plan can go a long way towards signing that management contract.  Multi-unit managers in particular have to show owners that they can do more than simply collect the rent and evict non-paying tenants.  A good management plan shows owners a broad picture on exactly where you plan to take the property, and requires a high level of detailed information on everything from optimum rents to yearly operating costs.

When creating a new management plan, the following areas need to be as accurate as possible:
Optimum Rents – Keep in mind that most properties never rent all of their units at optimum levels.  There are varying reasons for this; everything from a lack of popular amenities such as a swimming pool to the age of the property.  Even market conditions can dictate the amount of rent that can be charged for a property.

Total Anticipated Revenue – While all property managers would love to be able to collect 100% of the revenue owed, realistically, you must account for rental losses that can occur. These losses reflect everything from unanticipated vacancies to tenant skips.  It’s important to reflect this in the management plan, or owners will have an unrealistic expectation of revenue that will be hard to explain later.

Operating Costs – Be realistic when estimating expenses such as staff salaries, office supplies, minor repairs, insurance, taxes, and administrative and management costs.  Better to be under budget than over.

Reserve Funds – If drafting a management plan for a large building, it’s vital that reserve funds be allocated and expensed in the management plan.  A good estimate is between 10 – 15% of the total cost of all maintenance and repair expense for the previous year.

Five-Year Forecast – While a five year forecast is considerably more difficult to prepare, the level of information provided to potential clients can reassure them that you are the best choice to manage their building.  A five-year forecast provides owners with a long-term projection of the income potential of the property, taking things such as annual rent increases, vacancy and rental losses, and expenses and adjusting the annual totals by a realistic percentage.

Preparing a realistic management plan is never an easy thing to do.  Managers constantly stress about under or over-estimating revenues and costs, but if you let the market and your experience guide you, you’ll be signing more management contracts every day.

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