Softening the Time Crunch of Multifamily Budgeting
The multifamily budgeting process doesn’t have to consume so much time
How much time do you spend each year preparing for and executing the budget? If you sat down and really analyzed it, you would be pretty shocked.
Multifamily and other home leasing segments have made great strides in modernizing operations, marketing and accounting practices in the last 10 or 15 years. But 95 percent of the industry still uses manual spreadsheets for preparing budgets even though better technology is available. Many companies have not updated their accounting practices, and they’re missing opportunities to save time and money.
Let’s face it, property management companies have a love/hate relationship with the budgeting process and spreadsheets. First and foremost, budgeting season, with all of its spreadsheet and document preparation, is a major time crusher. Once that time is used, it is gone forever and you can never get it back. Just think what you could have done with that extra time to improve other aspects of the business.
Transitioning to a multifamily budgeting software product can not only save significant time creating budget and forecast models, but it can help reduce manual input, time dedicated to fixing formula errors and data input, and improve overall accuracy.
A web-based, customizable multifamily budgeting platform can make a positive impact while establishing the company’s financial plan for income, expense and capital expenses.
Rental income, ancillary income and rental losses tend to create the most frustration and time during budgeting. Values are always a moving target and can be influenced by several factors. Short of calling your favorite psychic network hotline, it can be anybody’s guess. However, a few best practices can be applied to reduce time spent in this area and improve accuracy.
Spreadsheets have many limitations and require a substantial amount of manual input time. Often, the result is generalized income calculations that are off the mark for Gross Potential Rent, Effective Rent and Loss/Gain to Lease. While market rent can be generalized by floorplan, Effective or Lease Rent is determined by other factors.
To best calculate rental increase, your multifamily budgeting product should import monthly rent values and expiration dates from your leasing product then apply a rent increase the month after the lease expires for each unit. Preparing manually on a spreadsheet could take an entire day just inputting values, not to mention calculating each increase.
Many property management companies use revenue management software to maximize renewal and lease rents based on market conditions. The result is you might have 25 one bedrooms with 25 different rents. Using a budgeting software that imports data and applies increase assumptions could reduce a days’ worth of calculations and manual input to only 10 minutes of work.
What could your staff do with a day back of their time?
Calculating loss or gain to lease
Calculating Loss or Gain to Lease can be a tricky if done manually. For those property management companies still using a manual spreadsheet, it is really difficult to get these values right. Not only is this a matter of your Gross Potential and Lease rents, but you need to factor in impact of move-ins and move outs. The task gets more complex when, for example, the property is under renovation and new units are to get premium rents.
Using software to calculate these values for you will improve your accuracy and cut time significantly. The same is true for calculating losses for model, administrative and down units.
Ancillary or other income
Preparing the budget for ancillary or other income is another area that can be time consuming because many of the values are tied to operational values.
For example, let’s look at utility reimbursement income, which is often tied to the number of occupied units multiplied by the average recoverable rate. Having software that create formulas using all the necessary factors can really make this process much easier. Being able to link what you have budgeting for occupancy, move-ins or move outs combined with historical factors will reduce the level of effort required.
All other areas such as Debt Services and Insurance are pretty much standard input. But the right budgeting software can eliminate tedious time spent plugging numbers into spreadsheets and creating calculations.
Chances are, your property management processes have been updated to conform to today’s standard. Isn’t it time you consider doing the same for your budgeting process? Learn more about multifamily property budgeting software.
[Editor’s Note: For more on this topic, don’t miss Christine’s session, RealPage Budgeting – Hit a Home Run: Your Budgeting Season Game Plan (Hands-On), at the RealWorld conference this July.]