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Property Management Blog

Published on Thursday, November 27, 2014

5 Forecasting Tips to Help Managers Find Hidden Profits

Forecasting – either weekly, monthly or quarterly – enables leadership to see a snapshot of where the portfolio financially and strategically headed. Revenue and expense forecasting help properties plan and make adjustments as market conditions change or stay the same.

Predicting what lies ahead is no picnic, especially if the forecasting process is done manually, like many in today’s home leasing industry. Typically, forecasts are done using internally created spreadsheets that require substantial manual preparation time. Often, they are subject to frequent formula errors.  When all is said and done, more time can be spent preparing the forecast format instead of the analysis that tells where the asset is headed.

And a mistake attributed to human error can cost the company money and resources.

“Failing to forecast correctly can increase risk of cash flow shortages or missed opportunities increasing rental income based on changes to the market,” Fisher said.

Market and crime conditions, effective rent, repairs, turnover, utilities, maintenance and other operational expenses can impact the financial success of an asset.  And because every property is different, a sophisticated forecasting tool can be highly effective if used in conjunction with integrated and well-designed processes, Fisher says.

“Improved forecast accuracy leads to many downstream improvements, not only financial, but also in operations, customer service and asset management,” Fisher said. “When problem areas are identified early, action can be taken to either address problem areas or take advantage of an income opportunity such as raising rents beyond what was budgeted.”

Using an automated forecasting tool simply offers a better look for properties to predict budget performance, Fisher added. She offers five ways to make any forecasting process easier and quicker:

Start with clean, accurate data

Bad data that is not truly representative of actuals or realistic projections will create problems with any forecast. workable baseline and to update it to identify potential trends.

Access data easily and seamlessly

Easy access to data is essential. Otherwise, the forecast expert is pouring through page after page of spreadsheets. An automated forecasting tool can make capturing and importing data, quick and easy. This will also enable easy modifications to be made, with little manual manipulation needed.

Plan ahead by tracking performance

Tracking prior performance is critical to forecasting accuracy. For example, when projecting repair expenses, a detailed, accurate overview of previous maintenance bills will enable the forecaster to apply the most up to date, realistic numbers. Tracking functionality within the budget forecasting tool offers a current view of performance for utilities, maintenance and other expenditures, as well as for revenue.

Share data through web-based applications

Use a web-based tool that enables your peers to have quick access to accurate information. Data can be shared with a click, instead of managing copies of manual spreadsheets between key stakeholders at different locations.

Adjust for seasonality

Note that expenses and revenue fluctuate depending on the time of the year, so being able to access prior performance quickly is essential. Remember, for example, that utility bills fluctuate during peak summer and winter months, which also can affect repairs. Keep that and other seasonal expenditures in mind when forecasting for the seasons ahead.

To forecast for the short and long terms, accuracy of data and the ability to access it and create manageable reports is essential, Fisher says. A good forecast can reveal money that could be getting away from the management team.

“Forecasts can allow managers to identify where profits may be hiding by closely examining property past performance and challenge them to identify what operational or rent influencers can be adjusted to improve financial efficiency.”

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Author: Web Master

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Landlord Knowledge Base

If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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