The most basic and fundamental
question you need to ask is what are
your client or owner or investors
goals and objectives for the property?
These questions are foundational
to the rest of your questions, and to
the success or failure of your budget.
Are they value adders looking to
reposition the property and renovate
every unit and amenity area? Is it a
broken lease-up and you are expected
"
painting a unit perfectly only to
discover they painted it Razzmatazz
Red. And you specifi ed Agreeable
Gray. No matter how good the paint
job is or how much you might like
Razzmatazz Red, you aren’t going to
pay for that unit paint because – well
it’s the wrong freakin’ color! Great
quality is irrelevant because the most
basic assumption wasn’t met.
And there were no questions asked
that would have clarifi ed
that assumption.
the budget? What kind of
preparation requirements
do you have? What budget
software do you use or need
to obtain? Do you have an
accrual, cash or modifi ed
accrual accounting system?
When are you obligated to
deliver the budget and to
whom? Do you send drafts
and have a back and forth
conversation about the detail
in the budget or are you a one and
done shop? Will you have budget
camps? Who will have input on the
budget from the site teams and when
and how much input should they
have? Are there corporate support
groups that will have budget writing
and/or reviewing responsibilities?
Who provides fi nal approvals to the
budget? When and how should the
fi nal approval be communicated?
ered –
sw
n
a
re
a
s
n
io
st
e
qu
e
os
After th ly then – you can start the
then and on ralysis process of putting
analysis pa the page
numbers on
to start the lease-up process all over
again? Are they looking to sell the
property during the budget period?
Are they long term holders with
guaranteed investor distribution
requirements? Do they want to
make this the fl agship property of
their portfolio with a Main and Main
address? The goals and objectives
of ownership groups are virtually
limitless. Therefore, you need to ask
logical, well framed questions that
will make clear their vision of the
property. Without that information,
you are likely to have a Razzmatazz
budget on a gray property. And that’s
not agreeable at all.
The next set of questions revolve
around process. Who is going to write
www.aamdhq.org
"
Once those questions are answered,
you might be able to actually start
writing the budget. Fire up the 10-key,
hit the save button often, calculate
percentage changes and start spitting
out a forest worth of templated
spreadsheets. Or are you? Now you
have to ask the “traditional” budget
questions. What are my revenue
growth expectations? Can I budget
out some expenses to keep operating
expense at more reasonable level? Are
property taxes being appealed? Will
I be able to fully staff the property
at ANY pay rate? Can I off set open
positions with contracted services? Is
there room to increase Other Income
to off set the regulatory burdens of low
application and pet fees? How much
does it cost to re-paint Razzmatazz
Red units?
It takes the average
Management Company
15.4 WEEKS O or R
77 BUSINESS DAYS
to budget for the next year?
After the actual heavy lifting
of writing the budget, there are
still questions, questions and more
questions. Do my assumption notes
correlate to the numbers (yes, this
is the part where there are actual
numbers and not just questions!)? Is
my seasonality correct on revenue
and utilities? Does this budget really
capture the ownership’s vision of the
property and meet their expectations?
Does this budget adequately
capture the nuance of ownerships
expectations and the reality of the
market?
The questions above are not
designed to be all-inclusive or even
a partial representation of the
questions that need to be asked
in order to write a great budget. Its
not a check-the-box document. Its
designed solely to start the process of
asking the questions that need to be
answered before you write a budget.
The questions are as varied as the
ownership groups and properties
these budgets will end up serving.
Start with basic and foundational
questions and go from there. And
after those questions are answered
– then and only then – you can
start the analysis paralysis process of
putting numbers on the page. The
ultimate question is – Is your budget a
Razzamatazz or just agreeable?
Nobody likes to see red on a budget
and there are always shades
of gray…
AUGUST 2019
TRENDS | 19