Fall marks the start of football season, the anticipation of upcoming holidays and, for property managers, the daunting duty of preparing a commercial property budget. While the task can take weeks or months, an annual budget is essential to organizing a property’s value and performance. What’s more, the process helps discover trends in expenses which help realistically predict future performance of the property.
Use these steps as a guide to creating a thorough commercial property budget:
- Determine the gross potential rental income of the property by adding together all income from rental fees and available spaces.
- Take note of any reimbursements or recoveries associated with the property if tenants are responsible for any operating costs or taxes.
- Account for any loss of income due to vacancy.
- Identify the facility’s operating expenses such as utilities, repairs, maintenance, insurance and other management fees.
- Examine the debt service and cash flow to understand the owner’s return on investment. This is particularly important if a property is for sale because it shows potential investors if the site is worth purchasing.
- Identify and account for all capital expenditures, escrow accounts and reserves. These include one-time expenses and funds set aside for emergency expenses or large maintenance projects in the future.
While creating a budget can be tedious, it’s best to take the time to make sure it’s thorough and accurate. It’s also important to keep detailed reports and records for future use. By doing so, you’ll have an easier time identifying items for future budgets and have a better understanding of when income or expenses need to be adjusted.
McWhirter Realty Partners manages properties throughout the southeast including office, medical office, industrial, retail and self-storage. If you have a real estate investment and are considering a property management company to maximize the return on your investment, contact McWhirter Realty Partners today.