B is for Budgets
B is for…
B is for Budgeting. Every successful Investment Real Estate Property does not just have a budget, but uses budget”S” as the roadmap to achieve their goals. I say budgets with an “s” because your roadmap should include both OpEx and CapEx Budgets and span multiple years. There is no way to know where you are going, or if and when you get there, unless you have a well defined map. A Budget is your Roadmap to achieve your goals.
Goals can be different for any property or even for the same property from one year or season to the next. You may be focused on cutting expenses or increasing revenue or in increasing long term asset value. You may be faced with low occupancy and need to invest in additional marketing, commission, and leasehold improvement dollars to increase occupancy. You may be a place where they building’s mechanical systems are old and inefficient, so you need to make significant upgrades to your mechanical systems.
While very different, Operating Expense and Capital Expense Budgets are very much connected. When either Operating Expenses or Capital Expenses exceed the available capital you will need to do one of three things, make additional equity investment into your asset, borrow additional capital, or reduce your expenses to balance the budget.
Since Real Estate is typically a long term hold, you may have a multi-year strategy that varies from year to year to meet your needs or goals. Partnering with an experience professional property management firm to help you create budgets both OpEx and CapEx for several years that map out a strategy to meet your goals over 3-5 years is invaluable to improve the probability that you meet those goals.
We all know people who run very fast, and work very hard and yet without a roadmap have no idea of where they are going, and as the joke says, are sure to get there.
If you need help developing your roadmap of how to get your investment real estate to the place you wan it to be, give KEEN a call. We’d love to help you with your Budgets.
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