Keys to Multifamily Asset Management for Investors
With the reports you get what kind of things would you look for in the reports you receive then?
Well, again, it comes back to the budget. Are they on track with the budget? You’re always going to see changes, right, like this. I mean, this is what a budget should look like for income and expenses. But every once in a while you’re going to have income that for whatever reason might drop here or a particular expense line that all of a sudden jumps up.
Well, the question is “Why?” And as an example, let’s say insurance. Well, maybe you pay your insurance every six months. So it’s down at the zero for five months and then all of a sudden it jumps up for six months and then it’s back down at zero for another five months. That explains it, right? That makes sense. So are your overall revenue that month, right, which normally is around here, all of a sudden it drops. That’s all explainable. It’s understandable. Same thing with property taxes. All of a sudden you’re going along. Also, the property taxes are paid, right? So that line goes way up. Your income goes way down. It’s understandable. There’s other things that come up, too.
So if all of a sudden as an example our utility bills spike. “Well, what happened? Why did this spike this month?” And then we find out “Oh, because the month before they didn’t get the utility bill paid on time. So we have a zero in that month and then the next month we had two months worth of utility bills.
So you want to go through every line, line item by line item, to see what’s happening on a month in and month out basis to make sure you understand what’s going on. Now, all of a sudden, if the utility like water spikes like this and then it stays up. What’s going on now? Is it because you just went from winter to spring and now they turn the sprinklers on or something like that? That’s a possibility. Or is it because “Hey, maybe we have a leak and we need to get that fixed because our budget is down here and now every month we’re paying up at this level we’re going to take a hit in the bottom line. And our investors aren’t going to be happy. The returns aren’t going to be what we want. So every single month we go through the P&L. On a line by line basis, and that’s what you need to do as an asset manager is manage your asset. And part of managing the asset is managing the budget, managing the income and the revenue, the revenue and the expenses, but overseeing the property manager, not doing that job on a day to day basis, but overseeing that they’re actually doing what they’re supposed to be doing on a day to day basis.