property management operating budget

What Items Should Be Included in a Property Management Budget?

A property management budget is an analysis of the income and expenses used to track a property’s financial situation and anticipate future expenses. Typically, property managers begin the process of preparing their annual operating budget a few months prior to the start of the upcoming fiscal year.

A property management operating budget should include the daily revenue and costs of the building, as well as estimates for significant expenses and anticipated income in the future.

A well planned budget can help you save more than you spend, plan for new building investments, and achieve your financial goals.

What Should Be in A Property Management Budget?

Most of the items in your budget can be broken down into two categories: income and expenses. First, review  the ways a property management company can create monthly revenue. Of course, the largest income stream for property management companies is rent collection. Monthly rent payments make up the biggest percentage of your income, but there are other ways to generate revenue.

Below is a list of potential revenue streams you may incorporate into your property management operating budget:

  • Application Fees
  • Late Rent Fees
  • Laundry Income
  • Parking Fees
  • Pet Rent/Fees
  • Early Lease Termination Fees
  • Property Damage Fees
  • Resident Benefit Packages

In addition to the income you already know, you may want to include any income projections that may occur. For example, do you plan to increase rent for new residents or residents who renew their leases? In addition, watch industry trend projections and expect vacancy rates to increase or decrease throughout the year. That can impact your projected income.

Now that you have calculated your projected income for the year, it is time to look at expenses. It’s no secret that the higher your costs, the more income you will need to bring in. The most common type of expenses are operating expenses. These are the costs associated with maintaining your property and keeping the property in good condition for your residents.

Below is a list of the most common operating expenses you should include in your budget.

  • Property taxes
  • Insurance
  • Supplies
  • Contract services (cleaning,security, landscaping, etc)
  • Maintenance
  • Utilities
  • Adding or improving resident amenities
  • Preventative maintenance
  • Property management software
  • Marketing and advertising

Creating an annual budget will help you calculate your net operating income (NOI)

Once you have figured out your NOI you can determine if you have enough profit to improve your properties, take on new properties, or purchase new products to improve on the services you provide. With Property Meld, property managers have the ability to automatically track their invoice costs, maintenance spend, and the utilization rate of their internal team members. These statistics can help you determine how much you are spending on maintenance and how it may be impacting your NOI.

Check out this article for a free downloadable property management budget template.