Multifamily Budget Season

Every year, the multifamily industry enters budget season – a planning period typically in the late summer through fall when management companies collaborate with ownership to create the operating budget for the upcoming fiscal year. The process requires precision and foresight. It sets the property up for success or can lead to financial setbacks.

This article explores why an accurate budget matters, the stressful process, how to set your team up for success, and the role supplier partners like Watchtower Security should play.

Why Budget Season Matters

Budget season does more than set a financial roadmap for the year. It guides all operating decisions, from staffing and payroll to marketing expenses. Identifying known maintenance capital expenditures will help a property prioritize upgrades and plan responsibly. For example, the cost of replacing all the roofs may outweigh the benefit of updating the fitness center.

Accurate revenue forecasting begins with assumptions made during budget season. Rent growth targets and leasing renewal strategies are major keys to financial success. It is also a way to ensure ownership and management are on the same page. Onsite teams can communicate their needs. Upper management should define all performance expectations, and ownership needs to clarify its investment goals. It is a yearly reset to ensure everyone is aligned with a structured layout of measurable goals.

A strong budget will build in contingencies for uncertainty and volatility. It provides a baseline that can be used throughout the year to compare to actual performance. It should be a driving force for accountability and decision-making.

Why Budget Season Can Be Stressful

Understanding the importance of an accurate budget makes creating it stressful. Rising operating expenses, particularly insurance and utilities, can handcuff a budget immediately. Rent forecasting is a major source of uncertainty. Changes in the market, economic factors, high lease turnover, and resident nonpayment can all play a factor in how a budget can go off the rails. Affordable housing has its own unique challenges, as the rent cap structure can dictate and limit what will be able to fit within a budget.

Coordination between onsite teams and asset managers is essential,  but differing ideas on the best path forward can create tension. What capital expenditures are needed most, and how does the approval process work? Unit renovations and amenity enhancements will help leasing agents attract new residents, but the maintenance team needs major equipment upgrades. There are multiple needs but limited room in the budget. Managing what goes where and who gets what can create friction between all involved.

How to Set Up for a Successful Budget Season

As discussed, creating a budget is a difficult process. The good news is that there are some proven strategies to ensure success. The first is to start early. The earlier you begin, the more time you have to gather the proper data and avoid last-minute fire drills. Schedule kickoff meetings, create a calendar with milestones and deadlines, and finalize with a review phase.

History is the best predictor of future needs. Budgets aren’t new, so there should be years of past budgets and property performance to draw from. This data can be used to identify gaps or recurring overages to adjust next year’s budget.

Cross-team collaboration and aligning with the goals of ownership is critical. The onsite management team should work hand in hand with regional and asset managers. A unified management team presenting a cohesive budget to ownership fosters alignment. This should reflect the vision of ownership.

Even the best budget can be thrown off by unexpected costs. It is critical to build in a buffer for operating expenses. A small capital reserve for unplanned upgrades should be considered.

Additional strategic opportunities are presented in this Apartment List article. ElevateOS provides a solid budget guide.

Supplier Partner Support During Budget Season

Supplier partners can and should be part of the budget process. They can provide updated pricing for the coming year. Relying solely on the previous year’s cost/price point is risky due to inflation, market shifts, or changes in contracts. Are there any changes needed to the services currently being provided?

Watchtower Security provides fully managed video surveillance exclusively to the multifamily industry. Because of this, Watchtower’s pricing structure makes the budget process easier. Contact us today if you have an existing system or if you plan on adding video surveillance to next year’s budget. Watchtower can provide all the information you need to ensure there are no surprises or unexpected costs. It is one less thing to worry about in the difficult process known as budget season.

What’s Next: Budgeting for Video Surveillance

Our next article will focus entirely on budgeting for video surveillance. A dependable camera system is a management tool all multifamily properties should budget for. Whether starting from scratch, expanding coverage, or upgrading an existing system, Watchtower Security will work with you from start to finish, delivering a system that provides value and stays within a budget line item.