Block Property Management: Have you got your Annual Budget Sorted?
Running a communal property is akin to running a business, and requires a carefully thought out block property management strategy. Essentially, your annual goal is to keep your property running without incurring more expenses than the income you receive from it. Any profit you make is known as a surplus in the property world. A carefully put together annual budget can ensure you will at least break even and not lose money on the managing of your property.
To ensure that your block property management strategy is a success, you need to be aware of your cash flow. This, in simple terms, means that you have sufficient money to cover expenses throughout the year at the time they are presented. Such expenses may include utility bills, council tax, and other common monthly or quarterly expenses. Apartment block management needn’t be difficult. All you need to work out is your cash flow and to ensure you have sufficient funds to break even in your annual budget. Your resident block management budget must show you have more money coming in than going out, in order for it to run without incurring debts.
All this sounds less than complex, but if you are new to residential block management, you may not have sufficient experience or understanding to ensure everything runs smoothly. Residential block management services available from your local professional property management experts will ensure you start off on the right track. Residential block management is a learning curve, and you need to go in with your eyes open. Taking on a property blindfolded can lead you into some very tricky situations, and sometimes the discovery of insufficient funds to cover even the smallest of monthly expenses.
Your annual budget is a key element to your success as a residential block property owner. Budgeting your income correctly can ensure your outgoings do not exceed your available funds, or indeed your income from the property. When you sit down and plan your annual budget, you will find ways of saving money that you wouldn’t find otherwise. For example, if you currently pay a cleaner £20 to clean the stairways each week, that adds up to nearly £1000 per year. You could cut down on your expenditure here by swapping weekly cleaning for bimonthly cleaning.
Your block property management annual budget also needs to find ways of saving money without cutting down on services if you want to have more surplus funds at the end of the year. Instead of cutting back on the amount of visits from your cleaners, you could perhaps
source a cheaper cleaning company. Here, however, it is very important to remember that cheapest is not always best.
As a block property manager, there will be some expenses that you cannot avoid or cut back on each year. These could include management fees or insurance. Coping with these bills is easy if you have a healthy balance of funds. By budgeting, you will be able to calculate how much you will need at peak expense periods. If you are unsure as to whether you will be able to cope financially, you can look into paying off some of your bills in instalments.
Lastly, as a property manager of an apartment block or other residence, you need to be prepared for the unexpected. This could be a costly repair, such as replacing the roof, or it could be a one-off incident such as pest-control problem that needs to be handled sooner rather than later. These unexpected expenses are not easy to plan for, as you never know how much they will cost. So, setting aside a proportion of your budget for such expenses can help avoid panic situations.
Once you are clear on what your annual expenses will be, you now need to work out how you will pay it all. Leaseholders are your source of income, and you need to balance your books so the fees paid by your leaseholders will more than cover all your expected expenses. Allowing leaseholders to make monthly or biannual payments is also good practice. This allows them to also budget their money without having to pay an excessive bill to you once a year.
When should a budget be done? As the vast majority of management companies are legal entities registered at Companies House, there will be a formal date for the end of the financial year. Your budget should be prepared at least a couple of months prior to this date, allowing you to pay your annual accounts with ease on the assigned date. This will give you adequate time to discuss and refine a draft budget, and present it at the AGM. Any changes should therefore be enforced at the start of the new financial year.
So, with your budget done, you may think the battle with your expenditure is over. Unfortunately, not everything will go according to plan. Your income and expenditure will rarely match your budget. Your budget should be used as a map where you can mark off expenditure and plot your expenses and income against what you budgeted for. Margins for error are undoubtedly slim, so the better you plan, and the more often you consult your budget to check you are on target, the better.
When PM Property Services take on the management of a property, getting a good budget in place is an important early step. Not only do we look at the immediate expenditure, but we also look at the longer term costs and where possible factor these into the budget so that sudden one off demands are mitigated where possible. Key to our budgeting is ensuring the planning is shared with the Directors of the Management Company, and their thoughts and preferences are built into the budget.
Good budgeting is an essential foundation towards good overall management.