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June 4, 2020

Ah… sweet, sweet liquidity! Property owners care the most about cash flow – it’s absolutely critical to your success as a property manager. You want to be planning ahead, collecting and analyzing data, and making smarter choices. But with so many factors involved, where do you even start?

If we imagine that your portfolio is a big ole boat, then keeping an eye on your cash flow is akin to preventing leaks, patching holes in the sails, and keeping that rudder sharp. When your cash flow is in good shape, it’s smooth sailing!

So, what are some habits of successful property managers to improve cash flow? Read on to find out!

1. Mitigate the Impact of Vacancies

Budget For Turnover: Vacancies happen, but you can mitigate their impact by including at least a marginal vacancy rate in your annual budget – around 5-8% can account for annual turnover. Plus, if you know that specific months are popular times for tenants to move out, work this in, too! That way, you can plan to have extra funds on hand to get you through the difficult season. *If you handle student housing or a college market, this is especially important for you!

Stagger Lease Dates: Fiddle with the dates in your leases to ensure that you don’t have vacancies hit all at once. For example, if you know you have two leases up for renewal in 12 months, then try to secure a 14-month lease with a new tenant to stagger potential vacancies. Typically, you’ll have a standard length deal, but if there’s room for adjustment here, take the opportunity!

Gather Data: By looking at the past year or two, you can begin to analyze trends and start to make predictions. Figure out what you can actually control (incentives, term lengths, rent amounts). Work to understand why there’s turnover and see if you can get to the root cause. It could be seasonal (college towns), but what if people are moving out due to maintenance issues? Or perhaps you’ve raised the rent too much? Yes, sometimes, people just move on! But try to figure out what aspects you can control to bifurcate natural turnover.

2. Be Proactive About Repairs & Maintenance

Regular Site Inspections: Stay ahead of potential issues by doing regular site inspections. This will help prevent nasty surprises, so you can get repairs completed before problems become worse (and more expensive).

Preventative Maintenance: Similarly, getting on a preventative maintenance schedule can help curb maintenance issues and save yourself thousands in repair costs each year. Your seasonal repair schedule might include things like weatherproofing, pest services, and gutter cleanings — and make sure to check for expiring appliance warranties!

Prioritize Repairs: Not sure where to start? Don’t overspend by trying to do everything all at once. Prioritize repairs that will impact the quality of life for tenants, and issues that can create bigger problems in the future (leaks, pest control, etc). If you’re doing major repairs while turning a unit, you might want to add in other repairs to take advantage of the time when tenants are not there.

Finally, see what capital expenditures (CapEx) you can work into your annual budget: these are rare but recurring large expenses like new roofs, new furnaces, and new appliances.

3.  Keep Up With Rent Increases

Check The Laws: California is the second state after Oregon to get legislation on statewide rent control. For now, it’ll be a 5% annual cap on raising the rents – but a year from now that could change! Each state is different, but if legislation is heading your way, it might be smart to raise your rents to the maximum amount every year because you never know what is going to happen.

Stay In The Know: Stay focused on the news. Follow peers and trade publications on Twitter. The Wallstreet Journal stays on top of this stuff pretty well! We also recommend following your local AOA, too. Do your best to stay up on all these things so you can forward plan as much as possible. Communicate with your owners and keep those rents up if you can, because you don’t know when they’ll be selling.

4.  Keep An Eye On Cash Flow

Monitor Your Money: Sounds obvious, right? Sure, but sometimes we get so caught up in the day-to-day, that setting time aside for more analytical thinking can feel like a luxury. But regularly running forecast reports can assist you in tracking accounts payable, accounts receivable and all other relevant factors in one central place. Getting (at least quarterly!) snapshots of your cash flow health is imperative if you want to grow your business.

5. Aggressively Pursue Good Tenants

Smart Screening: Develop a solid system for screening tenants (within the legal confines of your state, of course). Perform thorough background checks, look at their credit scores, and talk to their previous landlords or property managers to find out if they paid on time, or caused any damage.

Learn From The Past: When looking back on tenants, try to do some root cause analysis! Was it us, or them? Is something broken in our screening process, or did we just get unlucky? Ask yourself what makes a good tenant? When you start to look towards the past, you can begin building a framework for better evaluating and analyzing tenants.

The Next Step

Feeling inspired to get a better handle on your cash flow? Awesome. We’ve got one last thing for you to think about: GROWTH.

How are your accounting systems set up? Can you handle growth? Keeping your ship sailing strong is about setting up solid ways of tracking all your finances so that you’re not just keeping up, you’re able to make informed, data-driven decisions.

If you’re ready to take your business to the next level, let’s chat! We know the struggle of handling bookkeeping and accounting for a growing property – as a matter of fact, we’re experts on the topic! Our strategic accounting and bookkeeping services can help save you time, money, and give you space to grow.

Want to learn more? Schedule a quick, no-commitment discovery call with us to find out if our services are right for you.