Proper Financial Management for Property Managers

Several years after starting New York City and Syracuse, N.Y.-based DynaMax Realty Inc., Tony D'Anzica, owner and broker, started paying closer attention to the company’s record keeping. D’Anzica soon realized that he was neglecting marketing efforts and decided to funnel more money toward this area of his business. “As a result, we started getting more clients in two to three months than [we] had the entire year before,” D’Anzica says.

As D’Anzica learned, scrutinizing your books isn’t just about reigning in costs and budgeting: it is about finding new opportunities for growth. And while fine-tuning your financial practices is a good idea when the market is booming, it is essential in a soft market. Here are strategies to improve your cash flow and strengthen your finances.

Stay on Top of Your Books
It is tempting to neglect the mundane aspects of your business, but detailed bookkeeping is the bedrock for good financial management. “Every expense we have, we categorize,” D’Anzica says. This means making notations on every check, looking at online credit card statements every day and categorizing every penny that is spent, he says.

Often times, maintenance-related items are purchased in large batches, so employees don’t take the time to document individual expenses, says Jackie Ramstedt, a veteran of the multi-housing industry and owner and chief motivational officer of Austin, Texas-based Ramstedt Enterprises Inc., a motivational speaking, consulting and coaching firm. Inviting employees to participate in your budgeting process and demystifying why expenses need to be broken down into specific categories helps them understand why record keeping is important, says Ramstedt.

Cash is King
Because the majority of DynaMax Realty Inc.’s liquidity comes from rent collection, D’Anzica says it is crucial to be diligent with tenants. When rents are not paid, his staff immediately goes into collection mode by making phone calls or sending e-mails. One very effective tool that D’Anzica employs is sending a rent demand. Although it is only a simple, one-page letter, seeing a legal document often convinces people to make their payments. . According to D’Anzica, many landlords have a tendency of waiting before taking legal action, but what they don’t realize is that it is much costlier to wait than it is to address the problem immediately.

Fred Thompson, MPM RMP and president-elect of the National Association of Residential Property Managers, suggests that you also keep property owners apprised of likely expenses in the next 12 to 24 months. When property owners know they will need to cover costs such as painting the exterior, replacing carpets or the roof, they can budget ahead of time, says Thompson who also owns the Orlando, Fla.-based division office for RE/MAX 200 Realty.

Keep units rented
One of the most basic steps you can take to improve financial health is to keep every single unit rented.

If finances are tight, the property’s owner will be looking to you for value-added maintenance. Thompson offers the following tips on low-cost, big-impact improvements that will help attract and retain tenants.

• Outside: Trim trees, add mulch, fertilize the lawn, pressure wash the exterior, add window shutters, replace broken mailboxes and update house numbers.
• Inside: replace bathroom mirrors, blinds, clean carpets/windows/screens and old toilet seats.

Offer incentives for current tenants to stay such as upgrading their light fixtures, painting their units or giving them a unique perk such as an air filtration system, Ramstedt says. You can also differentiate your property by offering new renters half off on their deposits, or giving them a credit for moving expenses, she says.

In D’Anzica’s view, increasing the value of a property is an essential duty for property managers. Making improvements to your building means people will pay more to live there, which translates into better cash flow, he says. “Your job is not just to collect rent as a property manager; your job is to manage an asset.”