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and review their investment goals for each managed asset. Ownership’s long and short-term plans for each asset naturally have significant implications on the decisions you make when budgeting for next year’s expenses. Understanding your property owner’s investment goals for each asset allows you to manage the property in a way that maximizes their return on investment.
In addition to serving as a check-in with your owners regarding their investment goals, the pre- budget ownership discussion allows you to be mindful of any budget items that owners may have knowledge of such as insurance premium renewals or direct requests from leasing agents, tenants, property neighbors or others.
You can utilize your property inspection and tenant survey results as a guide for discussions with ownership and present your recommended budget projects. These discussions can aid not only in the creation of next year’s operating budget but your 5-year cap ex budget as well. Clear and open communication with property ownership can help expedite owner approval on expenses and set clear expectations while working towards investment return goals.
CREATION OF RFPS
Once you have identified projects that need to be rebid and are pivotal to include in your budget or service agreements, it’s a great idea to create formal requests for proposals (RFPs) to send out to vendors.
It is a best practice to get at least three bids on most projects, though there will be occasions when fewer or more than three bids are necessary. It is a good idea to solicit bids from new contractors and contractors you may use less frequently. Getting competitive bids from multiple companies results in more competitive pricing and often better services that add value to the asset’s bottom line. Contractors can become complacent and less competitive on pricing when service agreements are not frequently reviewed or rebid. Property managers have an ethical responsibility to obtain the best services at the best price for both the property owner and tenants, as these budget expenses are often passed back to tenants through CAM charges.
When drafting an RFP, be very specific about the materials, design and quality level of the projects
for which you are wishing to obtain pricing. Where possible, use industry-standard codes and materials language. It is a good practice to include any known timelines as well, particularly if the projects will involve inconvenience to tenants. You might even build in incentives and disincentives to help ensure your timetable is honored.
Depending on the structure of your company, you may find potential conflicts of interest. For example, a person who serves as a property manager or sits on the board might also have an interest (or friend) in a construction company. There can also be close relationships (and even incentives for recommendations) between contractors of different types who pull in one another for projects. Be attuned to these relationships and very clear to all involved that projects are to be awarded based exclusively on price, quality and schedule. Blind bidding can be a big help in this area.
Utilizing some of these pre-budget planning suggestions can help deliver exceptional commercial property management that maximizes asset value, controls operating expenses for your tenants and helps meet your property owners’ investment goals. Budget season is a complex time of year. Follow the guidelines above and you’ll be off to a good start as you prepare for 2022!
ABOUT TIM BLACKWELL
Tim Blackwell is a long-time publishing and printing executive in the Dallas/Fort Worth area who writes about the multifamily housing and transportation industries. He has contributed numerous articles to Property Management Insider, and worked as a newspaper reporter in the D/FW area. Blackwell is president of Ballpark Impressions, and publishes the Cowcatcher Magazine. He is a member of the Fort Worth Chapter/Society of Professional Journalists.
When You Call A Vendor
Let them know that you saw their ad in APARTMENT MANAGEMENT MAGAZINE
APARTMENT MANAGEMENT MAGAZINE - NOVEMBER 2021
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