Transform the financial health of your properties by doing this!

Are you a landlord or property manager looking to improve the financial health of your real estate portfolio? If so, then this article is for you!

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Transform the financial health of your properties by doing this!

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Are you a landlord or property manager looking to improve the financial health of your real estate portfolio? If so, then this article is for you! 

In this post, we will discuss why monitoring your financial position is important and introduce twelve financial controls to help you achieve better financial health for your properties. 

From budgetary control and cash flow analysis to lease and tenant analysis and risk management, we will cover everything you need to know to take control of your finances. 

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Monitoring your financial position is the key to better financial health 

The best way to achieve better financial health with your properties is to regularly monitor your portfolio's financial performance.  

It means digging into your numbers monthly or quarterly, understanding where you may be overspending or underspending, and getting a handle on financial control. 

By doing this, your reporting allows you to make more informed decisions on how you can maximise your resources and assets for a focus on building better profit. 


12 financial controls to help you monitor your portfolio's financial health 

You can easily introduce better controls for your portfolio's finances in several ways. Let's take a look at the most commonly used. 


1. Budgetary control

Developing detailed budgets for each property is vital to manage a real estate portfolio effectively. 

Your budgets should include income projections and expense forecasts to ensure a clear understanding of the financial performance of each property.  

It is also important to regularly compare actual financial performance against budgeted figures and promptly investigate and address significant variances to ensure that financial targets are met. 

In addition, you'll want to benchmark and compare income and expense ratios across the portfolio to provide the insights you need. Key metrics to consider when benchmarking include the average nightly rate/average weekly rate and customer acquisition costs (CAC). 

We recommend Xero to all our bookkeeping clients for this purpose and integrate it with Fathom for more detailed forecasting and analysis reporting. 


2. Cash flow analysis

Understanding how money enters and leaves your accounts is one thing, but getting to grips with liquidity is vital to cover all operational expenses, debt payments, and unexpected events. 

By analysing various factors such as rental income, vacancy rates, and lease expirations, it is possible to anticipate potential fluctuations in cash flow and take appropriate measures to mitigate any risks. 

Having this control in place isn't just about liquidity in the moment but also about projecting when and where you can introduce projects. 


3. Debt management

As a property owner, paying attention to your debt obligations, such as interest rates and loan maturity dates, is indispensable. One way to improve your financial health may be to explore opportunities for refinancing or debt consolidation. 

Additionally, it's crucial to monitor tenant debtor days and payment profiles to determine if your tenants are taking longer to pay, which could indicate a trend or an issue with the types of tenants you have on the property. 


4. Lease and tenant analysis

As a property manager and landlord, regularly review your lease agreements and tenant profiles to assess the stability and creditworthiness of your tenants. Ensuring that your property is in good hands can minimise the risk of any potential financial losses. 

Additionally, you'll want to identify the lease expirations well in advance to proactively address potential vacancies and make necessary arrangements to avoid disruptions in your rental income.  

By staying on top of these tasks, you can retain a steady cash flow and keep your property running smoothly. 

Most property management software will help you do this. Still, we recommend products like HubSpot, where you can build sales pipelines to automate rebooking sales from existing tenants or target new ones. 


5. Property valuation

Conducting periodic property valuations helps you assess the impact on your overall portfolio and make necessary adjustments. It also highlights localised or regional market trends, which can help you spot potential sites for further investment. 


6. Maintenance and capital expenditures

Property owners can make informed decisions that help protect their investment and ensure long-term success by monitoring maintenance and capital expenses. 

Implementing a preventive maintenance program is certainly a valuable strategy to preserve property value and reduce the cost of unexpected or bigger repairs.  

Additionally, evaluating your capital expenditure projects to determine their potential return on investment and impact on the overall property valuation is always helpful. 


7. Risk management

When managing a rental property, it's essential to recognise and evaluate potential risks that may impact rental renewals and prices. These risks can include changes in regulatory developments, market conditions or environmental factors. 

For example, if a new building goes up near your biggest earning property, it can potentially affect your property's rental velocity and pricing.  

Developing contingency plans to address potential challenges and ensure your continued success is always advisable. As with any new project or plan, you'll need cash; this is why regular cash flow reporting is vital to ensuring you have the resources ready to make your move. 


8. Financial reporting

Clear and concise financial reports should be provided to stakeholders, highlighting key performance indicators to help them make informed decisions quickly. 

Supplying this information in a timely and efficient manner not only benefits your stakeholders but also allows the organisation to maintain credibility and transparency. 

In each reporting round, you will want to include the following: 

  • income statements 
  • balance sheets 
  • cash flow statements and forecasts 
  • Rent roll showing achieved rent, duration and marketed rent 
  • Leasing velocity including new leads, viewings and applications  


9. Tax planning

When investing in your property portfolio, working closely with tax professionals to optimise your taxable benefits is going to be necessary. The right tax services will allow you to take advantage of available incentives and deductions.  

It is equally important to stay updated with changes in tax legislation and regulations that may affect your investments. This will help you make informed decisions and maximise your returns while complying with relevant tax laws. 

Of course, this is challenging if you don't have a CFO in-house. That's where providers like Cloudfox come into play - so contact us using the form below if you need regular bookkeeping help. 


10. Market research

You will also want to watch the local real estate market to identify emerging trends and competitive dynamics. This will enable you to gather valuable market insights and make informed decisions on property acquisition, disposition, and rental rates.  


11. Portfolio diversification

Assessing your property portfolio's risk and return characteristics is crucial before making investment decisions. One way to mitigate risk is to diversify the portfolio by investing across different types of properties and geographic locations. This approach spreads the risk and helps to minimise the negative impact of any single property or location.  


12. Sustainability and environmental impact

One crucial aspect to consider when evaluating properties is their environmental sustainability. Assessing and identifying opportunities for energy efficiency improvements is vital to reduce their environmental footprint and increase their sustainability. 

Staying informed and current with evolving sustainability standards and regulations can significantly impact property valuations. 


Conclusion: Transforming your portfolio's financial health shouldn't be a hard win 

Managing your real estate portfolio's financial health is not just a good practice - it's critical to achieving better financial outcomes and long-term success.

But to create that opportunity, you need to do two things: implement financial controls and set up detailed reporting. In other words, set up a financial monitoring protocol. 

With the right strategies, you can manage your properties strategically and stay ahead of the curve. By doing so, you can 

  • ensure a steady cash flow 
  • protect your investment
  • and confidently achieve your financial goals. 

So, take charge of your financial future today and start monitoring the financial health of your real estate portfolio regularly! 

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