Developing an Effective Property Management PlanReal Estate Influence
November 5, 2012 — 1,294 views
Developing an Effective Property Management Plan
A property management plan is the financial and operational strategy for the ongoing management of a property. To develop an effective property management plan, the very first thing that must be analyzed is the client’s objectives. It is most common for property managers to know and understand that most all clients who obtain the services of a property manager have two primary objectives: 1) to generate the greatest possible net income from their property, and 2) to preserve or increase the value of their property. In essence, property owners are usually entrepreneurs seeking a profit or cash flow on the invested property.
A property management plan is a valuable tool that is used by property managers that reflects the layout of how the client’s objectives will be achieved while providing the client with an understanding of the potential gross net income that can be expected from the property.
Before beginning to draft a property management plan, the property manager should obtain property-related documents from the client, such as a statement of annual taxes, special assessments on the property, current property insurance premiums, and the cost of debt service. Other documents may be necessary depending on the property to be managed.
Preparing the management plan involves analytical research on the regional and neighborhood market as well as a thorough assessment of the specific property. A comprehensive management plan will also include an alternative analysis, proposed financing and other recommendations that are in line with meeting the client’s objectives.
A regional market analysis report should incorporate information about the overall region where the property is located. Examples of information that is typically researched and included in the report are population statistics and trends, major employers of the area, average incomes and employment data, transportation facilities, and supply and demand trends, among other things.
The neighborhood analysis should begin with a tour of the surrounding area where the property is located. The property manager should assess major factors such as boundaries and land usage, local building codes and regulations, transportation and utilities, economic value of the land and property area, neighborhood amenities and facilities.
An analysis of the specific property familiarizes the property manager with the nature and condition of the property and how comparable it is in its value relative to similar properties in the neighborhood. A useful property analysis will include a thorough description of the interior and exterior of the property, data on similar properties in the area, an estimate of the average operating costs, suggestions of improvement to increase the property’s value for greater profit.
The types of financial reports that should be included in the property management plan will sometimes vary depending on the client’s objectives and the type of property. However, three major reports that should always be included are a one-year operating budget, a five-year forecast, and a comparative income and expense report.
An effective management plan not only presents the clients with a proposed strategy to meet their objectives, but the manner in which the information is presented by the manager will build for clients their first impressions about the manager’s expertise and ability to implement and carry out the responsibilities necessary to establish a long lasting client-manager relationship.