Annual Property Budget Review Checklist

As a small property management business, your annual budget review is an essential step in ensuring you're on track financially. To effectively manage your expenses and optimize your revenue, it's crucial to consider key factors such as tax rules, depreciation, and financial benchmarks. By following a clear and actionable checklist, you can streamline expense management for property management, stay compliant with current regulations, and prepare for any changes that may affect your business. For a complete overview, see our expense management guide.

Annual Budget Review: Tax Compliance and Reporting

Review your tax compliance and reporting for the past year by checking the following:

• Bonus Depreciation:
• Tax Returns:
• Depreciation Schedules:
• Accounting and Auditing: Verify that your accounting and auditing processes are in compliance with all applicable tax laws and regulations.

Financial Benchmarking and Regulatory Compliance

• Review and update your company's financial benchmarks to ensure they align with current market conditions and regulatory requirements.
• Compare your company's financial performance to industry averages and benchmarks, such as revenue growth, expense ratios, and return on investment (ROI).
• Monitor and analyze key financial metrics, including cash flow, debt-to-equity ratio, and net operating income (NOI), to identify areas for improvement.
• Review and update your company's financial policies and procedures to ensure they are current and compliant with regulatory requirements.
• Consider hiring a financial advisor or accountant to review and analyze your company's financial performance and provide recommendations for improvement.

When reviewing and updating your company's financial benchmarks, consider the following steps:

• Determine your company's financial goals and objectives.
• Identify key financial metrics to track and analyze.
• Research industry averages and benchmarks to compare your company's performance.
• Develop a plan to improve your company's financial performance based on your analysis.

Property Management and Asset Optimization

• Review Property Management Requirements:If your transactions are $10 million or less and involve certain sponsor profiles, you may need to hire a professional, third-party property management company.
• Verify Operator or Asset Manager Experience: Ensure that your property-level managers or asset managers have the necessary experience to effectively manage your properties.
• Document Property Management Activities: Maintain detailed records of all property management activities, including regular inspections, maintenance schedules, and tenant communications.
• Optimize Property Performance: Analyze your property's performance and identify areas for improvement, such as increasing rent or reducing expenses.
• Take Advantage of Bonus Depreciation:

Preparing for Regulatory Changes and Hotma Compliance

• Update staff training to reflect the changes in HOTMA regulations, focusing on the impact on property management and asset optimization.
• Verify that all property management systems and software are compatible with HOTMA requirements and make necessary adjustments.
• Establish a plan to review and update contracts with vendors and service providers to ensure compliance with HOTMA regulations.
• Consider hiring a compliance expert to review and audit your property management business's policies and procedures to ensure HOTMA readiness.
• Review and update your budget to reflect the potential costs associated with HOTMA compliance, such as training and software updates.
• Document all changes made to policies, procedures, and contracts to ensure compliance with HOTMA regulations.
• Establish a plan to review and update your HOTMA compliance plan annually to ensure continued compliance.