04 Checklist for preparing the operating budgets

1. Salaries for all personnel

  • List all employees, their roles, and salaries.
  • Include payroll taxes, benefits, and any bonuses or incentives.

2. Maintenance and repairs

  • Document ongoing maintenance costs.
  • Budget for periodic repairs and renovations.

3. Public utilities

  • Include costs for water, electricity, gas, and trash removal.
  • Track utility usage and look for opportunities to reduce consumption.

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4. All taxes

  • Detail property taxes, income taxes, and any other applicable taxes.
  • Keep records of tax assessments and payments.

5. Liability protection

  • Include insurance premiums for property, liability, and casualty insurance.
  • Maintain records of insurance policies and coverage.

6. Administrative costs

  • Cover expenses related to office supplies, software, and administrative staff.
  • Include costs for record-keeping and administrative tools.

7. Indirect property management fees

  • Account for fees paid to property management companies.
  • Detail contract terms and services provided.

8. Professional fees

  • Include legal, accounting, and consulting fees.
  • Maintain records of contracts and invoices.

9. Marketing

  • Budget for advertising and marketing campaigns.
  • Track expenses related to promoting the property.

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10. Contract services

  • List expenses for contracted services like landscaping or security.
  • Maintain service agreements and invoices.

11. Inventory of supplies

  • Document costs of cleaning supplies, maintenance tools, and other supplies.
  • Monitor inventory levels and reorder when necessary.

12. Renewal or tenant unit maintenance

  • Account for costs associated with tenant turnover and unit maintenance.
  • Keep records of repair and cleaning expenses.

13. Deposits and bonds

  • Include security deposits and any other financial guarantees.
  • Document deposit amounts and conditions.

14. Banking

  • List bank fees, charges, and interest expenses.
  • Track bank account balances and transactions.

15. Reserves and replacements

  • Set aside funds for future capital expenditures and replacements.
  • Plan for major repairs or replacements of building components.

16. Net operating income

17. Debt service

  • Include mortgage payments and interest expenses.
  • Keep records of loan agreements and payment schedules.

18. Before-tax cash flow

  • Calculate the cash flow before accounting for taxes.
  • Assess the property’s financial performance.

19. Capital expenditure

  • Budget for large-scale property improvements and upgrades.
  • Plan for long-term enhancements.

20. Tenant improvements (TI)

  • Detail costs related to customizing space for new tenants.
  • Track TI expenses for each lease agreement.

21. Leasing commissions

  • Include expenses associated with broker commissions.
  • Record commission agreements and payments.

22. Net spendable cash flow prior to taxes

  • Calculate the cash flow available for distribution or reinvestment.
  • Assess the property’s financial health after accounting for all expenses.