Assetsoft - Blog #forecasting

Budgeting vs. financial forecasting - Why Do You need both for your business?

Fri, 02 Dec 2022 20:35:54 -0500

Budgeting and forecasting are methods that businesses and company executives employ to decide where the business should be headed. It is the base for a future growth plan or the next step in business. Setting a budget as KPI also helps businesses understand whether they are on the right track with their business or if they have transgressed along the way. This opens up opportunities to rectify mistakes and plan the next steps forward.

Companies can predict their future financial performance better and have an idea if they will overuse their budget. But market research by Clutch says that more than 50% of small businesses did not make a budget in 2020. But other research says that only a budgeting plan can help companies keep track of their expenses and also be aware of their financial conditions. The companies that do make an official budget also sometimes exceed it - because of under forecasting.

When the two things come together cohesively, only then can a business move forward. Read this blog to know their key differences and similarities and how these two can help your company’s growth. https://canadahustle.com talks about how businesses can use cash or accrual method of accounting.

Are you Budgeting Properly?

If employees do not know what budgeting is, then overspending beyond the company’s capacity becomes very easy. When you do budgeting, it acts like a yardstick to measure progress; without it, the whole financial system of a business can crumble.

How can you properly conduct the budgeting process to ensure your finances and employees are aligned on the same track?

Your budgeting process should ideally have inputs from all departments and business stakeholders to ensure it is a practical financial plan and not just hypothetically perfect.
Ensure that your budgeting plan has enough funds for risk management and unforeseen situations in business. That is what makes for the most practical budget. You can easily make a budgeting plan with a lot less money if you omit these.

But you will have no safety net to fall back on when unexpected situations arise. This should be a contingency for bad days and should be constant in all financial planning processes.

What is forecasting?

Forecasting is more of a future prediction for the company and its progress based on various data analysis reports. Forecasting is where company executives and accountants come together to look at the company's budget. Then they tally it with previous data and market research to predict if the company will reach its target.

When you do forecasting, if you see that the budgeting process has become unrealistic and take a closer look at all the data, you can inform your team. This makes the revaluation of the budget much easier. Forecasts can be short-term and long-term, depending on the strategy and leadership body and company goals.

What are the key differences?

The budgeting process is mostly static, and forecasting are dynamic.
Budgeting acts as a business KPI, and forecasting mostly work to predict the financial future.
The budgeting process can function individually without the forecasting part. But forecasting always needs to look at the budget to make better predictions.
Budgeting plan is for a specific period of time, whereas forecasting can be done as often as the executives decide. Forecasting can constantly keep reevaluating and analysing the budgeting plan if they feel the need.

How do budgeting and forecasting come together?

A company can still function with just a budgeting plan, even if it does not do a forecasting plan and analysis. Why? Because the budgeting process is independent and can function on its own. But when budgeting and forecasting come together, they can give much better results than budgets alone.

The budgeting process helps set the target for the company, and the forecasting give an analytical report on whether this target is viable and can at all be achieved within the set budget. Basically, forecasting brings about a reality check into budgets with its data analysis and helps makes adjustments if necessary. Budgeting and forecasting should always be considered together and built harmoniously; they should never be at loggerheads.

Do you need both, or would one suffice?

In a typical situation, the financial budget comes first and then the financial forecast. A budget can be made based on the company’s future plans and revenue they have. But a financial forecast needs to look at the budget, the previous financial data of the company, and other current market reports to understand if the budget is realistic or not.

The best forecasting plan also considers what the competitors are up to and analyzes their data, the sales data of one's own company, etc. Though forecasting is more of an ever-changing, dynamic occurrence, taking in all these extra factors can make it more concrete and give better predictions.

Long-term financial forecasting can sometimes be done without the budget, but they mostly look at old budget data to make predictions. These can sometimes become inaccurate due to changing market conditions, like the effects of suddenly rising inflation.

Technology selection in budgeting and forecasting

There is a lot of the latest technology selection in the market where that can help speed up the budgeting and forecasting process. Integrating software like Yardi in project management can help you get quick reports if you are working in the real estate industry. The system analyses all the data and generates an automated report. You no longer have to spend money and labor getting these reports if you have the right technology selection.

Budgeting and forecasting for your company with Assetsoft

At Assetsoft, we bring together the best of both worlds. We work with expert back office accountants and use the latest technology selection to speed up work and get experienced help. You do not have to pay to hire full-time accountants or buy individual software when you work with us. We will get the work done for you while you focus on other core matters of business.

To know about our services, give us a call.

Get Started Now

Your Guide to Budgeting and Forecasting With a Property Management Software

Mon, 28 Jun 2021 08:00:01 -0500

Real estate forecasting was traditionally based on intuition and word-of-mouth. In today’s environment, data-backed decisions form the backbone of a company’s financial growth. As there is a lot of data generated every day, you can use technology to leverage your business growth.

PropTech has a variety of software for budgeting and forecasting. Recent software uses data mining and even machine learning to predict house prices.

Through this guide, you can learn how to use PropTech to improve forecasting for your property management company.

Why are budgeting and forecasting important?

The financial health of your company depends on the budgeting and forecasting process. It enables strategic decision-making and revenue growth for your business. Real estate market trends are volatile. If you utilize technology to evaluate your investments, you can:

Update forecasts according to new market trends.
Analyze upcoming changes in the market.
Budget better by predicting cash flows.

Make decisions based on data and not guesswork.
Safeguard your company from potential financial pitfalls.
Improve performance of other departments through proper planning.
Get more investors as you have proof of the financial future of your company.

Why choose automation for real estate budgeting and forecasting?

Many companies rely on spreadsheets for their budgeting needs. With 88% of them containing errors, they are far from accurate. The real estate industry is competitive, and embracing technology can put you ahead in the race.

Using budgeting software also helps you make better business plans. According to Bi-Survey, 53% of businesses reported better planning results after using budgeting software.

Here are the 5 benefits of automating your real estate budgeting and forecasting process.

Enhanced reporting

As a property manager, you would be looking for tailor-made reports unique to your company. Forecasting software does exactly that.

Reports based on generic conditions are usually not adequate. Forecasting software allows you to generate reports against any kind of trend. If you want to run multiple scenarios or analyze different reports, you should switch to forecasting software.

More reliability

A spreadsheet document can go wrong with a single error. Whether it is missed numbers or wrong data, it can cost you important investments. The most important benefit of utilizing software is reliability. As they don’t rely on manual data entry, they increase your budget’s accuracy. Your data can also be utilized by different platforms if your tools are integrated.

It is also more secure than manual data entry. You can rely on cloud storage to keep your data from getting lost.

Increased productivity

Automated budgeting and forecasting are not only more accurate but also faster. Your employees don’t need to spend hours entering data and rechecking it, You can put your team to more productive use.

Since the forecasting is faster, you can get more work done in the same amount of time.

Elimination of guesswork

Traditional real estate forecasting was based on intuition. This may work for smaller companies with a local reach. But, property managers and investors require reliable data-based decisions for their multiple properties. Forecasting software gives insights only after analyzing marketing data and trends. After all, no company wants to leave their key decisions to guesswork.

Improved compliance

There are several real estate laws that keep changing. In the US, you should also be careful about any state-specific laws. Automated forecasting is usually in compliance with the laws. They help you create the necessary reports and also verify them internally.

Different functions you can automate:

Leading companies have automated several important business functions. These work as a unified strategy and may not show results when singled out. Some of the essential functions you can automate are:

Lease forecasting

Lease forecasting improves your budget. Accurate predictions can direct your investments and improve ROI. Your software should forecast precisely and also have an easy-to-use interface.

Multiple variable forecasting

Forecasting takes into account multiple scenarios like tenancy changes, economic factors, and other changes. The right software needs to forecast considering all these aspects. It should also let you generate multiple reports on individual changes.

Corporate expense management

The real estate budget needs to account for corporate expenses such as legal fees, payrolls, and taxes. These can change in different regions or countries. You need to evaluate your budget according to the expenses specified by the local law.

Some software has such inbuilt functions. You can also use add-on tools in software like Yardi and MRI to manage budget and forecasting.

How to choose the right software?

There are many tools designed for real estate budgeting and forecasting. Before choosing one, you need to evaluate the software for some key abilities.

Being Adaptive: It should let you change your forecasting based on new inputs. Ideally, it should generate as many reports as you want.
Speed: It should generate reports within a short span of time. If you have deadlines, you need to consider this quality.
Integration: It should seamlessly integrate with your other tools.
Easy interface: It should be useful for a person who does not have much IT experience. A simple software understandable by a client could go a long way.

Efficiency: It should decrease the workload from your staff. The reports should not need much evaluation from your other employees.
Accurate: Most people shift from traditional methods to software because of the accuracy. Your software should generate reports that are accurate and up-to-date.

What features to look for?

Budgeting

The budget feature lets you collect data from a property level. This data is used to make granular level forecasts. Choose software that lets you predict future costs by analyzing individual data such as rent and vacancies.

Assumption analysis

As a property manager, there are several ‘what if?’ scenarios you need to analyze. Software that generates reports as per your input will allow you to evaluate different market scenarios.

Customizable P&L

Your software should evaluate cash flow based on the components of your chart of accounts. It should also allow a choice between generating reports at an account level or cash level.

Adjustable granularity

Software that has adjustable granularity generates reports at all levels. You can choose to generate an overall report or divide them into segments. You can also choose many reports of individual properties.

Short and long term forecasting

Usually, forecasts are done for 1 year to 5 years. If you require forecasts for varied durations, choose software that is flexible with time. That way, you can input the duration to get an accurate forecast.

Global reporting

If you are thinking about international investment, you should choose software that can deliver global results. You should be able to switch between regions and currencies before making a forecast.

Investment planning

Based on the forecast, the software should plan your ROI on various investments. It should also give you valuable insights on the right areas for investment as well as the upcoming trends.

Integration with other tools

If you use multiple software for other processes, you should focus on the integration of your budgeting and forecasting software. The integration allows your other tools to utilize data from your budgeting software directly. This ensures seamless workflow and increased efficiency.

Dashboard

A dashboard comes in handy if you want to view all your generated reports. It also provides some key insights into your activity. A dashboard helps you manage your budgeting and forecasting data within the app. It also lets you view, forecast, and delete any reports.

Support and troubleshooting

Make sure that a dedicated support team is available for the software you choose. If you ever face problems with the forecasting software, the team should be ready to look after the issue for you. They should also notify and guide you through any new updates.

Cloud-based storage

Cloud storage is popular for a number of reasons. Since budgeting and forecasting uses a lot of data, it is safe to store it on the cloud. That way, it will be more secure and you will always be able to recover data.

Our recommended real estate budgeting and forecasting software

Yardi advanced budgeting and forecasting

This software by Yardi delivers accurate budgets quickly. The features include budgeting, flexible modeling, real-time valuations, and much more. It allows you to reforecast according to your data input.

MRI's budgeting and forecasting software

This software is built to make budgeting more efficient for property managers and investors. Some of the features are centralized budgeting, configurable leasing assumptions, access to data, and a simple user interface.

Get the best out of technology through Assetsoft

Budgeting and Forecasting are the financial backbones of a real estate business. At Assetsoft, we assist you in every step like planning, strategy, and operation. From tech advisory to implementation, we do it all.

Through software like Yardi and MRI, we help you make the best out of technology. We can suggest the right software by understanding your requirements. We can also integrate your tools, check-up existing software and provide training for your staff. For any property management software requirements, reach out to us!

Book a free consultation now!

How Can Tenant Portals Help Real Estate Companies?

Fri, 28 May 2021 12:04:21 -0500

Real estate is among the fastest-growing industries regarding technology implementation. Tenant portals pose a promising development for any company wishing to streamline its tenant support.

These portals allow property managers to provide a direct contact channel for their tenants. It enables property occupants to reach out, request services, access lease documentation, and pay their rent online.

Naturally, implementations such as tenant portals are crucial advantages for any company, especially in today's market. If you're interested in implementing a professional tenant portal, consider working with a professional Yardi implementation service.

Streamlining transactions and processes

The real estate sector has experienced massive evolution thanks to technology development. Cloud solutions, enterprise software, and communication apps have shaped the industry in recent years.

Why does that happen?

Today’s solutions allow companies to shed complicated filing systems and cumbersome paperwork. Simultaneously, they optimize countless processes thanks to features like automation, remote collaboration, and data centralization.

Tenant portals cover all those needs. One platform can keep all information related to your leases. Your tenants can also access the necessary information, which means more manageable payments, requests, and more.

The current need for digital solutions

Today, virtually all industries depend on digital implementation to recover from the pandemic. Many real estate firms still rely on traditional paperwork for lease agreements, accounting, and other processes,

Tenant portals aren't the same as ERP software, but their advantages extend to numerous departments. For instance, remote communications keep your resources safe by aiding with social distancing.

Robust functionality and customization features

One of the issues with traditional practices is their lack of versatility. Tenants must stick to their landlords’ schedules for payments and disputes. These requirements cause general discomfort in a lease agreement.

With tenant portals, tenants and landlords can instantly access the information they need. Companies can arrange their listings depending on priority, risk, or profitability, among other factors. Dashboards offer extensive customization possibilities.

Intuitiveness for tenants

Paperwork has lost its intuitiveness. It typically requires expert advisory to audit and analyze clauses for compliance. Likewise, traditional rent collection practices require too much effort from both parties.

With tenant portals, everyone can access payment channels and lease conditions from any device. Tenants can pay their rent in minutes thanks to payment processor integrations. All these quality of life improvements make the relationship more pleasant.

Seamless access to documentation

Documentation is as extensive as it is essential for any lease agreement. Tenants need their documents to verify their rights, responsibilities, and benefits. The same holds for property managers.

Tenant portals allow landlords to upload and sort lease documents seamlessly. This advantage also applies to tenants, who can download and evaluate their lease agreements anytime they need.

Paperless transactions

As we mentioned, lease agreements translate into seemingly endless paperwork. Initial contracts, requests, payments, services, and virtually every transaction requires it. They can quickly cause accounting nightmares for everyone.

Tenant portals eliminate the need for paperwork. All transactions occur in the cloud, and all related data remains stored within the platform. Naturally, this benefit also reduces the need for physical proximity and complex scheduling.

Accessing advanced features and tools

Tenant portals offer more than communications between tenants and landlords. Even fundamental features — like document storage and request submissions—can provide crucial advantages.

However, today’s solutions offer much more than that. Tenant portals generate constant data streams: lease statuses, income data, tenant risk, and more. You can turn your tenant portal into a central database for the rest of your company.

The right tenant portal helps you find room for improvement. These benefits manifest throughout your firm, offering unique returns outside of the portal’s functionality.

Manage deals and lease pipelines

Every lease agreement is a lengthy process. You need to market your properties, sort through applications, reach an agreement, and keep track of multiple contracts. That takes time, and it can get tedious quickly.

Tenant portals let you gain insight into your applicants and tenants from one system. You can access data from marketing to lease generation in minutes, and the entire process is easier for everyone.

Receiving and tracking requests

Every property needs maintenance and repairs, and the same is valid for common areas. Traditionally, all these requests require at least days to process and provide.

With tenant portals, every occupant can access their profile from any device and place an online request. The platform processes them, and property managers can access vendor lists and status updates for every request.

Boost financial accounting and forecasting

Accounting requires lots of data and said data is also essential for developing forecasts. Traditionally, acquiring this data meant sorting through countless files and paperwork.

Tenant portals centralize all the information you need for you. Are you registering income? You can segment the data. Do you need to assess a lease’s risks? You can do it from the same dashboard.

Property valuation and modelling

Studying properties’ market values was a similar challenge. You needed to sort through countless folders and physical documents for the simplest valuation models.

Tenant portals provide real-time data on every property: occupancy rates, number of deals, upcoming vacancies, and more. All this data considerably streamlines property valuation regardless of the property type and sector.

Evaluate individual leases

Finally, tenant portals let you evaluate every lease within a property. You can register multiple buildings and break them into property-specific lists for every lease.

It allows you to evaluate every tenant individually. You can see when their rent is due, overdue payments, risk factors, and the rent's term, among other factors.

Make your and your tenants' lives easier

Tenant portals have myriads of advantages for everyone: tenants and landlords alike. Today, digital solutions are vital for any company and service. Providing an outstanding customer experience is one of the best marketing strategies you can use.

Similarly, making it easier for your tenants to abide by their responsibilities is a direct benefit for you. They’ll be happier because they can pay their rent and services in seconds, and you won’t have to worry about overdue tenants.

In the end, benefitting your tenants is a direct benefit for you—in addition to all the operational benefits of implementing a tenant portal.

Data Analytics in Real Estate

Thu, 27 May 2021 15:52:57 -0500

Data is one of the most important assets for any company. You could have the best resources, software, and properties. If you forego data analysis, you’re still leaving your company’s success depending on pure luck.

You can follow your instinct for many of your decisions. That said, any market and industry includes countless factors—i.e. Competitors, consumers, economics—each one with its set of variables.

That’s why data science, particularly data analysis, is vital for any company. It provides the right groundwork to nurture informed decisions. That means reliability, boosting your success chances noticeably.

What does that mean for the real estate industry? How are people using data science? What can you do to add this skill to your roster? That’s what we’ll find out today.

What exactly is data analysis?

Data in business is the basis for several approaches and techniques. People tend to use data analysis and science interchangeably, and the same is true for big data. However, we must note that they’re different terms. SimpliLearn has a great article explaining the differences.

Essentially, data science is the main term. It encompasses several techniques and skill sets, including data research, preparation, and even analysis. That means that data analysis is effectively part of data science.

Technically, it’s not wrong to use data analytics and data science interchangeably for the real estate industry. After all, data analytics is the most prominent data-science-related skill used in the sector.

On the other hand, big data is somewhat separated as a concept. It refers to considerable amounts of data. Big data can be part of data science, but it’s not an interchangeable term. It just describes large data volumes, and not all companies employ big data. It requires more resources in exchange for much more information access and leverage.

Why is data analysis important in all industries?

Data analysis tends to have different advantages depending on the industry. Still, virtually all companies, in all sectors, can leverage data analytics to grow. The most common use for data analysis across the world is to influence decision making.

That’s because making choices, regardless of your sector, is a lot more effective if facts are the foundation. Data science can influence other industries in terms of process automation and management.

That said, we’ll focus on the general benefits here.

Targeting

Data from your customers and marketing campaigns shed light into ideal advertising methods. You can show people what they need in the way they like it, thus boosting sales noticeably.

Additionally, data analysis allows you to figure out how much you’ll have to invest in marketing and your returns on investment. It’s great for optimizing your budget and finding where you could improve your marketing.

Customer data

Speaking of customer data, that’s a benefit in its own right. You’ll need this information for several of your strategies and goals: better marketing, acquiring the right assets, ideal audiences, and more.

In the end, all businesses come down to selling, and real estate is the same, fundamentally. You need clients if you wish to turn a profit, and you need to learn who these clients are. Customer data enables you to do so.

Innovation

Understanding and taking advantage of market trends boils down to data analysis. Things like sales, advertising expenses, and market performance are purely data. Companies studying this data can find patterns they can leverage.

Realizing new trends before your competitors enables you to adapt quickly and offer what’s starting to become popular. The competitive edge you gain from innovation is one of the best ways to achieve your goals.

Cost-effectiveness

Data analysis isn’t solely about selling, though. Data analysts can be a big advantage if you wish to lower and optimize your costs. Data points you towards departments and processes that might be receiving a larger budget than they need.

The same is true for marketing expenses. You can assess which marketing strategies aren’t yielding the results you expect. Therefore, relocating capital from these methods to ones that work reduce your overall budget while increasing profits.

Problem solving

Problems are common in all businesses throughout all industries. They’re not always catastrophic, but that doesn’t mean you shouldn’t solve them quickly. All problems cause halts in your operations, as little as they might be.

Data analytics spot where these problems might be coming from. The same is true for finding out what you can do to solve and prevent them in the future. Consequential problems are also easy to spot and shut down before they occur.

Data accuracy

Data analysis doesn’t simply assess the data you’re getting. It also ensures said data offers quality, actionable insight into the market and your business. This advantage is vital for company growth, as it lets you spot what you’re doing wrong.

The same is true for forecasting and formulating strategies. You can use market data to find out which methods have been working within—and outside—your industry. Data science is vital for both studying information and ensuring its quality.

Marketing anchor

Data analysis is so advantageous for marketing because it gives you the foundation for your strategy. In the end, your customers’ likes, needs, and preferred marketing methods are data. Therefore, studying this data saves time finding out what’s working.

It’s particularly important when we consider the insights from market data into customer behavior. If you’re using social media marketing, you can gain insight into what’s working and what isn’t, even within your advert’s design.

Forecasting for the new year is vital

Forecasting is critical for countless businesses. We’ve seen companies forego this technique because of a single misconception. People usually see forecasting as prediction, as a “what if” idea.

That leads them to believe forecasting is trivial, thus avoiding all its advantages. In reality, forecasting can be an active element working towards your goals. It allows you to see where your company is going right now, thus allowing for revising strategies and adapting to pressing problems.

In this Forbes article, the main topic is forecasting for 2021. After the huge obstacle presented by 2020, we can agree that preparing for a new year is vital. That’s not the point, though.

If you read the article, you’ll spot what they point out as the fundamentals:

Industry growth.
Understanding customers.

Resource planning according to demand.
Sales opportunities.

All of these are part of data analytics. As we mentioned, data analytics lets you spot trends and identify your target audience. Therefore, data science in general makes up the backbone of forecasting, and thus, it’s critical for setting and revising goals and expectations.

How are real estate firms applying data science?

The real estate industry depends on big data to a large scale. Every property—both commercial and residential—has plenty of variables and information. You need to track lease agreements, property value, maintenance expenses, renovations, and more.

Then, each lease agreement has lots of information by itself: terms, clauses, responsibilities, and compensations. That means your company likely has countless data sources and variables to account for. That’s not even mentioning market information.

That’s why data science is more than an advantage for real estate firms. Knowing how to leverage the amounts of information available in your industry is vital to ensure you achieve your goals and stay ahead of the competition.

Pricing indices

Every real estate transaction is unique. Even two apartments in the same building aren’t identical, and that affects property pricing, conditions, costs, and more. That’s one of real estate’s main challenges since it makes market performance harder to assess.

Transaction averages are tricky because of property type variations throughout the market. Data science has bred methods to curb this problem, including specific techniques and filters for the specific information you want to look for.

Valuation automation

Valuation is gaining lots of traction when it comes to statistical approaches. Automating valuation aims to come up with market value estimates for different properties. The immediate benefit is that property market value is usually more accurate.

However, it’s not simply more accurate. It’s also cheaper and faster.

Time series forecast

Time series are useful for figuring out upcoming trends. Forecasting allows you to create a strategy towards specific goals and milestones, thus improving your investment and efficiency. Data analysis is perfect to turn existing data into accurate forecasts.

Thankfully, the real estate sector has plenty of information available. You can use property prices, markets, GDP, employment rates, inflation, and more. Additionally, mortgages and loan interest rates are real-estate-specific metrics that can provide invaluable data.

Cluster analysis

Real estate is quite unique in that performance varies significantly throughout different locations. Even cities within the same state can be completely different. The same is true for neighborhood and sectors within said cities.

Cluster analyses allow companies to spot data patterns for specific property groups, which tend to perform similarly. This data science method lets us measure which markets perform similarly, and use these as reference for performance measurement.

GIS

Geographic information systems are huge advantages for real estate analysis, particularly for visualization of local areas. With governments becoming more open with their data sources, data analysts have a plethora of sources to choose from.

You can use GIS to establish a property’s radius. That’s useful for evaluating properties near commodities, like train stations, malls, and other facilities that could boost their value. The same is true for figuring out commuting and property criteria.

Data-driven decisions: are they better?

According to the Harvard Business School, using data to back your decisions is a huge advantage. People tend to overestimate the value of “gut instinct” as a virtue instead of a disadvantage.

Sure, following your intuition can be fine in minor decisions. However, managing a business turns every decision into profit or money loss, thus rendering intuition as a liability in most cases.

That’s not to say that intuition is always bad. It’s still a great starting point to start your research and spot possible opportunities.

How to become data-driven

The same Harvard Business School article has several tips for companies planning to become data-driven. If you wish to give more priority to data in decision-making, you can take 3 fundamental steps to get there.

Pattern searching

Data analysis is, essentially, studying market information to figure out exploitable patterns. The first step to implement data analysis into your company is to study data consciously. With enough practice, you’ll start approaching data sources with an analytical approach by instinct.

Decision tying

Again “gut instinct” is our primary driver when it comes to making choices. That’s natural, and it’s not detrimental unless we rely purely on our intuition. Make sure to look for data support for every choice you plan to make.

Education

Finally, training your resources or hiring data analysts is always an advantage. Having a specialized staff for studying data will ensure many of these steps are already taken by them.

Texas Retirement Systems $100m Commitment with Real Estate - What to Expect

Sun, 09 May 2021 15:31:53 -0500

COVID-19 has claimed hundreds of thousands of lives and changed how we work.

Thankfully, monetary stimuli like the Biden administration’s $1.9 Trillion stimulus plan has kept the U.S. economy relatively healthy.

Real estate has continued to fare well across U.S. and Canada. The demand for housing has grown considerably even during the pandemic. Commercial real estate—one of the most significant victims—showed promising signs near the end of last year.

Now, the TMRS (Texas Municipal Retirement System) allocated $200 million in real estate funding in recent months.

These funds are split into two, which we'll go through in a bit. Each fund received $100 million, and they promise relief for the municipal real estate sector.

The first fund: Transwestern Strategic Partners Fund III

Managed by Transwestern, it's a value-added fund. The partner organization is among TMRS' managers. The fundraiser launched in January, yet it seems like it didn't reach its $450 million purpose.

However, TMRS secured six investors, adding up to $259 million. This capital will provide relief for assets related to multifamily, healthcare, and industrial sectors. It’ll also aid some medical office and retail properties.

The second fund: Platform Ventures Real Estate Strategies V

On the other hand, Platform Investments owns this fund, and it’s a recent TMRS manager. Unlike its counterpart, it targets opportunistic real estate assets. It opened somewhat earlier, in October 2019, and it raised $14 million in its first year.

It might sound like a lot, but it’s far from its $300 target. Nevertheless, COVID-19 took over most of the fundraising period, making the goal harder to reach.

Government's interest in real estate

Governments have always prioritized real estate for its role in developing cities and contributing to virtually all markets. That’s why we have so many government grants.

Essentially, helping the real estate sector yields superior returns for governments. In exchange, startups and established companies can offset many hurdles, like the recent pandemic.

Multiple funds available

Only in the US, that linked article lists 19 real estate funds. They come from government and private entities alike. However, each fund has its eligibility criteria and available capital per company.

Outsourcing city projects

Why are there so many public funds? That’s because real estate is critical for any city’s development. It provides the space necessary for industries, offices, retail businesses, and housing.

Governments can outsource city development to real estate firms. These funds allow said firms to perform more effectively because they can invest in resources, technologies, and logistics.

Governments’ role in the sector

For some experts, the government is among the most influential factors determining a property's value. Whether it's more important than social factors, location, or other aspects, we can't deny the influence.

Additionally, a government’s role in the industry goes beyond public funding for development and management companies.

Financial intervention

Firstly, government intervention is considered crucial for the economy in many cases. The extent of this intervention changes whether it’s good or not. One of the best examples is the Fed bailing out banks during the 2008 crisis.

Is today’s funding similar? In some ways, yes: the government is intervening in the market to aid one industry. That’s the first half of how the government is abiding by its responsibilities.

Infrastructure development

Infrastructure is among the governments' primary responsibilities, with the most common instance being roads. According to experts, these "free goods" that everyone can use can only be provided by the government.

For-profit companies are unlikely to spend resources building a road that won’t generate profits. However, governments can pay construction companies for these developments, benefiting all parties involved.

When intervention gets out of hand

When government intervention aims to control the market, distortions begin to appear. Overinflation and other phenomena become more prevalent, and asset values tend to plummet.

For instance, you can check the prices per square meter for buying apartments in the US compared with other American countries. For reference, the average price per square meter in Caracas—the Venezuelan capital—is around 10% of the median US price.

Is this the current case?

So far, the stimulus provided by the TMRS is solely an example of financial incentives. There's little reason to worry about market distortion. That said, it raises unique concerns about competition and how you can take advantage of the fund.

As such, let’s go through what property managers should expect and how they can prepare.

What can real estate companies expect from these moves?

We can simplify this movement by injecting capital into the real estate sector. Increasing liquidity leads to more investment power for the companies receiving it. That means better investment opportunities for companies in the region.

How does that translate? We can foresee three significant benefits and requirements (simultaneously) for real estate companies.

More flexibility

On the one hand, companies gain financial power. That means better reach into more markets, technologies, and project development.

However, it means companies need a proper methodology to accommodate this liquidity influx. Taking advantage of these benefits still requires effort.

Proper forecasting

Secondly, companies will build better forecast structures and implement the necessary technology to improve their accuracy. AI forecasting is a great example.

Nevertheless, accuracy improvements might become necessary, as companies require better assessments of how the market evolves.

Strategy development

Finally, building a robust investment strategy to leverage these funds will likely prove invaluable.

It could be pretty challenging, though. Average liquidity will increase as companies receive funding. You'll need effective strategy and leadership to overcome stronger competitors.

Finally, we can’t overlook the need for proper technology implementation for real estate companies. As trends like remote work become standard, leveraging cloud ERP solutions can make a significant difference.

How can Assetsoft Help?

Assetsoft have worked with several enterprises, helping manage the medical, dental and hospitality funds. We have helped our clients invest into hotels and build their portfolio, while we took care of the investment accounting.

Talk to us for Yardi consulting or MRI integration, and let us take care of the back-end work. We will help you calculate the distribution amount while avoiding accounting inaccuracies and errors. Our accounting experts are well versed with all popular and complicated accounting methods, from capital call fund accounting to Waterfall calculation.

Some calculations like bridge loans may bring up inaccurate results when done automatically. For these, our team members do it all manually, to ensure accuracy and avoid errors.

Want to use the right technology to do more? Assetsoft offers professional technology selection services to assess the best investments for your company. Know how we can help you choose the right ERP, or help you with everything from back office accounting to robotic process automation.