guidebook: supportive housing asset management

A I D S H O U S I N G

O F W A S H I N G T O N

S E A T T L E 2 0 0 2

Put Your House in Order

Securing Your Supportive HousingProgram’s Future through Effective

Asset Management

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

SHOULD YOU READ THIS GUIDE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6WHAT WILL YOU LEARN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6HOW SHOULD YOU USE THIS GUIDE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7CAN YOU AFFORD TO WAIT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8WHAT DOES ASSET MANAGEMENT MEAN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8WHY DOES SUPPORTIVE HOUSING NEED ASSET MANAGEMENT? . . . . . . . . . . . . . . . . . 9WHAT DOES THE JOB ENTAIL? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10HOW IS IT NOT PROPERTY MANAGEMENT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11SUPPORTIVE HOUSING—ADVANTAGED OR DISADVANTAGED? . . . . . . . . . . . . . . . . . . . . . . 12

Before You Start. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13DEFINE YOUR ASSET MANAGEMENT GOAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13START TO THINK LIKE A BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14ANSWER SOME BASIC QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15FIND A LITTLE MONEY TO START . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16FIND MORE MONEY AS YOU GO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17DELEGATE ASSET MANAGEMENT RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18PLAN FOR ASSET MANAGEMENT TO BE TAKEN SERIOUSLY . . . . . . . . . . . . . . . . . . . . . . . . . 20

First Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21EDUCATE YOURSELF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21HOLD A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21START A BINDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22WHAT GOES IN AN ASSET MANAGEMENT PLAN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23SPECIAL WORDS ABOUT THE PROPERTY MANAGEMENT PLAN . . . . . . . . . . . . . . . . . . . . . . 24EVALUATE YOUR PROPERTY MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27IF YOU CONTRACT OUT PROPERTY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28GET ORGANIZED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29START RESERVE ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31PLANNING YOUR CAPITAL RESERVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Rise to the Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37THE NEED TO COMPARE YOURSELF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37PERFORMANCE STANDARDS TO CONSULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38RED FLAGS TO WATCH FOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

CONTENTS

Look for Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41FIND WHERE THE MONEY GOES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41YOUR CHOICE OF PERFORMANCE INDICATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41FIRST INDICATORS TO STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41INDICATORS PARTICULAR TO SUPPORTIVE HOUSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43OTHER INDICATORS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43ANOTHER STRATEGY: BENCHMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44FINDING RELEVANT BENCHMARK DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Make Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46MORE WAYS TO MAKE AND KEEP MONEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46CUT YOUR OPERATING COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47INCREASE EFFECTIVE GROSS INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49REFINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51SUBSIDIZE WITH FUNDRAISING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52SUBSIDIZE WITH OTHER PUBLIC FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52NO OTHER WAY OUT: DISPOSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

A New Instinct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55THE NEED FOR A SELF-MONITORING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55THE BEST INTERNAL REPORTING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55CHALLENGES OF MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57A WORD ON PREVENTATIVE MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58STAY CLOSE TO YOUR BUILDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59MAXIMUM BENEFIT FROM SITE VISITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59COMMUNITY RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Just For Board Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62YOUR ROLE IN ASSET MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63NEW SOFTWARE OR NOT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63CHOOSING SOFTWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63SOFTWARE RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65OTHER TOOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Do it Right the First Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68ASSET MANAGEMENT STARTS IN THE DESIGN PHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Best Picks of Trainings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Best Picks of Guides and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71Best Picks of Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Best Picks of Prototype Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

C o n t e n t s | 3

ACKNOWLEDGMENTS

AIDS Housing of Washington would like to thank the author, Kristina Hals,for her diligent research and invaluable expertise in the creation of thisguide.

We would also like to thank asset management experts David Fromm of TheEnterprise Foundation and Judith Rose of the Local Initiatives SupportCorporation for their invaluable advice regarding the content of this guide.

The research, development, and publication of this manual was fundedby the Housing Opportunities for Persons with AIDS (HOPWA) NationalTechnical Assistance Program in partnership with the U.S. Department ofHousing and Urban Development’s Office of HIV/AIDS Housing. Thesubstance and findings of the work are dedicated to the public. The authorand publisher are solely responsible for the accuracy of the statements andinterpretations contained in this publication. Such interpretations do notnecessarily reflect the views of the Government.

PREFACE

1. Amos Tuck School of Business, DartmouthCollege, Lecture at LincolnFilenes Institute on Com-munity Development, Medford, MA, 1999.

“Be careful what you wish for. Now that you have created housing, you havethe responsibility of owning and managing property. If you are going to bea landlord, then you should be a good landlord. As a nonprofit, you don’thave the financial cushion to do this work badly. Asset management of yourproperty is going to be a very significant enterprise. People who are in yourhousing are dependent on you to hit your targets.”1

– John Vogel, Expert on Asset Management in Affordable Housing

SHOULD YOU READ THIS GUIDE?

This guide is intended for anyone with a role in managing supportivehousing. By “supportive housing,” we mean residences targeted to personswith special needs such as HIV/AIDS, mental illness, substance abuse, andother conditions that frequently occur with homelessness. Typically, suchsettings combine housing with “supportive” services to stabilize and insurethe well-being of residents. If your group owns real estate that is used tohouse and support special populations in this manner, this guide is writtenwith you in mind.

If you simply lease property for your housing program, this guide will be aneducation in the long-term issues to anticipate, should your organizationbuy its own real estate in the future.

Others who may have an interest are property managers associated withsupportive housing and contract managers or underwriters working forinstitutions with financial investments in supportive housing.

WHAT WILL YOU LEARN?

The material presented here is an introduction to basic concepts of assetmanagement. It translates practices from the more mainstream field ofaffordable housing to the specialized context of supportive housing.

It encourages supportive housing professionals to step outside their tradi-tional vantage point of measuring success in the exclusive terms of today’stenants’ well-being. It includes specifics about predicting trends in yourproperty’s finances, operating more efficiently, using systems and tools toimprove operations, and tracking financial indicators. In general, the guideprovides ideas on how to think and operate more like a business. It alsopresents the argument for why an asset management approach is necessaryto protect the long-term availability of supportive housing.

Asset management should not be mistaken for property management.Although it may take some convincing on our part, you will learn to distin-guish between these two different aspects of managing a property. Aspectsof property management are discussed in the guide but only insofar as theyintersect with ideas about asset management. For those looking for a guidewith more substance about property management, recommended resourceson this topic are listed in the Best Picks section at the back of this guide.

WELCOME

READERS OF THIS GUIDE

• AIDS Housing

Providers

• Supportive Housing

Groups

• Property Managers of

Supportive Housing

• Boards of Directors for

Supportive Housing

• Contract Managers of

Supportive Housing

• Underwriters of

Supportive Housing

• Staff of Supportive

Housing

HOW SHOULD YOU USE THIS GUIDE?

First, browse this guide for the big picture of what asset managementmeans. Then, go back and read topics that appear to be realistic first steps—or next steps—for your organization to begin asset management. Review otherparts of the guide with the expectation that you will not accomplish all tasksat once. Expect to gradually build your asset management program over time.

Consult references at the back of the guide. At the back of this guide arenumerous Best Picks that you can access for additional information related toyour particular supportive housing program. There is a wealth of publicationson individual aspects of asset management; look for materials specific to yourparticular housing group, whether you operate in a rural community, arefinanced by low income housing tax credits, or function as your own proper-ty management company. Worth exploring are the listings of trainings onasset management just for nonprofit housing groups. As a next step after read-ing this guide, consider educating a staff or board representative to becomeyour in-house expert.

Share this guide with colleagues. Once you are convinced of the need for anasset management approach, spread the word. The more that AIDS housingand supportive housing promote asset management, the better understoodwill be requests for financial resources to carry it out. Bringing this guide to theattention of supportive housing colleagues and board members, both insideand outside your organization, will help the AIDS housing and supportivehousing communities develop long-term strategies for staying in business.

CAN YOU AFFORD TO WAIT?

Asset management is not a rainy day project. Those who have studiedtrends in the long-term stability of affordable housing indicate that assetmanagement is an urgent agenda for all nonprofit housing groups.2

Research shows that if housing groups wait to introduce their organization toasset management, problems affecting financial performance may graduallygrow to the point where they can’t be reversed quickly, or at all.

Pursue both agendas of creating and preserving housing with equal com-mitment. Historically, there has been strong emphasis on creating affordablehousing. By comparison, preserving housing owned by nonprofit groups hasreceived relatively little attention. The concept of asset management is anattempt to balance these two equally important agendas. It needs to beapplied to every sector of affordable housing.

Follow the lead of affordable housing groups doing asset management.Traditionally, supportive housing groups have not identified closely with thewider affordable housing movement. However, asset management is an agen-da where supportive housing has considerable common ground with the restof the country’s affordable housing organizations. Supportive housing groupsshould seek out opportunities to gain knowledge, resources, and momentumon asset management generated by mainstream housing groups.

2. Rachel Bratt, Confront-ing the Management Chal-lenge: Affordable Housing inthe Nonprofit Sector. NewSchool for Social Research,1994, p. 204. Available fromthe Community Develop-ment Research Center at the New School for SocialResearch.

W e l c o m e | 7

WHAT DOES ASSET MANAGEMENT MEAN?

Asset management is in favor with today’s government funders andhousing groups nationwide. It is a concept that is borrowed from privatesector real estate and is increasingly relevant to nonprofit providers of low-income housing. Yet, despite its growing popularity, asset management ispoorly understood. Often confused with property management, few groupsknow what asset management might involve for them or how they couldapply it. Supportive housing providers, particularly smaller organizationswith backgrounds primarily in social services, AIDS care, or homeless pro-grams, seem least likely of all to know about asset management.

The term “asset” refers to a piece of real estate that has current and futurevalue. The asset management approach asks that you consider the proper-ties you use for supportive housing in terms of their monetary value. Assetmanagement means taking the long view—meaning the next ten to fifteenyears—of whether your property’s value is stable, growing, or decreasing.The idea is that things you do today will set the stage for financial perform-ance tomorrow.

Conventionally focused on the short term, AIDS housing and supportivehousing groups in particular need to shift their perspective if they are toadopt this long-term approach. Ultimately, the asset management mentali-ty translates into concrete practices and policies that will protect andenhance the viability of the asset’s future.

3. Bratt, p.86.4. Bob Stone, “A Guide to

the Roles and Responsibilitiesof an Asset Manager,” Occa-sional Paper Series, LocalInitiatives Support Corpo-ration, Organizational Devel-opment Initiative, p. 3. NewYork, 1997.

INTRODUCTION

“Asset management

involves planning for

the long-term con-

cern for bricks and

mortar...the long-

term economic and

physical viability of

the building.”3

“The group’s horizon

for planning, budget-

ing, and monitoring

must be extended

into the future. We

need to do things

today to make sure

real estate endures

as supportive hous-

ing and achieves its

goals to benefit as

many people as pos-

sible in the long

run.”4

WHY DOES SUPPORTIVE HOUSING NEED ASSET MANAGEMENT?

Many supportive housing providers have “backed into” the real estatebusiness with minimal experience owning and managing property.Before getting into housing, most of your organization’s background mayhave been in delivering support services of one kind or another. In all like-lihood, your agency became a property owner in response to a crisis ofhomelessness among your service constituency. If you are like many sup-portive housing groups, you have a social work orientation to your housingwork. While helpful in day-to-day management of residents’ needs, this pre-disposes the whole organization towards short-term goals. Staff may turnover with the relatively high frequency common among social service organ-izations. This leaves your organization without a long-term “owner” withmemory of when the housing was created. These patterns diminish the longview of where your program has been, in what direction it is going, andwhat needs doing in the long run.

The financial structure of funding for supportive housing is a weak link.Supportive housing has evolved from a series of specialized governmentfunding mechanisms that have relatively short commitments. Thus, manysupportive housing groups find themselves built upon insecure, time-limit-ed resources without contingency plans, should this money dry up.Although some groups have taken steps to build in more long-term financ-ing, others are left with little monetary cushion and cannot afford to dobusiness badly. In these situations, careful monitoring of financial trendsthrough asset management is essential.

A mission of delivering transitional housing can mean financial vulnera-bility. For the subset of supportive housing groups who provide housing ona short-term basis, there are inherent financial problems that come with thisway of structuring the housing. High turnover rates of residents, while desir-able from the perspective of these groups’ missions, result in many costs andfinancial losses that are difficult to recoup. A compounding problem is thefluctuating market for supportive housing groups who operate in a special-ized niche such as HIV/AIDS housing. If you are a niche provider, changesin the status of your target population may reduce the desirability of yourhousing program in unanticipated ways and create financial losses untilyour census recovers.

I n t r o d u c t i o n | 9

1 0 | P u t Y o u r H o u s e i n O r d e r

WHAT DOES THE JOB ENTAIL?

The practice of asset management is made up of a number of discrete tasks. Inplanning your approach, it may be helpful to think of the work in the for-mat of a job description with certain tasks associated with the start-up of theproject and others involved with its ongoing implementation.

Job Description for Asset Management in Supportive Housing

Start-up • Develop long-term asset management goals reflecting the individuality of

each piece of real estate used for supportive housing. • Create a tailored asset management plan made up of policies for meeting

the unique needs of each individual property today, such that it will per-form best tomorrow.

• Systematize operations for collecting data on the property’s operationsand finances with well-designed forms, databases, and software.

• Assess performance against standards in the nonprofit housing industry. • Reevaluate existing arrangements for property management with an asset

management approach.• Compare the financial performance of the property with indicators from

comparable properties in the affordable housing industry.• Analyze trends if the property is losing money and develop solutions.

Ongoing Implementation• Monitor income, expenses, and cash flows to track trends in financial per-

formance.• Inspect conditions of the property and develop timelines that anticipate

capital costs and maintenance schedules. • Budget using a ten-year spreadsheet of anticipated capital costs.• Save or raise money to create reserve accounts as part of project develop-

ment, or fund as part of ongoing operations.• Assess performance against standards in the nonprofit housing industry.• Compare financial performance of the property with indicators from com-

parable properties in the affordable housing industry.• Analyze trends where property loses money and develop solutions.• Report at close intervals on indicators of the property’s performance.• Communicate with boards of directors, investors, and government agen-

cies on the property’s status, performance, and long-term needs. • Ensure compliance with all regulations, reporting requirements, and contracts.• Anticipate the endpoint of funding programs and seek substitutes.

HOW IS IT NOT PROPERTY MANAGEMENT?

Asset management is a broader, longer-term activity than property man-agement. Property management addresses day-to-day needs of the buildingby carrying out rent collection, record keeping, and routine maintenance. Itsemphasis is on details and delivery of basic services. In contrast, asset man-agement has an extended horizon for considering the property’s needs andthe big picture of performance trends over time. For example, this extended,broader perspective includes creating a ten-to-twenty-year spreadsheet topredict the property’s ability to pay for its long-range expenses, secure long-term funding, and examine long-term values in the neighborhood.

There are areas of overlap between asset and property management.Think of property management as a discrete, specialized activity within assetmanagement. For example, as discussed in the next chapter, your choices ofproperty management arrangements should be dictated by your broaderasset management approach. Typically, property management is at the topof a housing group’s to-do list and asset management is at the bottom.Understanding the distinctions between asset and property management isthe first step toward correcting this imbalance.

5. Maria Gutierrez andJohn Vogel, “Nuts and Boltsof Asset Management,” Pre-pared for the Local Initia-tives Support Corporation,June 1998, p. 4.

6. Jim Stockard and BobEngler, “A Guide to Com-prehensive Asset and Prop-erty Management: Manualfor Building Communitiesthrough Good Asset andProperty Management,”Second Edition, Local Ini-tiatives Support Corpora-tion,1997, p. 173.

I n t r o d u c t i o n | 1 1

Asset Management

Hiring and Evaluating Property Manager

Developing Asset Management Goals

Refinancing/Disposition Decisions

Tracking Standards, Benchmarks, Indicators

Managing Cash and Reserves

Fundraising

Communicating with Investors

Hiring Accountant, Lawyers, and Contractors

Property Management

Rent Collection

Day-to-Day Management

Record Keeping

Financial Reporting

Routine Maintenance

Areas of Overlap

Tenant Relations

Annual Budgeting

Capital Costs Study

Preventative Maintenance

Regulatory Compliance

Community Relations

Crisis Management

Security

Asset Value Increase

Asset Management and Property Management Roles5

Asset Management and Property Management Timeframes6

Years: 1 2 3 4 5 10 15

Asset Management

Property Management


SUPPORTIVE HOUSING—ADVANTAGED OR DISADVANTAGED?

Supportive housing is in a unique financial position vis-à-vis the wideraffordable housing field. Your approach to asset management will need toreflect the special strengths and weaknesses of this position. By notingwhich ups and downs associated with supportive housing apply to yourprogram, you will unearth areas to both focus your concern and build yourconfidence.

Upsides

In many cases, supportive housingis free from any debt. Withoutdebt, there is no pressure frombanks that monitor performanceor impose required practices.

A preponderance of deep rentalsubsidies associated with residentswho contribute minimally to rent.These subsidies can offset losseswhen residents do not pay rentand mask inefficiencies of opera-tions.

A preponderance of sponsoringorganizations with charitable orsocial service missions. Typically,such groups have the means offundraising to pay for unmet costsin the supportive housing pro-gram.

A total portfolio of a few smallproperties makes it easier for assetmanagers to follow the details ofeach property.

Downsides

Without debt, there is no outsideagent to help detect problems inyour financial status. Groups thatare debt-free need to be self-moti-vated and watch their bottomlines.

Many deep subsidies come fromshort-term federal funding mecha-nisms. Reliance on these sourcesmay leave groups without accessto longer-term funding mecha-nisms.

Subsidization from sponsoringorganizations is an unreliablelong-term strategy for meetingcosts. Housing needs to be struc-tured so that it can pay for itself.

Lack of a large portfolio of diverseproperties leaves the organizationvulnerable to the impact of prob-lem properties. Buildings operat-ing at a loss cannot be balanced byincome from other real estate.

“The asset manager

of supportive hous-

ing must understand

that their project

may need to oper-

ate with a ‘planned

deficit.’ But these

deficits are okay.

It is the unplanned

ones that are the

problem.”7

7. Brigitt Jandreau-Smith,Corporation for SupportiveHousing.

Ups and Downs of Supportive Housing’s Financial Position

DEFINE YOUR ASSET MANAGEMENT GOAL

Your asset management goal will dictate many of the decisions youmake. It will be the guiding principle for how you do business. It is notto be confused with the programmatic goals your organization has estab-lished for the services it delivers. Most supportive housing groups have agoal statement related to desired changes in the status of their residents.Asset management asks that you transfer that perspective to the propertyitself. Ask what goals you have for the status of your property as an asset.

To begin, review what covenants exist for maintaining your building asaffordable AIDS or special needs housing and for what period of time.For example, many supportive housing groups are obligated to maintaintheir property as affordable housing for forty or more years as a condi-tion of their financing. Housing Opportunities for Persons with AIDS(HOPWA) requires a ten-year commitment to housing people withAIDS.

Within the parameters of your covenants, define your asset manage-ment goal. One group’s goal may be to maintain a building as AIDShousing for as long as the HIV epidemic continues and to build an addi-tion for a day care center onto the property. Another group may intendto sell their building in the next five years to take advantage of the neigh-borhood’s increased real estate values and adjust their housing model tochanges in their target population’s needs. They may want to use rev-enues from the sale to create a larger, mixed special needs housing pro-gram in a nearby neighborhood.

Exercise in Developing Your Asset Management Goal

As an exercise, it may be helpful to think about goals for another asset that is common-

ly owned, such as a boat. A new boat is purchased with any one of several possible goals

of how it will be used. Perhaps the owners want to preserve it as a showpiece to be

passed along to future generations. Or perhaps they want to race it in regattas and sail

around the world. Depending on their goal, the boat’s owners will spend money differ-

ently and keep track of different aspects of its performance and wear and tear. Similarly,

if you are to plan how you will maintain and monitor the building you use for supportive

housing, you need to have a clear long-term asset management goal in mind.

BEFORE YOU START

START TO THINK LIKE A BUSINESS

The asset management approach requires an unfamiliar shift in roles.You will need to take off your social worker and social activist hats for amoment. Pretend you work in the private sector where work is conceptual-

ized in terms of bottom lines. In the private sector, you learn to keep youreye on the bottom line: profits.

In supportive housing, you are trying to balance two bottomlines: (1) meeting your costs and (2) providing the best possible

services on a day-to-day basis. This is known as the “double bot-tom line.” In many cases, these two commitments compete with one

another, such as when more expensive programs are desired but thebudget cannot support them.

The asset management approach offers a different perspective on thedouble bottom line. It suggests that the two goals of excellent service deliv-ery and cost efficiency can complement one another. Try to reconceptualizeyour approach to services from a business perspective; see how effectivesocial services can strengthen the bottom line. For example, programs suchas case management, relapse prevention, workforce participation services,and personal budgeting encourage residents to have lower impacts on yourproperty. That is, they ultimately save you money. On the other side of theequation, residents who are helped to increase their earnings may reducethe amount of subsidy that comes in to the building from public funds.Thus, there are many variables to consider.


Example of the “Double Bottom Line” Approach

AIDS housing offers a good example of the merits of thinking in terms of the “double

bottom line.” There is a current trend toward residents’ unprecedented independence from

home-based support services observed nationwide. In modifying programmatic models

to better fit residents’ changed status, AIDS housing providers need to consider what is good

business. If they simply cut back on support services in response to this new pattern, they

may set off trends that deteriorate the property’s financial status. For example, having

fewer case managers may reduce regularity of rent payments, lead to higher turnover of

units, and allow more damage to the property to occur. When problems compound them-

selves over time, these results may cost more money than the investment in consistent sup-

port services. Ideally, AIDS housing providers will learn to give both bottom lines equal

weight when making these kinds of choices.

B e f o r e Y o u S t a r t | 1 5

ANSWER SOME BASIC QUESTIONS

A good simple exercise to get started in asset manage-ment is to sit down with your accountant and look at theincome statements for your property. Explore the simplequestions outlined below. Your answers to these questionsshould help ignite concern for how you can continue toprovide a clean, safe, and comfortable environment, if youdon’t start evaluating and planning how to manage thisasset over the long term.

Simple Questions for Your Accountant

• Does our supportive housing program meet its costs now? • If there is a larger sponsoring organization, then what size subsidy is the

larger group contributing to keep us in the black?• How much government subsidy does our program receive? What is the

likelihood that it will be renewed?• Is subsidization of the housing program growing each year? • Is the sponsoring organization in a reliable position to maintain this subsidy?• What factors are causing the property to lose money?• What specific system upgrades would reduce our operating costs?• Does our program have operating reserves for planned deficits? How long

will they last?• Are there any costs showing unanticipated increases?• Is the tenant rental income stable or does it fluctuate from month to month

or year to year?• How much do we write off on average for failing to collect at least 90 per-

cent of rent contributions each month?• How long does it take on average for us to fill a unit after it is vacated?• What is our average vacancy rate?• Do we know what big-ticket (capital) expenses are likely to accrue and

when?• Is there money in reserve accounts for unanticipated operating deficits

and longer-term major improvements that may be needed for the property?• Are we underinsured or do we have an insurance deductible that is bur-

densome? • Are we insured against local hazards, such as earthquakes, that could

expose us to high repair costs?• Do we know of any code upgrades our property currently needs?• Do the owners of this property (e.g., the board) know the answers to these

questions?

A Guide to Comprehensive Asset and Property Management. . . . . . . . . . . . . $13

Nonprofit Housing and Management Specialist Course. . . . . . . . . . . . $800

Asset Management Training Curriculum . . . . . . . . . . . . . . . . . . . . . . . . $100

Selecting a Management Firm: Workbook and Sample Forms . . . . . . . . . . . . $11

Build a Manual Software Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65

TrackPro Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500

TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,489

See Best Picks at the back of this guide for details on where to obtain these items.

FIND A LITTLE MONEY TO START

Getting started on asset management will not be a costly endeavor. Yourinitial expenses will be modest investments in training, publications, soft-ware, etc.


Larger organizations may want to put a line item in their budgets for per-sonnel costs associated with asset management, perhaps an amountequivalent to one-quarter of a full-time management-level employee. If youcan’t find the money in your budget, look to your local community develop-ment or housing agency for “one time only” seed grants to get you started.

Sample Starter Kit on Asset Management

FIND MORE MONEY AS YOU GO

Plan on needing some grant money to do asset management. As yourgroup begins to implement asset management practices, the need for moneywill become evident. In particular, raising money to invest in reserveaccounts is perhaps the biggest financial obstacle to overcome without someexternal source of subsidy.

It is worth noting the precedents for grant making in support of asset man-agement. Mainstream affordable housing groups have received variousforms of financing, usually from national intermediary groups, to do thiswork over the last decade.8 Explaining this history is a good starting pointfor arguing your case with potential funders.

You may want to partner with other supportive housing groups in yourregion to organize efforts to raise money for asset management and, in par-ticular, for reserve accounts. As a group, you would be in a better position toapproach local government officials and sources of private financing in yourcommunity about the need for resources.

The Need for Incentives

“There is always a conflict between spending on your operations and committing to your

capital reserve in this business. It’s tough. I know of a foundation that created a matching

fund for youth centers, in which groups that saved money to improve their buildings were

given an equivalent amount in grants. Maybe this could be replicated for supportive

housing.”

—Terry Gagnon, Director of Finance, Paul Sullivan Housing Trust 9

8. Bratt, p. 191.9. Terry Gagnon, Direc-

tor of Finance, Paul SullivanHousing Trust.


DELEGATE ASSET MANAGEMENT RESPONSIBILITY

There are many ways to delegate the responsibilities of asset management.Your choices will depend on the size and skill of your staff. Perhaps yourorganization’s busy schedule makes it seem that there is no choice at all. Infact, many supportive housing groups believe that asset management will bean extra burden that their organization cannot bear with their currentstaffing. But, in all likelihood, it will just require thinking creatively abouthow the work can be accomplished. Keep in mind that asset managementis the responsibility of the actual owner—your agency’s board of directors—so the work should be done as close to the hierarchy of the board as possible.

How One Supportive Housing Administrator Became an Asset Manager

Don Maison, President and CEO of AIDS Services of Dallas (ASD), heardabout the concept of asset management from colleagues operating afford-able housing in his region of Texas. Interested in improving the perform-ance of his organization’s housing, Don followed a recommendation thathe enroll in a four-day class to become a Nonprofit Housing ManagementSpecialist (see Best Picks at the back of this guide). The course appealed toDon’s belief that there is much to be learned about nonprofit housing out-side the AIDS housing field.

While it involved travel and time away from his organization, the courseproved worthwhile. Most importantly, it offered Don exposure to basic con-cepts, such as replacement reserves and capitalization rates, as well as strate-gies such as computing net operating income. He felt his overall compre-hension of asset management components improved. “It is nice to beexposed to what these terms mean when discussing financial issues withreal estate attorneys and funders.”

Don returned to Dallas with some forms and tracking sheets that he sharedwith the facilities and maintenance staff of his organization. As a result, thestaff changed how they track work orders and “make-readies” (getting unitsready for new tenants). In general, he raised the staff’s consciousness aboutthe importance of tracking what it costs and how long it takes to turn overand lease-up units. The staff now understand that this is an area wheremoney is saved or lost. However, because each of ASD’s properties operateson a unique model of housing, Don finds that the condition of his proper-ties varies so much from one to the next that national standards don’t apply.

On an ongoing basis, Don consults a publication from Local InitiativesSupport Corporation, “Guide to Comprehensive Asset and Property Man-agement” (see Best Picks), to learn about asset management or to refresh hismemory. He finds it well organized and easy to look up any topic and findquick answers.

“What is important

is not who takes on

the role but that it

is taken on explicit-

ly by someone and

that the organiza-

tion finds ways to

support the func-

tion.”10


10. Stockard and Engler,p. 176.

Don is growing naturally into the role of asset manager for his organization.The board of directors falls into the role of oversight and buy-in of his work.Next steps in asset management for AIDS Services of Dallas include research-ing and purchasing some kind of software to improve property management(see Best Picks). Currently, they use Excel. Don plans to explore LISC’s“Track-It!” software, which is designed to produce reports on asset manage-ment for nonprofit housing providers.

The creation of replacement and operating reserves for all ASD properties isalso on Don’s longer-term agenda. As required by one of the organization’sfunding mechanisms, the Low Income Housing Tax Credit Program, one ofthe organization’s properties already has such a reserve. Although he has yetto find the time or resources to expand this standard to all the properties,Don now better understands the need for them.

Like those of most AIDS housing organizations, ASD’s properties do notmeet their costs independent of the organization’s reserves. AIDS Services ofDallas has been fortunate over the years to “tap into a lot of freebies” andbenefit from successful capital campaigns. Nevertheless, this is not a secureplan for doing business. Don’s long-term strategy for getting ASD propertiesto pay their costs is to diversify the organization’s real estate portfolio toinclude non-special needs housing that will have a healthier cash flow thanAIDS housing. He believes all supportive housing groups need to becomemore familiar with funding streams that are not dedicated to AIDS, home-less, or special needs populations (see Best Picks). “Were it not for HOPWA[Housing Opportunities for Persons with AIDS], what does the future holdfor small AIDS housing groups reliant on these narrow resources?”

Don’s example points to the benefit of becoming educated about asset man-agement through the many courses, printed materials, web sites, and soft-ware packages that exist outside the supportive housing field. His work alsodemonstrates that introducing asset management is likely to be a gradualprocess that will build over time.

Options for Delegating Asset Management11

a. For small organizations, the executive director may make recommendations and the

board make decisions.

b. A new trend in larger nonprofits is to have a full-time asset manager on staff.

c. Middle-sized organizations may have the housing director serve as asset manager in

addition to other responsibilities.

d. The property manager may be delegated asset management functions if the indivi-

dual or firm has the necessary experience to do so.11 Stockard and Engler.,

p.169–180


PLAN FOR ASSET MANAGEMENT TO BE TAKEN SERIOUSLY

Making sure asset management is taken seriously may require some formalsteps to heighten the awareness of personnel in your organization. For amoderate-sized housing organization, it is estimated to take approximately23 hours a month to do asset management.12

How to Emphasize Asset Management through Job Structure13

a. Add the terms “asset management” to a job title.

b. Provide time and money for training staff in asset management.

c. Redistribute existing job responsibilities to asset management tasks.

d. Take the asset manager seriously by making time for asset management reports.

Distribute reports. Use reports in key decisions.

e. Raise the salary of the staff member designated as the asset manager.

12 Workshop: Nuts andBolts of Asset Management,Lincoln Filenes Center forCommunity Development,Tufts University, 1999.

13 Stockard and Engler, p. 176.


EDUCATE YOURSELF

Invest time in reviewing materials about asset management. Realize thatthis guide is a basic primer. Many more detailed resources about asset man-agement are available and are listed in Best Picks at the back of this guide.In recent years, several national organizations have collaborated on devel-oping trainings, publications, and conferences on asset managementin the nonprofit housing sector, all of which are available at afford-able prices.

Questions to Anticipate from Staff

HOLD A MEETING

Expect that it will take some focused time to introduce the concept ofasset management to staff and board members. Set aside a special meet-ing to cover the topic well the first time. You want to convey that while staffand board may identify strongly with the nonprofit sector, by virtue of work-ing in housing they have crossed over into the business world. If the organi-zation’s assets (its housing resources) are going to be protected and reachtheir full potential, everyone will need to be business savvy.

In meeting with staff, plan a presentation that works for the diverse back-grounds and learning styles that are especially common in supportive hous-ing organizations. Try using a variety of approaches, including small groupdiscussions, to help them grasp your message. Conclude your meeting byoutlining the first steps your organization will take and their anticipatedtime frame.

FIRST STEPS

a. What does asset management mean?

b. How does it differ from property

management?

c. Why is it important?

d. What will it entail to start?

e. How will this affect our current jobs?

Questions to Help Generate Staff Discussion on Asset Management

• “How many of you can think of a special needs housing program of somekind that has gone out of business in our community? What problemscontributed to its demise? What do you think the sponsor could havedone differently to avert these problems? What lessons for our work canwe take from these observations?”

• “If you joined an Internet start-up company with employee stock options,what would you want to know before you took the job? How would youevaluate whether to stay with that company? How would you obtain theinformation you need to make your career decision? What parallels existwithin this context and how should staff of our organization evaluate thestatus of our properties?

START A BINDER

Experts recommend that housing groups create detailed AssetManagement Plans. Don’t mistake the need for such a plan as an emptyformality. Basically, the Asset Management Plan is a collection of writtenstrategies and policies for how the property will be administered.

Think of your Asset Management Plan as a work in progress. A simpleway to approach the task is to put in writing all the decisions that are madealong the way. Then create a binder with tabbed dividers and add elementsas your asset management work progresses. Have copies of the plan avail-able at each of your sites.

The objective of the plan is to transform your hard work into a lastingtool and standard that can be passed on to staff members who inherit theresponsibility of preserving your housing program. Whatever format youfollow, taking the time to write down how things get done is a worthwhileinvestment of your time and energy. If your organization is like most sup-portive housing organizations, it has a relatively high rate of turnover at themanagerial level. The Asset Management Plan will outlast such personnelchanges and pass on a permanent standard.


WHAT GOES IN AN ASSET MANAGEMENT PLAN?

An Asset Management Plan need not conform to any standard or model.It is primarily an internal document and its workability should reflect that.You can follow the recommended format below or, alternatively, inventnames of elements that are most relevant to your particular housing group.Note that a good Asset Management Plan makes a strong impression on fun-ders and underwriters. They will gain confidence in your operations fromreading it on their visits to your site.

Contents of the Asset Management Plan14

a. Goals explaining why you own and provide supportive housing

b. Finance Plan containing your initial pro forma and a twenty-year spreadsheet

for operations

c. Copies of legal documents that have covenants that need to be monitored (e.g.,

Funding and Disbursement Agreement)

d. Monitoring Strategy detailing how you will study financial trends and upkeep

of the property

e. Annual Budget compared to Actual Comparisons

f. Updated Pro Forma Budgets that capture information that changes over time

g. Property Management Plan outlining the day-to-day operations of the building

h. Finance Plan enumerating all funding sources and obligations

i. Long-Range Capital Plan explaining the intended sources that will pay for major

costs in the future

j. Resident Participation Plan encouraging involvement of consumers in oversight

of the housing

k. Resident Selection Plan defining the eligibility and tenant-screening criteria and

process used for applicants to your program

l. Preventative Maintenance Plan outlining detailed plans for maintaining major

building elements in good working order

14 Workshop: Nuts andBolts of Asset Management.

F i r s t S t e p s | 2 3

SPECIAL WORDS ABOUT THE PROPERTY MANAGEMENT PLAN

Fundamental to all the written policies will be your Property Manage-ment Plan. The Property Management Plan explains how the building willbe managed on a day-to-day basis and what standards are expected. Hous-ing experts say that before longer-term asset management can be achieved,the Property Management plan must be perfected.

Every housing program will have its unique property managementneeds. Variables influencing these needs include the target population,security issues, marketing dynamics, support services, and lease provisions.Given these variables, you will find that copying a generic property man-agement plan is not a good idea. Experts recommend that you create a planto represent your specific tenant clientele and to meet your particular goals.

Find a general model of a plan you like and then carefully tailor your owndocuments for each housing program you operate. See Best Picks at the backof this guide for publications and software that can help you create a fine-tuned Property Management Plan.



Asset Management Advice Column

Dear Advice Guru,I am the director of housing programs for a large social service agency. Among theprograms I manage is a small multi-family property used as special needs homelesshousing. The property was bequeathed to my organization, which is primarily asocial service provider, before I started working here. When they received it, myorganization had no experience, or strong interest for that matter, in managingrental property. As a result, I inherited the job of managing the building with noth-ing in writing and skeletal systems in place. While the building is in good condi-tion and the residents are generally very satisfied and stable, the long-term outlookfor the property is vague. Our income does not begin to meet our costs, so my organ-ization must contribute money from its own reserves. There are questions about howlong this can continue. In this vacuum of clarity, management is a challenge. It ishard to know how to make decisions regarding improvements, clarify my role, planfor the building’s long-term needs, and balance the double bottom line of excellentservice delivery with cost efficiency. What should I do?

Sincerely,Housing DirectorAIDS Series Committee, your town

Dear Housing Director,You’ve come to the right place. If things continue along their present course, yourorganization will probably be forced to sell its property some time in the future andthe residents will lose their home. Your organization needs to begin an AssetManagement Plan. Start with writing a Property Management Plan right away.Put everything you do now—tenant issues, maintenance, grievances, rent collec-tion, inspections, etc.— in writing right away. The more detail and specificity, thebetter. Then take your work, your concerns, and literature about asset managementto a meeting with administrators of your organization. Make your case for the assetmanagement approach and ask that your efforts be supported.

Advisedly,Your Guru

a. Marketing and Outreach Strategies

b. Eligibility Requirements and Required

Documents

c. Tenant Selection Screening

d. Credit Check Process and Fees

e. Waiting List Practices

f. First and Last Month Rent/Security

Deposit Policy

g. Leasing Procedures

h. Move-In Procedures

i. Tenant Orientation

j. Common Space and Building Rules

k. Parking

l. Community Relations

m. Resident Involvement Practices

n. Drug Policies

o. Guest/Visitor Policy

p. Pet Policy

q. Storage Policy

r. List of Furnishings

s. Pest Control Practices

t. Unit Inspection Practices

u. Cleaning Practices

v. Grievance and Complaints Policies

w. List of Maintenance Priorities

x. Work Orders

y. Unit Turnover

z. Security

aa. Forms and Permits Required by

City/State/County

15 Workshop: Nuts andBolts of Asset Management.


Table of Contents for a Property Management Plan15

EVALUATE YOUR PROPERTY MANAGER

Reevaluate your current arrangements for property management withthe asset management approach. Whether to self-manage or contract outproperty management is a key decision. This is because bad day-to-daymanagement situations can be damaging to the long-term status of aproperty. You may assume that as an organization’s portfolio of housinggrows, property management is typically moved inside. However, manynonprofit housing groups have not followed this evolution.16 Thereare no definitive rules.

Property Management Options

a. Manage property internally within your organization.

b. Hire a consultant to help with setting up an internal property management team

and systems such that you can self-manage your property.

c. Hire a private company to be your ongoing property manager.

d. Hire another nonprofit organization specializing in affordable housing to be your

property manager.

Communication with your property manager is key. Ideally, whether in-house or contracted out, the relationship between asset management andproperty management should be close and organized by a system of antici-pated reports, site visits, and meetings. Problems occur when in-house prop-erty managers are micromanaged by administrators. Instead of overinvolve-ment in the minutiae of property management activities, administratorsshould use information provided by the property manager to gain a per-spective on the bigger picture of the property’s performance and the agency’sgoals.

If you choose to self-manage, do so with realistic expectations. Don’t doself-management primarily as a cost-savings strategy. Furthermore, don’tassume you will get better results. Nationally, there is no conclusive evidencethat housing groups have better success, or even lower costs, with inside,rather than with contracted management. However, there is a good argu-ment for self-management: to be more familiar with your residents’ lives. Ifyou follow the self-management route, be sure to use benchmarks (dis-cussed in the next section) that will help you keep spending on desired serv-ices within limits that your program establishes.

16 Bratt, p. 75.


Criteria for Deciding Between Inside and Outside Property Management17

a. Availability of outside management agents, including other housing nonprofits or

housing authorities in your area

b. Private managers’ willingness to work with a nonprofit client

c. Pressure from your financing agents to “go outside” for management services

d. Your interest in staying close to your residents’ day-to-day lives

IF YOU CONTRACT OUT PROPERTY MANAGEMENT

Those who contract out property management have special concerns. Ifyou follow this route, make sure that your organization does not divorceitself from the property so much that you lose track of information neededfor asset management. In addition, think through the criteria by which youwill evaluate your property manager. Expect more than the minimum yardwork, painting, exterminating, etc. Communicate that you want the proper-ty manager to contribute value to your asset.

The selection and contracting process sets the tone for your relationshipwith your property manager. Try to come across as professional and knowl-edgeable. A formal process to choose your vendor will help give this impression.

Recommended Steps for Choosing a Property Manager19

a. Do outreach to property management firms.

b. Prepare a formal request for proposal.

c. Review and evaluate the proposals with a ranking sheet.

d. Check references.

e. Look for experience with the U.S. Department of Housing and Urban Development

housing programs.

f. Review their presentation of financial data for other projects.

g. Compare administrative fees among management firms.

h. Negotiate a deal to suit your specific project and goals.

i. Educate your property manager about the particular needs of the residents you house.

j. Outline the criteria on which the property manager will be evaluated.

Be vigilant in your checks and balances of property management ven-dors. As an industry, property management suffers from a reputation of ille-gal activities such as kickbacks. Plan on verifying the property manager’swork by visiting the site and checking with residents on a regular basis.

“You are not simply

a community group

dabbling in housing

and desperate to

find someone to

solve management

problems.”18

17 Ibid.18 Joan Wallstein,

“Selecting a ManagementFirm: A Workbook andSample Forms,” OccasionalPaper Series, Local InitiativesSupport Corporation, Orga-nizational DevelopmentInitiative, 1996, p. 11.

19 Ibid., p. 5.


GET ORGANIZED

Asset management involves tracking indicators and monitoring trends inthe property’s performance. Gathering these data in a timely, organized,and efficient fashion is key. Designing your system for data keeping maybring the kind of satisfaction one gets from a well-organized basement.Every piece of information has its place and is easily located. To get there,you will need different kinds of forms. Some will record daily informationsuch as move-ins/move-outs and work orders. It is also useful to have formsthat summarize information such as capital improvements that will be nec-essary over the next ten years.

Well-designed forms are essential for managing data about your proper-ty. Supportive housing providers often use simple systems such as enteringall their data into an Excel spreadsheet. Switching to more carefully craftedschedules and forms may produce more organized and thorough informa-tion from which to make your analysis. For example, poorly structured rentschedules are a common problem in supportive housing that can be easilyfixed with the right format.

A number of ready-made prototype forms have been developed specifi-cally for nonprofit housing groups to use. They save time and offer a varietyof ideas about how to collect information. See Best Picks at the back of thisguide for a list of publications and software you can purchase that comewith ready-made forms both in hard copy format and on diskette. Amongthe many useful forms available is one for creating a Monthly AssetManagement Report, available with Track-It! software. You can also createyour own with contents similar to those outlined below.


20 Track-It! Asset Manage-ment Software InstructionGuide, Local InitiativesSupport Corporation, 1998,p. 21.


Contents of a Monthly Asset Management Report20

Net profit per unit Occupancy rate

Total operating expenses Average unit turnaround time

Budget to actual expenses Turnover rate

Capital reserve contribution per unit Families on wait list

Collection rates Average unit preparation time

Tenant receivables per unit Work order backlog

Subsidy receivables per unit Average work order completion time

Accounts payable per unit Percentage of units in arrears

21 Terry Gagnon, PaulSullivan Housing Trust.

START RESERVE ACCOUNTS

Creating reserves may be the single most important step in asset man-agement. By investing money into reserve accounts today, you will havefunds to pay for expenses that will occur in the future, whether anticipatedor not. This source of financial security will avert the financial problems anddisruptions to operation that occur when housing groups encounter expens-es that cannot be covered by operating income, as they inevitably do. Aswith any form of savings, reserve accounts require doing without money inthe short term so as to create long-term security. Similar to saving for achild’s education, it is best to start making contributions as early as possible.Typically, you make monthly deposits into each of these cash reserves in astandard amount. These funds grow over time to give your organizationmore value for its investment.

Supportive housing has few examples of ample reserve accounts. In fact,for some supportive housing organizations, they are an unknown. If yoursis a housing group that does not even meet its existing costs, it may be dif-ficult to imagine finding the money to squirrel away into reserves. Theseadverse conditions require a concerted effort if supportive housing groupsare to catch up to other parts of the housing sector in protecting their assetsthrough reserve accounts.

Low Income Housing Tax Credit properties have a better outlook. Groupswith this form of financing are an exception. For one, they are mandated tocontribute a portion of their operating budget to a reserve account. In addi-tion, this program allows for a Support Service Reserve to be included in thecapital budget.

If you do not have Low Income Housing Tax Credit funding, you will needto experiment with your budgets to determine whether it is permissible touse the grants you receive for reserve accounts. Alternatively, consider chan-neling a portion of your residents’ rent contributions directly into yourreserves.

“Regardless of how

well or poorly

endowed your hous-

ing group is, there

will always be a ten-

sion between spend-

ing on operations

and contributing to

reserves.” 21


Four Reserve Accounts for Supportive Housing

a. Social Service Reserve—Puts aside funds equivalent to a percentage of your social

service budget to be used to continue seamless service delivery. It protects against an

unexpected reduction or termination of funding for services. This reserve also allows

you to bridge gaps in funding when one source dries up and another takes its place.

b. Operating Reserve—Puts aside funds equivalent to a percentage of your day-to-day

operating budget to pay for unanticipated increases in operating expenses. Examples

include spikes in the price of your property taxes, utilities, or insurance. This reserve

allows you to meet such costs without throwing your operating budget out of kilter.

c. Capital Reserve (also called a Replacement Reserve)—Puts aside contributions equiva-

lent to a percentage of the total replacement cost of your building. It is used to pay for

repair and replacement of elements such as roofs, elevators, etc. The rationale for a cap-

ital reserve is that eventually your building is going to cost you money you don’t have.

d. Rental Subsidy Reserve—Puts aside money to be used when rental subsidies are short

term and the provider wants to ensure that the target population can be served for a

longer period. It can also be used when no other subsidy is available for a unit.


“Do not turn away

from the establish-

ment of a capital

reserve—it will not

go away. Do not let

the account slide.

This would be sign-

ing a death warrant

for your property. If

necessary, cover the

need in phases. But

do cover the need.”24

22 Bratt, p. 86.23 LISC, p. 119.24 Text from Institute

for Real Estate ManagementCourse #305, p. 16.

PLANNING YOUR CAPITAL RESERVE

The need for a capital reserve deserves special priority. Research into thelongevity of affordable housing resources reveals that groups who lack ade-quate capital reserves have an uncertain future.22 For-profits in the real estateindustry have heard this warning and are generally better prepared to pay forwhat they will need. The practice of saving large sums of money in a capitalreserve generally runs contrary to common practice in nonprofit housing,where practitioners are constantly trying to do more with less. Reserve plan-ning is an area where nonprofits would do well to mimic more closely theirfor-profit counterparts.

Start your capital reserve by estimating savings goals for the amount ofmoney you want to accumulate and maintain in your reserve. Keep in mindthat moderately rehabilitated properties will need capital infusions muchearlier than buildings developed as new construction or complete rehabili-tation. All the major elements of your property will ultimately need repairor replacement.

Two Ways to Estimate Savings Goals for a Capital Reserve

1. The simplest strategy is to adopt the nonprofit housing industry’s standard of accumu-

lating savings equivalent to 5 to 20 percent of your property’s replacement value.23

Because major components may need replacement sooner, moderately rehabilitated

buildings will require a higher percentage set aside than either new construction or

substantially rehabilitated property. To calculate, consult your property insurance carrier

each year for an updated estimate of the replacement value for your property. A draw-

back to this method is that it doesn’t project anticipated expenses along a timeline,

leaving you without a sense of when your savings goals must be met.

2. The most thorough strategy is to conduct a capital cost study of all the major elements

of your building and predict both the life expectancy of each element and the future

replacement costs. Use these calculations to estimate the total amount of the capital

reserve goal and the timing of future outlays. See the following page for a breakdown

of steps in such a survey.


Major Building Elements of a Capital Cost Survey

Steps of a Capital Cost Study

1. Find a knowledgeable person, such as a general contractor or experienced facilities

manager, to do a walk-through of your property and evaluate major elements.

2. Realize that a contractor, who will look at your building free of charge, may overesti-

mate the work needed. A building inspector will charge a fee but will provide a more

reliable estimate.

3. Ask for written estimates on the life expectancy of each of your building’s major

elements.

4. Research the cost of replacement for each element. Local vendors are probably best

at answering questions pertaining to replacement costs for major appliances and

systems.

5. Pull all this information together in a spreadsheet that maps out the anticipated

costs over time according to your predictions.

6. Tabulate the costs to provide at least a ten-year analysis of your anticipated capital

needs. Some groups go so far as to calculate twenty-year spread sheets.

7. Match the anticipated capital needs with the reserves you have accumulated to date.

The difference will give you saving goals for your capital reserve.

Regional Capital Cost Study

“Our housing organization does have an operating reserve but, unfortunately, nocapital reserve to tap for major building improvements. However, here inConnecticut, we are lucky in that there was an initiative to create a statewide bondfund to pay for major capital expenses in HIV/AIDS housing. First, there was aprocess of systematically assessing the needs of all the properties. Then the statefloated a general obligation bond to pay for those repairs and refurbishment. Forus, this has been a great resource.”25

a. Roof

b. Exterior paint, siding

c. Windows

d. Furnishings

e. Elevators

f. Heating systems and

water heaters

g. Air conditioning

h. Plumbing

i. Wiring

j. Carpets, flooring

k. Security systems

l. Required system

upgrade

m. Major appliances

n. Weather protection

o. Trees, shrubs

p. Fire extinguishers,

alarms

q. Compactors, dumpsters

25 David Mensah,Connecticut AIDS ResidenceProgram.


Exterior Building Component Analysis (for 2001)26

Item Cost Life

Roof – pitched $.75/sq.ft. plus $1.00 per 15 yearssq.ft. for plywood repair

Roof – flat $2.50/sq.ft. 12 years/10 in extreme climates

Siding – vinyl $1.50/sq.ft. Indefinite if good and aluminum material and if cared for

Siding – hardboard $1.00/sq.ft. Indefinite

Painting $.50/sq.ft. 5 years

Paving $.60/sq.ft. 15 years

Interior Building Component Analysis (for 2001)27

Item Cost Life

Boiler/Furnace Variable Indefinite if maintained properly

Heating – individual Variable Gas – Indefiniteunits Electric – 20 years

Air Conditioning – Variable 15-18 yearscentral

Air Conditioning – $600/each 15 yearsindividual

Hot Water System – Variable 15 yearscentral

Hot Water System – $240 each 12 yearsindividual

Elevators Variable Indefinite – 30 years

26 Institute for Real EstateManagement Course #305.

27 Ibid.


28 Institute for Real EstateManagement Course #305.


Interior Small Items Building Component Analysis28

Item Cost Life

Carpet in units $10/sq.yd. 12 years

Carpet in 8 yearscommon areas

Tile in units $10/sq.yd. 18 years

Tile in common areas 12 years

Cabinets $150/linear foot 18 yearsminimum

Ranges $400 minimum 15 years

Refrigerators $350 minimum 15 years

Disposals $75 12 years

Exhaust Fans $80 8 years

Dishwashers $410 minimum 8 years

Washers $410 10 years

Dryers $300 minimum 12 years

THE NEED TO COMPARE YOURSELF

The affordable housing community has agreed upon certain perform-ance standards towards which nonprofits can strive in the way they dobusiness. These performance standards prompt an organization topush itself towards optimum efficiency and financial stability.

Performance standards are not to be confused with servicedelivery standards. In fact, in many cases the performance of theasset can be hidden from tenants, who may feel well servedand satisfied with their experience in your supportive housingfacility. A program may be functioning at a high level in termsof service delivery despite problems with performance.

To date, no special performance standards have been created just for sup-portive housing. However, there are some documents spelling out “stan-dards of care” for supportive housing. If you obtain these documents, youwill find some recommendations related to asset management issues thatwill be worth your attention. Consult Best Picks at the back of this guide fora listing of standards-of-care publications.

For now, supportive housing groups need to look outside their ownhousing niche for performance standards. As there are, to date, no officialstandards for the specialty of supportive housing, you will need to start byconsulting those of the broader field. Note those standards with which yourgroup is consistently out of line. Ask yourself if there is anything about theprofile of your housing that makes these standards not applicable. Consideradopting those standards that seem relevant to the context of your work andwrite them into your Asset Management Plan.

RISE TO THE STANDARD

PERFORMANCE STANDARDS TO CONSULT

Performance Standards re: Budgeting

a. The budget is developed annually and reviewed monthly.

b. An income and expense report is produced and revised monthly.

c. The operating budget is sufficient to cover all expenses.

d. Variance between spending and allocations in your annual budget is within 10%

for the year.

e. Total operating expenses are less than 90% of your income. The remaining 10%

of income is put into an operating reserve.

f. A capital reserve is maintained, equivalent to 5% to 20% of the estimated value

of your property.

g. An operating reserve is maintained, representing between 10% and 25% of the

annual operating budget, depending on how much cash flow is generated after

debt service.

h. A supportive service reserve is maintained, equivalent of 20% of your annual

supportive service budget.

i. Expenses incurred once or twice in a year are divided into twelve monthly

increments in the annual budget.

Performance Standards re: Leasing

a. 95% of your rental units are occupied at all times.

b. 95% of your rents are collected from tenants by the middle of the month.

c. Your waiting list is updated every three months.

d. Five active applicants are on the waiting list for every available unit size in your

facility.

e. A unit is made ready for occupancy by maintenance in one to two days and leased

in another two to three days.

f. Management screens tenants on your waiting list before units become vacant.

g. Management consults references from prospective tenants’ last two housing

arrangements.

h. Average monthly turnaround time is ten to fifteen business days.

i. No more than 15 to 20% of units turn over in a month.


Performance Standards re: Maintenance

a. Every unit is inspected once a year.

b. Emergency maintenance is performed within twenty-four hours.

c. Routine maintenance is performed in three to seven business days.

d. Preventative maintenance is performed every two weeks.

e. The curb appeal of the building is superior or comparable to the surrounding properties.

f. There are monthly inspections of curb appeal.

Other Performance Standards

a. A capital needs study is undertaken every five years.

b. Utility consumption is monitored as well as costs.

c. Energy bills do not vary out of proportion to changes in utility rates and weather

conditions.

d. Bills are paid within thirty days of receipt.

e. All reports are submitted within ten days of the deadline.

f. Resident satisfaction with the property and its management is assessed annually.

g. Appropriate emergency drills (e.g., fire, earthquake, tornado) occur twice a year.

R i s e t o t h e S t a n d a r d | 3 9

RED FLAGS TO WATCH FOR

There are indicators that problems may lie ahead for your property. It ishelpful to have an idea which of these indicators may signal problematictrends. If such trends persist, changes are needed.

Indicators of Problems Ahead29

a. Rent collection is less than 90% of rent roll.

b. Accounts receivable are greater than 20% of your current assets and tenant

accounts receivable are greater than 50% of your total accounts receivable.

c. There is a growing gap between your expenses and income.

d. The capital reserve is less than 5% of the replacement cost of the property.

e. The operating reserve is less than 10% of your operating budget.

f. The vacancy rate is higher than acceptable.

g. The turnover rate is higher than acceptable.

h. There are an inordinate amount of maintenance costs.

29 Bratt, p. 119.


FIND WHERE THE MONEY GOES

The asset management approach schools you in the art of saving money.Whether your program is financially stable or troubled, there are alwaysgoing to be areas where operations contribute to financial losses. Ratherthan jumping into austerity measures in an effort to save, it is worthwhileto first study where the money goes. Part of this process also involvesdistinguishing between controllable and uncontrollable costs.

Performance indicators and benchmarks identify where you are leachingmoney. Note that performance indicators are different from performancestandards discussed in the last chapter.

Using both indicators and benchmarks requires research and trackingdata. It may be easier to start with performance indicators, as no outsideinformation will be required. Benchmarking is a longer-term project thatwould involve the cooperation of the supportive housing providers in yourcommunity.

YOUR CHOICE OF PERFORMANCE INDICATORS

There is much to be learned from the wider nonprofit housing fieldabout performance indicators. Other nonprofit housing providers havedeveloped recommended measures for reviewing the performance of assetsover time and identifying positive and negative directional movement. Youwill find many of their indicators applicable to your particular supportivehousing project(s).

Choose some measures of interest to you and set up your organization toproduce monthly reports on these particular trends. A simple Excel spread-sheet can help you calculate and track this information. However, LocalInitiatives Support Corporation’s Track-It! software may be a more usefultool for tracking and calculating this information. Track-It! allows you tocreate charts and tables to view monthly trends and changes over time. SeeBest Picks at the back of this guide for information on how to obtain it.

FIRST INDICATORS TO STUDY

A few simple calculations on a monthly basis will produce informativeindicators. These relate primarily to housing groups with income tied totheir tenancies. Some supportive housing has no reliance on occupancy togenerate income. However, if, like most housing organizations, your prop-erty’s revenue is based on the number of units leased and/or rent contribu-tions, try calculating the indicators described below.

L O O K F O R L O S S E S

30 Gutierrez and Vogel,pp. 2-3 to 2-9.


Monthly Calculations30

Occupancy Rate =(# days in the month x # of units) – (total vacant days for all units in the month)

# days in the month x # of units

This calculation is the first indicator to measure each month. It tells you thepercentage of actual tenant days versus the total number of potential tenantdays. Consider how your occupancy rate compares with the allowances builtinto your pro forma and funding streams. Low occupancy rates affect yourbottom line and may signify problems with your market, an insufficientwaiting list, or lack of appeal of your property or service program, etc.

Average Turnaround Time = total # of days all units re-rented this month were vacant

# of units re-rented during the month

This calculation tells you the amount of time it takes from the day a tenantvacates a unit to the day the next tenant moves in. It is an indicator of man-agement efficiency. More detailed analysis could include clocking the stepsin between, such as the time it takes to complete inspections and makethem ready. Over the long term, slow turnaround is typically one of thebiggest drains on rental real estate.

Average Turnover =# of move-outs which took place during the month

# of units

Turnover is a measure of trends in tenants moving in and out of the build-ing. Unless short stays are part of your program’s mission, high turnovershould be avoided as it creates high costs in cleaning and preparing apart-ments for new tenants. A high turnover may be an early warning sign thatproblems exist in the resident community.

Rent Collection Rate =total actual rent collected during the period – amount collected in arrears

gross potential rent – vacancy loss

This tally speaks to the effectiveness of management’s collection efforts andpolicies. Many supportive housing providers choose not to pressure tenantsfor their rent contribution. If this is your organization’s policy, track your rentcollection rate for a few months and calculate your losses. Then considerwhether those losses over the long term of five to ten years are tolerable.

INDICATORS PARTICULAR TO SUPPORTIVE HOUSING

It may be of interest to track per-unit costs of supportive services.Although the overall budget for support services is usually static on amonth-to-month basis, support services calculated on a per-unit (i.e., perconsumer) basis often fluctuate widely from one building to the next. Trycomparing your per-unit costs for support services with another housingprogram on either a monthly or annual basis.

Comparing per-unit service delivery costs provides perspective on thecost effectiveness of your program. If you are a provider who bills thirdparties for supportive services on a per-unit basis, you have a different set ofreasons for measuring this kind of cost effectiveness. While it doesn’t affectyour bottom line to spend less on each consumer, it does improve your bar-gaining position with parties providing reimbursement.

OTHER INDICATORS OF INTEREST

Another strategy for tracking your performance is following operatingexpenses on a monthly basis and then dividing by the number of units inyour property. These are referred to as per-unit per-month costs. Those thatpertain to utilities should be broken out on a seasonal, as opposed tomonthly, basis to achieve the most relevant comparisons. For example, elec-tric bills looked at from one summer to the next will tell you the extent ofincreased savings made on air-conditioning.

Use your per-unit per-month calculations to focus your attention. Afterseveral months of tracking this information, you may identify some indicatorsthat are consistently high or steadily increasing. Pay attention to those coststhat are within your power to control. After identifying your building’s prob-lem areas, you can campaign to bring those expenses down. This informationcan also be used to support requests for an increase in rental subsidies.

Heating and cooling are a primary focus for savings, both in cold parts ofthe country such as the Northeast and in areas experiencing an energy crisissuch as the Northwest. For example, unanticipated heating and air-condi-tioning costs may warrant investing in energy conservation and weatheriza-tion projects. The results of your efforts to reduce these costs will be evidentin your ongoing collection of per-unit performance. Some utilities giverebates for weatherization organization; check in your own community forthis potential option.

Per-unit Per-month Operations Indicators

a. Water/sewer expenses per unit b. Other utilities per unitc. Maintenance costs per unitd. Insurance costs per unit

e. Taxes per unitf. Overall profit per unitg. Other per-unit per-month indicators that

have relevance to your particular program

L o o k f o r L o s s e s | 4 3

ANOTHER STRATEGY: BENCHMARKS

Yet another approach to saving money is “benchmarking” your costs.This means comparing your property’s controllable costs against “bench-marks” representing the average price paid industry-wide. Benchmarking isused widely in private sector real estate management and is increasingly ofinterest in nonprofit real estate as well.

Benchmarks are just numbers, not quality indicators. They are availableto help you target your energy and put your efforts into big savings. Forexample, if benchmarks indicate that your utility costs are twice the averageof other supportive housing in your region, focus your energies there.However, in some instances, spending more money than others do to buy alasting-quality product, such as a top-grade elevator, may produce more sav-ings in the long run. So keep benchmarking data in perspective.

Benchmarks are also good motivators for staff to change. When present-ed with data showing how something is done at a lower cost somewhereelse, staff gain confidence that perhaps your organization can do it cheaperas well.

Recommended Costs for Benchmarking31

31 Guitierrez and Vogel,p. 4-2.


a. Total operating costs

b. Administrative costs

c. Utilities

d. Maintenance

e. Property insurance

f. Management fees

g. Replacement

reserves

h. Capital expenses

32 Judith Rose, SeniorProgram Officer, Local Ini-iatives Support Corporation.

FINDING RELEVANT BENCHMARK DATA

Currently, there is no database of benchmarks for nonprofit housing.Some national organizations are working with the Multi-Family HousingInstitute to establish such a resource sometime in the future.

Until benchmarks for nonprofit housing exist, consult community devel-opment officials and nonprofit housing leaders for leads on local bench-mark data or suggestions for gathering data for such a project. You may alsowant to take a look at data supplied by the Institute for Real EstateManagement’s Income and Expense Exchange. See Best Picks at the back ofthis guide for how to contact them.

Keep benchmarks in perspective. It is important to find benchmarking datarepresenting properties comparable to your own in size, location, and othervariables. For example, it is much more expensive to operate a moderatelyrehabilitated building than new construction, or to gut rehabilitation. So ifyour building is a rehab, stick to comparing it with other rehabs.Additionally, don’t let benchmarks cloud your judgment about the need forquality investments in your building’s infrastructure. Nonprofit housinggroups, in particular, cannot afford the maintenance costs that result fromskimping on quality.

“One of the best

services that could

be provided to the

supportive housing

constituency would

be to create a spe-

cialized benchmark-

ing database just for

this sector of hous-

ing, and then make

it available to these

groups.”32

L o o k f o r L o s s e s | 4 5

MORE WAYS TO MAKE AND KEEP MONEY

Asset management requires ongoing vigilance to find money and sav-ings. Therefore, in addition to the strategies discussed so far in this guide(standards, indicators, and benchmarks), it is important to hunt for other

clues about how to adjust your finances.

The more money you earn and save, the better protected your programwill be from the vagaries of your property’s future. Use your resource-

fulness to try to make adjustments on both sides of the financial equa-tion: what you bring in and what you spend.

In choosing where to put your energies, recognize that your timeis money. Before setting off in a particular direction, ask yourselves if youcan afford the cost of paying staff for their time on such work. Is it worththe anticipated outcome? Furthermore, before changes are made, alwaysevaluate the payoff. Cost considerations should include not only price butalso value. In supportive housing, it is a challenge to take care of a proper-ty without good investments in high quality infrastructure.

Three Options for Financial Adjustments

MAKE GAINS

a. Cut your operating costs.

b. Increase your effective gross income.

c. Subsidize your financing with other sources.

CUT YOUR OPERATING COSTS33

Start your search for gains by brainstorming on how to cut your operatingcosts. Consult the list below for ideas.

Tips on Saving Administrative Costs from a Housing Group in Seattle

George Osborne, a consultant to nonprofit housing development firms, finds that patroniz-

ing “big-box” supply stores such as Home Depot is not always cost-effective for affordable

housing groups. As an alternative approach, he recommends seeking out smaller vendors to

form long-term relationships. A paint store, for example, might agree to track the colors of

paint used in your building and store partially used paint for you in return for your commit-

ment to buy exclusively from them. A locksmith could track codes for all the keys in your

building in return for the same commitment. In the long run, these partnerships can save

you money by eliminating administrative functions and guaranteeing good service.

Staffing Cost Savings

a. Comparison shop for an affordable staff benefits package.

b. Evaluate the costs and benefits of contractual services versus paying hourly wages

to contractors.

c. Carefully consider the level of experience needed for staff positions and avoid hiring

overly qualified personnel who cost more.

Utilities Cost Savings

a. Educate tenants about energy conservation and provide incentives for them to change

their energy-use habits.

b. Integrate energy conservation into community activities and the responsibilities of tenants.

c. Contact your utility companies and request an analysis of their rate schedule to ensure

that you are getting the lowest possible rate.

d. Request a use audit from your utility company and use it to analyze where and how you

are spending.

e. Ask your electric and gas companies for free energy-saving devices that may be available.

f. Upgrade windows and exterior doors for greater heat retention.33 Birute Skurdenis, “Tips

and Strategies for Control-ling Costs in AffordableHousing,” p. 1.

M a k e G a i n s | 4 7

Administrative Cost Savings

a. Refinance your mortgage to reduce debt-service costs.

b. Analyze your bank account for fees and interest rates. Could you save money elsewhere?

c. Ensure that your replacement reserve is in a longer-term, higher-interest instrument.

d. Consider placing all your deposits in a market-rate account.

e. Comparison shop for your accounting, insurance, and legal services. Look for group rates

on insurance and pro bono legal services.

Maintenance Cost Savings

a. Evaluate the cost/benefit of contractual services versus hourly labor.

b. Regularly obtain bids on costly items such as carpet, painting, etc.

c. Increase recycling to save on dumpster charges.

d. Purchase maintenance items through catalogs or join a buyer’s club.

e. Purchase janitorial equipment that can withstand heavy use of multi-family properties.

f. Maintain a full inventory of specialty items that may be more costly to buy locally.

g. Encourage donations of maintenance items and solicit volunteer labor and free skilled

work in areas such as painting and grounds work. Try forming a partnership with a local

corporation, sheltered workshop, or local college for this purpose.


“You can increase

your Effective Gross

Income and not con-

tradict the afford-

able housing mission

by implementing

efficient manage-

ment policies and

procedures.”35

34 Mark Woeful, PropertyManager, Rogerson Commu-nities, Boston.

35 David Fromm, EffectingIncome, p. 1. Available online:www.enterprisefoundation.org.

INCREASE EFFECTIVE GROSS INCOME

Effective Gross Income is your ability to maximize earnings from rentcontributions. Many supportive housing providers have a pattern of main-taining tenants who are not paying rent or who are no longer eligible or cer-tified for the program. Such providers often believe the special circum-stances of their residents’ lives require extra flexibility and tolerance aroundlease violations.

Residents who do not pay rent or are delinquent can cost you in severalways. It is important to take into account that such residents can have a dou-bly negative impact if they are occupying without paying for units that couldbring in revenue. Apart from loss of income, there is also a spillover effectfrom rent payments that get written off. Other residents are less likely to paywhen there is no clear and universal expectation from the owner regardingtimely payment of rent.

If you have a low Effective Gross Income, think of the issue in terms ofcosts and benefits. Is forgiving your tenants’ rent obligations creating a ben-efit to you or to them that outweighs the costs of lost revenue?

The Right Place for Compassion

“Supportive housing groups need to learn to be consistent and not tolerate lease vio-lations such as unpaid rent. Residents will stay inside the lines in an atmosphere ofconsistency. Don’t let up on tenants who owe money. Every tenant should feel theobligation of rent. It’s a mistake to try to be compassionate about rent. Put yourcompassion into finding other places for a resident to live who can’t make it in yourprogram.”34

M a k e G a i n s | 4 9

Strategies for Increasing Effective Gross Income

a. Be familiar with social service supports in your community that can stabilize

tenancies and increase the likelihood of rent coming in.

b. Apply for project-based rental assistance programs to subsidize tenants’ rent

contributions.

c. Cultivate a sense of urgency for apartment lease-up and best maintenance

systems for preoccupancy preparations.

d. Arrange for “protective payee” rent contributions whereby rent is garnished

from entitlement checks, such as social security, and entered directly into a

local bank account set up for rent contributions.

e. Plan on avoiding evictions as a last resort, given their high costs.

f. Enlist a lawyer to help you perform proper and timely evictions.

g. Send notices of eviction at the earliest possible time. Delays in sending notices

cost money.

h. Grant yourselves permission to perform timely and efficient evictions.

i. Have the asset manager in your organization play the “bad guy” role with

collections and evictions, underscoring the significance of rent to the future

of the housing program.

j. Perform proper and timely recertification for rental subsidies if participating

in any public- or tax credit-financed projects.


REFINANCE

Refinancing debt can be a tool for bringing down monthly costs.Increasingly, supportive housing providers are using loans from privatebanks in conjunction with grants to pay for their programs. Even if yourproperty carries no debt today, in the future, your housing group may beforced to enter into loans, if there is a change in your existing funding or ifthere is a gap that cannot be filled by other resources. Thus, all supportivehousing groups should have an idea of how to benefit from refinancing.

If you have any mortgage on your property, the asset manager shouldmake an annual evaluation of the desirability of refinancing based on cur-rent interest rates and the overall benefits over a ten-year period to the prop-erty’s financial status. It is important to figure in the fees associated with refi-nancing.

Before entering into refinancing, put your best financial foot forward.You can do this by “dressing up” the financial status of your property to lookits best. Suggested strategies include deferring big-ticket items so that yourbalance sheet looks optimally balanced. You can also work to reduce insur-ance, support service, or other costs that, in light of your limited income,may appear expensive to a potential lender.

Know the “Five Cs” of Refinancing36

a. Character—your overall reputation in the community.

b. Credit—your track record of repaying other loans.

c. Capacity—whether you have executed a project of similar scope.

d. Cash Flow—whether there is sufficient anticipated cash flow from the building

to pay the debt with a cushion.

e. Collateral—the ratio of loan to value of the building. The bank will want to know,

if it needs to seize the property, whether it can sell it for at least 75% of the

original price on today’s market.

36 Vogel.

M a k e G a i n s | 5 1

SUBSIDIZE WITH FUNDRAISING

Private fundraising is one financial arena in which supportive housingproviders have an advantage. Relative to mainstream housing counterparts,many supportive housing providers have strong track records with fundrais-ing and capital campaigns. Perhaps the unique appeal of serving specialneeds groups has given supportive housing its advantage in this arena.

If your organization has yet to tap into this particular capacity for suc-cess, it is essential that it explore avenues of private fundraising from foun-dations and individual donors. Set a goal of trying to raise at least 10 per-cent of your budget from private sources. If you have already achieved thislevel, it may be a mistake to believe a track record of success in privatefundraising will continue indefinitely. Public donors can be fickle. Theytend to change their priorities over time, and this can leave organizationsvulnerable if they come to rely on these monies.

SUBSIDIZE WITH OTHER PUBLIC FINANCING

In all probability, your existing public financing structure is not ideal. Ifyou are like many supportive housing groups—Section 8 ModerateRehabilitation recipients being a lucky exception—your existing financing ison a short time frame. This inherent financial uncertainty is so typical ofsome supportive housing that it is often perceived as a necessary way ofdoing business. Many providers seem to operate on faith that grants will berenewed or that some other resource will magically come their way.

The only way to guard against funding instability is through proactiveefforts to expand financing options. In all probability, there are otherfunding mechanisms for which your housing group would qualify. A diversefunding stream may add complexity to your operations, but it will stabilizeyour bottom line. Learning about other funding sources may also inspireyour organization to expand its portfolio of housing by developing newprograms. Such organizational growth may have a stabilizing effect on yourexisting financial profile. To learn details about all public sources of financ-ing that may apply to supportive housing and how to pursue them, see BestPicks at the back of this guide.

“The key to asset

management for

supportive housing

groups is to under-

stand all the subsidy

and subsidy-renewal

processes and proce-

dures, as well as

funding availability

in their local area.”37

37 Brigitt Jandreau-Smith,Corporation for SupportiveHousing.


Public Financing Sources for Supportive Housing38

a. Section 8 Housing for People with Disabilities Single Room Occupancy

b. The Supportive Housing Program

c. Project basing of Shelter Plus Care

d. Low Income Housing Tax Credit Program

e. Housing authorities’ ability to project base Section 8’s

f. Homeless Providers Grant and Per Diem Program

g. Supportive Housing for Persons with Disabilities—Section 811

h. Ryan White Comprehensive AIDS Resources Emergency Act (CARE)

i. Runaway and Homeless Youth Program, Transitional Living Program for Homeless Youth

j. Section 515: Rural Rental and Cooperative Housing

k. Health Care for the Homeless

l. Community Development Block Grant

m. HOME Investments Partnership Program

n. Housing Opportunities for Persons with AIDS (HOPWA)

o. Emergency Shelter Grants

38 Financing SupportiveHousing, AIDS Housing ofWashington, 2002.

M a k e G a i n s | 5 3

NO OTHER WAY OUT: DISPOSITION

Selling your building should not occur in crisis mode. If your prop-erty is troubled today or runs into trouble in the future, it is importantto have a framework developed ahead of time for deciding under whatcircumstances you would sell. A panicked process for disposing of yourproperty could hurt your organization’s bottom line and your reputationwith funders and community members.

Before you sell, hunt for external solutions. If debt is a problem, call ameeting with your lender to work out better terms on your loan. If thefinancial responsibilities of the property are just too great, look for com-munity partners who might assume ownership and enter into a collabora-

tion with you. Remember, affordable housing of any kind is an increasing-ly scarce resource, so one should fight hard to preserve it.

Planning the criteria for the potential disposition of your property is key.Each property is unique and the circumstances under which one propertywill be disposed of will differ from the next. Once you have arrived at cir-cumstances for your property’s disposition, make sure to inform the proper-ty manager and other parties involved with monitoring your building.

Some Circumstances for Disposing of a Property

a. The building consistently loses money over a three-year period.

b. A certain percentage of the units is consistently unoccupied.

c. All opportunities to refinance or restructure funding have been tried.

d. The owner’s subsidization of the property has reached a maximum percentage

of the building’s budget.

e. Your particular niche of supportive housing has experienced a reduction in the

market that does not appear to be reversing itself.

Tips for a Successful Sale39

a. Keep your building looking its best while trying to sell.

b. Hire a broker with a track record of selling property in your neighborhood.

c. Make clear in the marketing plans what is expected of your broker. Follow up by looking

for advertisements for your property in local real estate sections of newspapers, etc.

d. Come to the bargaining table prepared to negotiate your price but with a clear picture

of your bottom line.

39 Stone, p. 16.


THE NEED FOR A SELF-MONITORING SYSTEM

Self-monitoring systems are a way of institutionalizing asset managementwithin your organization. Ideally, you will build an infrastructure of self-monitoring systems that are guaranteed to be followed year in and year out.

Supportive housing organizations have a tendency to keep self-monitoring a folksy, informal affair. However, supportive housinggroups need formality perhaps more than other organizations, giventheir relatively high turnover rates at the managerial level, which per-haps is a result of the demands of working with special populations.

There are two important areas for self-monitoring: the creation of inter-nal reports and a schedule of visits to/inspections of the property itself.Since they are essential to the asset management approach, neither of thesetasks should be left to the property manager alone.

THE BEST INTERNAL REPORTING SYSTEM

Your group already has some method for gathering information torespond to external demands for reports. This guide has also discussedstrategies for gathering information for internal examination. Some of thesestrategies lend themselves to ongoing tracking.

The asset management approach will coordinate reporting to externalparties with these internal processes of collecting information. A numberof the publications listed in Best Picks at the back of this guide includediskettes with prototype forms that you can modify.

Characteristics of Effective Forms and Schedules40

a. Collects information regularly

b. Are easily understood

c. Are as focused and simple

as possible

d. Highlight issues of importance

e. Use consistent data forms from

internal to external reports

f. Are not cluttered on the page

A NEW INSTINCT

40 Vogel.

41 Stockard and Engler, p. 190.


Contents of a High-Performance Reporting System41

Occupancy ReportsWeekly Reports Incident Reports

Monthly or Monthly Asset Management ReportsQuarterly Reports Rent Collection Reports

Utility Consumption ReportsFinancial Statements – Balance Sheet,

Income and Expense Statement, Accounts Payable and Receivable Reports

Maintenance Repair LogWaiting List StatusWork Order Status Turnaround Time Reports

Annual Reports Annual Asset Management ReportAnnual AuditManagement Letters

A N e w I n s t i n c t | 5 7

CHALLENGES OF MAINTENANCE

Plan your maintenance strategy with an eye towards preservingthe property for the long term. Your goal should be to sort out thearray of tasks that need doing and to prioritize work that will preservethe building’s longevity in the least expensive way. You want to be a goodlandlord today and save the building from disrepair tomorrow.

The first step is to write out your plans for maintenance and organizethem by categories. Asset management experts recommend four categoriesof maintenance plans as an effective strategy for balancing maintenanceactivities between day-to-day issues and long-term care of the property. Eachplan should have its own prescribed schedule or time frame in which work-ers must complete the associated maintenance tasks.

Four Categories of Maintenance

Most important is your process of prioritizing maintenance activities. Insupportive housing, you will always be trying to do more maintenance withless staff and resources than other sectors of real estate. The only way to suc-ceed is to keep the expensive parts of your property in good shape so theydon’t lead to repairs or require replacement. Building experts (contractors,inspectors) can be hired as consultants to help evaluate the status of yourproperty on an ongoing basis.

For many groups, day-to-day requests from residents dominate mainte-nance activities. Creating maintenance plans will help workers structuretheir day so this does not occur. In general, maintenance plans add elementsof formality and detail that will increase results.

a. Preventative Maintenance

b. Routine Maintenance

c. Emergency Maintenance

d. Requested Maintenance

A WORD ON PREVENTATIVE MAINTENANCE

The asset management approach requires special emphasis on pre-ventative maintenance. The preventative maintenance plan tells yourcrew how each element of the building should be maintained so that itgives good service over the long term. It outlines specific maintenancetasks to be performed at prescribed intervals.

Walk through your building with a general contractor and applicablesubcontractors or vendors. Have them explain and demonstrate how

and when to inspect and perform preventative maintenance on the build-ing’s equipment. Document this information in your Preventative Mainte-nance Guide. If appropriate and convenient, document this walk-throughwith a video camera to produce an additional training resource for mainte-nance staff.42

Building Components that Require Preventative Maintenance

42 Stone, p. 10.


a. Gutters

b. Furnace, radiators,

hot water heaters

c. Air-conditioning

d. Plumbing

e. Wiring

f. Carpets, flooring

g. Elevators

h. Security

i. Porches and decks

j. Weather protection

k. Trees, shrubs, landscaping,

sprinklers

l. Fire extinguishers, alarms

m. Compactors, dumpsters

n. Elevators

o. Exterior walls and roof

STAY CLOSE TO YOUR BUILDING

Get out and visit your building regularly. Asset managers should considerit their role to personally monitor the status and performance of the agency’sproperties. Inform your property manager to expect this way of doing busi-ness and make both scheduled and unscheduled visits. The purpose of thesevisits is to find clues that reveal general trends in the property’s conditionand performance.

Recommended Building Monitoring Scheduleby Asset Management

MAXIMUM BENEFIT FROM SITE VISITS

Site visits to your property are a quick way to study the management’soverall performance. Conduct your visits with a list of details you plan toexamine. Learn to notice clues that your property or its immediate neigh-borhood is vulnerable to decline or neglect and the consequential loss invalue.


a. Unit inspections annually

b. Exterior and common site visits semiannually

c. Risk management inspections annually (looking for fire hazards and inspecting

safety features)

43 Vogel.


Getting Maximum Value from a Site Visit43

If you find these clues… You may have a problem with…

Graffiti Vandalism and poor security Untidy grounds and trash Lack of attention to curb appeal and

community relationships

Poor condition of Falling property valuesneighboring properties

Insufficient night lighting Lack of security

Excessive vehicles parked Poor rule enforcement – residents not on or near premises on the lease or unregulated auto repairs

Disorganized or dirty Inadequate housekeeping of high-laundry room traffic areas – signaling worse condi-

tions in low-traffic areas

Water damage at base of gutters Poor preventative maintenance, over-looked seasonal gutter cleaning and other weatherization strategies

Bulletin boards that are not up Lack of communication betweento date or informative tenants and management

COMMUNITY RELATIONSHIPS

There is much to be learned from affordable housing groups aboutbuilding community relationships. They have a long tradition ofmaintaining close ties with the neighborhoods where their projectsare sited. In fact, their mission is often enmeshed in the health andwell-being of a neighborhood. Supportive housing is less likely tohave natural ties with its surrounding community. Typically, support-ive housing is administered by outside groups with no reputation inthe neighborhood.

Strong connections to community protect your asset. Gettinginvolved with local community members and their neighborhoodgroups, newspapers, banks, and city officials will build your group’s rep-utation in the community. Such a strong reputation helps ensure thatyour housing program is accepted in the neighborhood. Ultimately, itprotects the resale value of your property. Furthermore, the approval of com-munity members looks favorable to lenders and buyers of your property.

Spend money on your building’s curb appeal. Community members willjudge your property purely upon its exterior appearance, so clean windows,tidy grounds, landscaping, flower plantings, exterior maintenance, and goodexterior lighting are more than superficial details. They are of primaryimportance to your housing group’s status in the community.

If your program is located in a distressed neighborhood, leading and par-ticipating in efforts to improve the neighborhood are important parts of sta-bilizing the value of your property. Crime prevention activities, neighbor-hood clean-ups, and environmental health projects are excellent activities inwhich to involve your group. In fact, this kind of neighborhood improve-ment can increase the value of your asset by making the neighborhood moredesirable.


YOUR ROLE IN ASSET MANAGEMENT

As a member of the board of directors, you have ultimate fiscal respon-sibility for the property that is used as supportive housing. In the end, itsfinancial problems are yours to solve, and its solvency gives you peace ofmind. Therefore, you and your fellow board members, above all other stake-holders associated with your housing group, have reason to encourage thepractice of asset management.

Questions to Ask Yourself as Board Members

a. Do I know who the asset manager is for my organization?

b. Are our staff and board sufficiently skilled at asset management?

c. How will asset management information be communicated to me?

d. Do I know enough to intelligently interpret this information?

e. Am I confident we are doing everything we can to manage our assets?

f. Should additional expertise be added to the board to assure that buildings

are well-managed?

Ideas for Board Involvement in Asset Management

a. Conduct an educational meeting for all board members on the concepts and practices

of asset management.

b. Send at least one board member to an intensive training on asset management in the

affordable housing sector. See Best Picks at the back of this guide.

c. Appoint one board member or a subcommittee of the board to work with staff on

building the organization’s asset management capacity and improving its performance.

d. Structure an asset management update into the board’s agenda on a regular basis.

e. Conduct annual or biennial strategy sessions on asset management to ensure that it

remains one of the board’s priorities.

JUST FOR BOARD MEMBERS

“I don’t think all

these high-flung

software packages

are going to be that

relevant to your con-

stituency of small

supportive housing

groups.” 44

44 Judith Rose, LocalInitiatives Support Corpo-ration.

SOFT WARE

NEW SOFTWARE OR NOT?

Buying new software is an appealing approach to profes-sionalizing the way you do business. If you are like manysmall supportive housing groups, you currently rely on acombination of accounting software and Excel spread-sheets to track budgets and other data. But you may notbe aware of the availability of more sophisticated propertymanagement software. With mixed success, communitydevelopment corporations and other nonprofit housinggroups have been using such products for the last decade.

Unfortunately, much of the property management software available isnot the best fit for small supportive housing groups. At this time, theredoesn’t seem to be a perfect package to recommend to the supportive hous-ing constituency. However, there are a handful of packages that may improveyour asset and property management significantly. They are described in thenext pages of this guide.

Alternatively, you may want to stick with your current arrangements untilmore software is created with the needs of small nonprofit housing groupsin mind. In the future, in all likelihood these programs will be availableonline and with links between property and asset management functions. Asasset management becomes more commonplace, related functions will like-ly appear in updates for existing software packages.

CHOOSING SOFTWARE

There are many variables to your property management software needs.Needs vary depending on staff size and expertise, the number of propertiesin your portfolio, your budget, and your need for support to understand thesoftware.

Steps in Choosing Software45

1. Involve your accountant in investigating some recommended software programs.

2. Brainstorm with staff and determine which outputs are important to those who

use your financial reports (internally and externally).

3. Look for a package with a flexible report writer that can create user-defined reports

by accessing every data element and can store these reports.

4. Eliminate the kinds of packages that don’t meet your needs.

5. Select several packages that seem appropriate and gather information about them.

6. Order demonstration diskettes or limited-use versions of the software at little or no

cost. These let you play with the actual program using your own data.

7. Narrow down the choices.

8. Get the names of other nonprofits that have used the software and call them.

9. Determine if the software is easy to use and could be operated by someone with no

accounting experience.

45 LaCharla Figgs and D. Crowley, “AccountingSoftware for CommunityDevelopment Corpora-tions,” p. 2. Available online:www.enterprisefoundation.org.


SOFTWARE RECOMMENDATIONS

Track-It! Specialized Asset Management Software for Nonprofits

Available from Local Initiatives Support Corporation, Organizational Devel-opment Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

This software is a unique program designed for nonprofit housing groups toorganize and process asset management data on a monthly basis. Created bya national intermediary housing group, it helps in crunching numbers andpreparing charts to show performance based on a handful of indicators. Youcan use this software to spot problems, identify trends, and ultimatelyimprove performance. It is not meant to prepare information for an audit orfor other financial reports. It runs on Windows 95 using Excel 97. For thosewith older versions of Excel, the diskette contains a saved version, which willrun on Excel 5 or 7. This is a separate entry system that is not coordinatedwith any property management software. Therefore, groups need to manu-ally enter data from any other software in their use.

BUILD A MANUAL: Software for Creating Your PropertyManagement Plan

Available from LISC, Organizational Development Initiative, 733 3rd Ave.,8th Floor, New York, NY 10017, (212) 455-9800.

This software, designed exclusively for nonprofit real estate, will create a cus-tomized and detailed Property Management Plan. By answering thirty-fivequestions concerning the property’s operation, you construct a manual withchapters on financial management, leasing, tenant relations, rent collection,lease enforcement, maintenance, administration, and tax credit compliance.This software can save you considerable money, as consultants typicallycharge a lot to produce such property management plans. Also included is adiskette with standard letters, tracking sheets, and inter-staff memos, as wellas financial, leasing, and maintenance forms, all of which are well-designed.Perhaps most useful of all are prototypes for compiling your own handysummaries of key information about the project. You can create a ProjectAddendum for your manual that summarizes information on the history ofyour project, applicable government programs and related agreements,underwriting information, and performance standards. Such an addendumcan also summarize information on the regulations, leasing criteria, rentlimits, and reporting requirements associated with each government fund-ing program you use.

S o f t w a r e | 6 5

TrackPro – for Low Income Housing Tax Credit Properties and others

Available from Trackpro Services, c/o Heartland Properties, Inc. 122 W.Washington Ave., Hovde Building, 6th Floor, Madison, WI 53703. Visit website: www.trackproservices.com or call (800) 742-5442.

A nonprofit housing group developed this Windows-based software whenthey couldn’t find an appropriate program to meet their own in-houseneeds. It is designed foremost for operators of tax credit-financed properties.However, it has many features that would be useful to any supportive hous-ing group that seeks a simple, straightforward program. TrackPro handlesinformation such as income limits, rent limits, applications, number offamily members, lease information, and likely violations of Low IncomeHousing Tax Credits regulations. It also has a simple rent roll that tracks cur-rent rent balances and keeps them rolling forward from month to month.The next update will include assorted asset management functions. Aninternet-enabled version of the program was scheduled to be introducedlate in 2001. When support is needed, users of this software deal directlywith nonprofit housing professionals at Heartland Properties. A feature oftheir support services is individualized “file assessments.” If you want toavoid corporate software, TrackPro may be an accessible and affordablealternative.

YARDI: Recommended Software for any HUD-Funded Program46

Available from Yardi Systems, 819 Reddick Ave., Santa Barbara, CA 93103.Visit web site: www.yardi.com or call (800) 866-1144.

This property management software is an “integrated program,” includinggeneral ledger and accounts payable, along with separate property manage-ment and maintenance programs that share files. It is popular among larg-er nonprofit housing groups who do in-house property management. It isrelatively easy to use, as the interface is intuitive and easy to grasp. As oneof the few property management software programs that is Windows-based,it is user-friendly. YARDI has a reputation of being easy to use and conven-ient for data entry, and it can perform several tasks simultaneously. It has a“subsidized enhanced module” that interfaces with A&M HUD Manager.

Other Software Packages Compatible with HUD Programs

CAM II Software (800) 548-6656 HUD Manager (800) 448-3647 MICROHUD www.realpage.com

46 Murray Dropkin,“Property ManagementSoftware Review,” Occa-sional Paper Series, LocalInitiatives Support Cor-poration, OrganizationalDevelopment Initiative,1996, p. 7.


OTHER TOOLS

HEWLETT-PACKARD 12C Financial Calculator

Available at any major electronic store. It retails for approximately $60.00.

This financial calculator performs math functions that are sometimes usedin financial analysis associated with asset management. It can be used to cal-culate amortization of debt payments, depreciation of capital costs, net pres-ent and future value, interest conversions, etc. If your property holds debt,this calculator is essential for helping estimate the value of refinancingoptions.

S o f t w a r e | 6 7

ASSET MANAGEMENT STARTS IN THE DESIGN PHASE

To a great extent, the financial status of your housing program ispredetermined. The design and development phase of nonprofitreal estate is the best opportunity an organization will get to influ-ence a building’s long-term outlook. Supportive housing groupswho consider long-term asset management during this stage will

have the advantage over groups who piece their deal together by anymeans necessary.

In creating supportive housing, a lack of long-term cash flow shouldbe anticipated. This means the property needs to be highly durable and itscomponents long lasting. Such an approach amounts to higher costs at thefront end, knowing that it will be a greater challenge to replace componentsof the building as it ages. Additional wise choices, from the level of insur-ance purchased to the type of neighborhood where the building is located,will increase the long-term viability of the housing program.

Tips for Starting Asset Management in the Design Phase

a. Create as many building improvements and updates as possible before occupancy.

b. Buy only highly durable and sophisticated building components.

c. Purchase building components that can be maintained by any party rather than those

linked to a maintenance contract with one vendor.

d. Invest money on exterior appearances, such as perennial shrub plantings and a

gardening irrigation system.

e. Upgrade old housing stock to the highest possible standard.

f. Look for moderate- to large-scale projects, as the smaller the scale of your property,

the more expensive it will be to manage. If your property is small, try to group its

management with other sites.

g. Purchase property that has a good reputation in the community. If your building has

a troubled history, make concentrated steps to reverse its reputation.

h. Start reserve accounts when you begin budgeting.

i. If you choose a property in a declined neighborhood, prioritize security and durability

in exterior elements such as fencing, alarms, etc.

DO IT RIGHT THE FIRST TIME

Nonprofit Housing Management Specialist Course (NHMS)

Information available on the CHAM web site: www.cham.org

The NHMS course is a four-day intensive introduction to the field of assetmanagement for any party involved in the oversight of affordable housing.It is offered at rotating sites across the country. While most students of thiscourse are associated with multi-family affordable housing, a number ofAIDS/homeless housing providers have taken the course and been satisfiedwith it. Working in teams, students write a management plan for a hypo-thetical property. They are also presented with a case study to which theymust apply the tools of asset management. Financial performance andsome number crunching round out the course.

Certified Asset and Housing Manager Program of Study

Information available on the CHAM web site: www.cham.org

For those who have completed the NHMS course and want to become excel-lent asset managers, there is a more extensive course of study for theCertified Asset and Housing Manager. This certification is achieved by com-pleting eight required courses such as Nuts and Bolts of Asset Managementand Improving Income Performance. The NHMS course is a prerequisite. Italso requires taking continuing education and completing an exam. Coursesare affordable and offered across the country, mostly through the Neighbor-hood Reinvestment Training Institutes. This program offers the only recog-nized “asset management” designation in the affordable housing field. Toapply, one must have a college degree or work experience in the nonprofithousing management field. CHAM has the backing of The Enterprise Foun-dation, Local Initiatives Support Corporation, Neighborhood Reinvest-ment, Freddie MAC, National Equity Fund, and other major players in theaffordable housing field.

Neighborhood Reinvestment Training Institutes (NRT)

Information available on the Neighbor Works web site: www.neighborworks.net

The NRT institute offers courses across the country on affordable housingand community development. Many courses offered at the institute fulfillrequirements for becoming a Certified Housing and Asset Manager.

Minority Managers Training Institute

Massachusetts Housing Finance Agency, One Beacon Street, Boston, MA 02109,(617) 854-1029.

This is a year-long combination of classroom and internship placementsthat prepares minority individuals for a career in the nonprofit propertymanagement/development field. Stipend provided.

BEST PICKS OF TRAININGS

National Center for Housing Management Certification Program

1275 K Street NW, Washington, DC 20005, (202) 872-1717.

This congressionally-chartered nonprofit provides training on housingmanagement. A certification program is offered as part of its wide range ofcourse offerings.

Institute of Real Estate Management Designation (IREM)

Information available on the web site: www.irem.org

IREM offers courses and certification much like the NHMS and CHAM pro-grams but targeted to the private sector. While all training may not apply tothe nonprofit context, IREM does have a greater variety of courses than thenonprofit training groups. Courses of interest may include TurningTroubled Properties into Valuable Real Estate Assets and Writing and UsingProperty Management Plans. The seminars are offered at every skill leveland in many major metropolitan areas.

Home Study: Turning Troubled Properties into Profitable Real Estate Assets


This is a home-study course to help turn around properties that arelosing money. The course shows you how to identify strategies forachieving the fullest financial potential of real estate. Course materi-als can be saved as reference guides for ongoing use. Requires thatyou have a Hewlett-Packard Financial Calculator.

Home Study: Measuring Performance of Real Estate Assets


This is a home-study course designed to teach the fiscal analysisskills needed to maximize the long-term value of real estate. Withthis home-study course, you will focus on a variety of techniques forevaluating financial performance and then turn theory into practiceby applying your skills. Requires that you have a Hewlett-PackardFinancial Calculator.


Roles and Responsibilities of the Asset Manager

Occasional Paper Series, 1997Available from Local Initiatives Support Corporation, Organizational DevelopmentInitiative, 733 3rd Ave., 8th Floor, New York, NY 10017 (212) 455-9800.

This short, concise booklet quickly defines the roles and responsibilities ofthe asset manager at each stage of a property’s life—from developmentthrough disposition. AIDS/homeless housing groups could circulate thisquick read through their organization to educate staff and board about assetmanagement concepts. Basically, it details the broad range of activities per-formed by the asset manager. The paper also includes a computer diskettecontaining checklists, forms, and schedules that can be used to completemany of the asset manager’s tasks.

A Guide to Comprehensive Asset and Property Management:Manual for Building Communities through Good Asset andProperty Management

Second Edition, 1997Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9814.

This lengthy (250 pages) guide is a thorough description and how-to man-ual on property and asset management in nonprofit real estate. Its sugges-tions go beyond basic rent collection and lease enforcement. Considerableattention is given to the double bottom line of the property’s financialhealth and the well-being of residents. It is based on the assumption thatthese two interests can reinforce one another. Of note are ideas on how toengage residents in the management of a property. This book will be veryuseful for gleaning ideas on how to raise your standards for asset and prop-erty management. It may also be useful for lenders to help them assess themanagement of the AIDS housing in which they are invested.

BEST PICKS OF GUIDES & REPORTS

Confronting the Management Challenge: Affordable Housing in the Nonprofit Sector

Rachel Bratt, New School for Social ResearchAvailable from the Community Development Research Center at the New School for Social Research, (212) 229-5404.

This is an interesting and substantial report of the findings of a New Schoolfor Social Research team that took an in-depth look at thirty-four nonprof-it housing properties in six U.S. cities. The report examines how nonprofitshandle the responsibility of being owners. It looks at issues such as theirdecisions to self-manage or contract out, and management of their assets. Italso examines indicators of management performance. This comprehensivereport would be useful to anyone researching background and trends in thenonprofit sector and how the need for asset management became apparent.For technical assistance organizations, researchers, and students, this reportis a provocative analysis of the long-term viability of affordable housing.

Selecting a Management Firm: Workbook and Sample Forms

Occasional Paper Series, November, 1996Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

Whether or not to manage your property in-house or hire a property man-agement firm is a key decision in asset management. This workbook out-lines the key steps for selecting the right company. It tells you how to use acompetitive process and how to avoid common pitfalls. The inclusion ofsample documents, questionnaires, checklists, and forms on computerdiskettes makes them easy to use and modify.

Asset Management Training Curriculum

Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

This volume is used in national training about asset management. ForAIDS/homeless housing providers who cannot enroll in such a course butwant more hands-on ideas for learning asset management, this could beused as an independent study tool. Staff groups could review the materialstogether. The manual contains the most frequently requested modules fromLISC’s courses including: Elements of Asset Management, the Initial ProForma, Building a Property Management Plan, Contracting Out vs. Manag-ing for Yourself, Performance Standards, Reporting and Monitoring, Asset-Based Budgeting, Financial Workouts, Roles for Board and Staff.


Should We Do it Ourselves or Hire Someone Else? A RuralProperty Management Planning Guide

Available from the Housing Assistance Corporation, Washington, D.C., (202) 842-8600.

This guide is especially designed for rural nonprofits that are decidingbetween in-house property management and outsourcing. The guide ana-lyzes the issues in depth. It is not a detailed guide to property managementitself.

A Guide for the Management of Low Income Housing Tax Credits

Available from CHAM, 10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400, www.cham.org.

This guide and accompanying video provide an overview of complianceissues mandated by the Low Income Housing Tax Credit Program. For staffmanaging AIDS/homeless housing developed with tax credits, this publica-tion is a good tool for orientating oneself to this notoriously complex pro-gram. It includes a concise description of the tax credit program and its basicrequirements. It also contains eligibility predetermination checklists andforms necessary for compliance with reporting and monitoring.

Tips and Strategies for Controlling Costs in Affordable Housing

Birute SkurdenisAvailable from CHAM, 10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400, www.cham.org.

This lengthy article discusses ideas for property managers to use in control-ling costs in affordable housing administration, utilities, maintenance, laun-dry, taxes, insurance, and staffing.

Outline of a Residential Property Management Plan

Available from The Enterprise Foundation, 10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400, www.enterprisefoundation.org.

This is an outline for developing a residential property management plan. Itwas adopted from a “fill-in-the-blanks” form used in property managementtraining, which has been offered by The Enterprise Foundation.

B e s t P i c k s o f G u i d e s a n d R e p o r t s | 7 3

Successful Residential Management for Professionals Guide

Barbara HollandAvailable from The Institute of Real Estate Management, 430 N. Michigan Ave.,Chicago, IL 60611, (800) 837-0706, www.irem.org.

This textbook is used in training residential site managers who work in pri-vate sector residential real estate. It may be useful to larger AIDS housingorganizations that are building their own in-house property managementcapacity. Although there is little mention of low-income housing manage-ment, it covers a wide range of property management basics. It moves frombig concepts such as maximizing the bottom line to nitty-gritty details onday-to-day matters.

Effecting Income

David FrommCan be downloaded from The Enterprise Foundation web site: www.enterprisefoundation.org.

This article focuses on ways that managers can have an impact on the rev-enue of projects. It discusses “downtime,” efficient rent collection and evic-tion proceedings, and rectification (relative to tax credit properties).

Cost-Reduction Ideas for Rental Housing Property Management

Can be downloaded from The Enterprise Foundation web site: www.enterprisefoundation.org.

This brief document, adapted from one used by the Development TrainingInstitute, lists a number of cost-saving ideas for operation of rental properties.

Collection of Asset Management Articles

Available from IREM, 430 N. Michigan Ave., Chicago, IL 60611, (800) 837-0706, www.irem.org.

This collection of articles teaches techniques for interacting with institu-tional investors and creating an asset management plan.


Enhancing Residential Property Value

Can be downloaded from The Enterprise Foundation web site: www.enterprisefoundation.org.

Best new ideas for containing costs and keeping residents satisfied.

Financing Supportive Housing

Available from AIDS Housing of Washington, 2014 East Madison, Suite 200, Seattle, WA 98122, (206) 322-9444. Available on their web site: www.aidshousing.org.

Doing it Best: The Practice of HIV Supportive Housing

Available from AIDS Housing Corporation, 29 Stanhope Street, Boston, MA 02116, (617) 927-0088, www.ahc.org.

This document outlines standards of care for supportive housing practice.Although it is written for HIV housing programs, it has relevance to all spe-cial needs housing.

B e s t P i c k s o f G u i d e s a n d R e p o r t s | 7 5

The Consortium for Housing and Asset Management (CHAM)

10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400.www.cham.org

CHAM is a consortium that specializes in training on asset management inthe affordable housing arena. Its work is a collaboration of The EnterpriseFoundation, the Local Initiatives Support Corporation, and theNeighborhood Reinvestment Corporation. No longer a self-standing organ-ization, CHAM now has an asset management specialist on staff with eachof the three collaborators. Its web site has up-to-date information on theintroductory and advanced asset management training sponsored by thisgroup. Also on the site are useful prototype forms for asset managementand property management that can be downloaded. In the future, the sitewill provide examples of how groups have used asset management to theirbenefit. Staff members travel extensively and may not be easily accessible byphone. Nevertheless, CHAM is an essential resource to be explored throughits web site, trainings, and national conference. Presently, CHAM has fivetraining regions.

Neighbor Works Network

1325 G Street NW, Suite 800, Washington, DC 20005, (202) 220-2300.www.neighborworks.net

The Neighbor Works Network web site is a clearinghouse of informationpertaining to educational services offered by the NeighborhoodReinvestment Corporation, Neighborhood Housing Services of America,and a national network of public and private partnerships. Most impor-tantly, this web site has up-to-date information on all upcomingNeighborhood Reinvestment Training Institutes. The NRT Institute is thesource for a majority of the advanced courses pertaining to asset manage-ment-related topics for the nonprofit housing sector.

BEST PICKS OF WEB SITES

The Enterprise Foundation

10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400www.enterprisefoundation.org.

The Enterprise Foundation is a national leader in nonprofit affordable hous-ing and community development. Its extensive web site has many featuresthat may be useful to those seeking information on specific aspects of assetmanagement. Searching the resource database will give you citations and, insome cases, full text of articles on the topic. Also of interest is the EnterpriseMoney net push button that provides extensive up-to-date information onfinancing sources for affordable housing.

The Institute for Real Estate Management (IREM)

430 N. Michigan Ave., Chicago, IL 60611, (800) 837-0706.www.irem.org.

IREM is the primary clearinghouse organization for training in private sec-tor property and asset management. IREM provides national training, certi-fication, publications, and conferences. Local chapters are located through-out the United States.

National Assisted Housing Management Association (NAHMA)

526 King Street, Suite 511, Alexandria, VA 22314, (703) 683-8630.www.nahma.org.

NAHMA is a membership organization of property management agentsmanaging affordable housing, with an emphasis on HUD-subsidized pro-grams. Regional chapters are located throughout the United States.

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Roles and Responsibilities of the Asset Manager

Occasional Paper Series, December 1997.Available from Local Initiatives Support Corporation, Organizational DevelopmentInitiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

Forms include:• Summary of Loan, Grant, Subsidy Terms and Requirements• Project Regulatory Compliance and Monitoring Schedule• Property Insurance Coverage Schedule• Management Monitoring Schedule• Estimated Replacement Costs of Capital Items• Annual Replacement Reserves Cash Flow Details • Performance Standard Worksheet

A Guide to Comprehensive Asset and Property Management:Manual for Building Communities through Good Asset andProperty Management

Second Edition, 1997.Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

Forms include:• Maintenance Job Descriptions• Staff Evaluation Forms• Maintenance Monitoring Sheets• Quality Control Inquiry• Sample Financials• Vacancy Log• Rent Delinquency Report• Maintenance Monitoring Worksheet

BEST PICKS OF PROTOT YPE FORMS

Selecting a Management Firm: Workbook and Sample Forms

Occasional Paper Series, November 1996.Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

Forms include: • Selection Process Calendar Workplan• Sample Request for Proposal for Property Management Services• Firm Qualification Questionnaire• Management Fee Bid Form• Reference Questionnaire• Resident Satisfaction Questionnaire• Firm Interview Outline• Management Firm Scoring Form

Track-It! Specialized Asset Management Software for Nonprofits

Available from LISC, Organizational Development Initiative, 733 3rd Ave., 8th Floor, New York, NY 10017, (212) 455-9800.

• Monthly Asset Management Report

A Guide for the Management of Low Income Housing TaxCredits

Available from CHAM, 10227 Wincopin Circle, Suite 500, Columbia, MD 21044-3400, www.cham.org.

• Eligibility Predetermination Checklists• Forms for Compliance with Reporting and Requirements

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