What to Expect Post-Closing Real Estate Deal
Once we’ve been through the hoopla of getting to the closing table, you might ask yourself, now what? It’s important to consider what that first year will look like. There will be reporting and communication requirements to keep you informed and other needs as well.
First, we start the new ownership, informing all our investors immediately after closing. In that first month, when taking over a new property, the time is dedicated to getting things in order with all the tenants. At this time, we are getting an idea of where we might have challenges. This is the time to make a game plan of which tenants may get a nonrenewal.
During these initial months, we will also be finalizing and getting ready to begin CAPEX projects. We will also need to implement the strategy determined for renewals with appropriate rent raises. We will send an email update to all investors after that first month. Then we send official reports quarterly.
In the past, we tried once-a-month reports but found that there wasn’t a ton to report for just one month. We also found that a report once per month wouldn’t paint the whole picture. Some months you have more turns than other months, so looking at just one month could make things look bad versus some months looking really good. It evens out better over a quarter.
We also found the first few months tend to be a little rougher as you deal with being the new sheriff in town and clamp down on any delinquency issues with tenants. Granted, we are always transparent and happy to respond to any question’s investors have for us. Doing quarterly reporting tells the story better.
What You Should Expect to Find on JB2 Quarterly Reports
Here are the types of items you will find in our quarterly reports:
1.) Percentage of total collections
2.) Occupancy for that period
3.) Total Renewals/New Leases
4.) Average Rent
5.) Actual Numbers against projections (also in chart form for visuals)
6.) CAPEX expenditures based on what was budgeted
We will also include an executive summary that talks about how we are meeting or exceeding projections. We will drill down into details about income, expenses, and CAPEX projects. For example, are we hitting the average rent that we should be at, at that point? What things could be affecting these things positively or negatively?
We speak about our staff on the property and how they are contributing to the success of the asset. We also include pictures of any work that has been done on the property thus far. We don’t shy away from bad news but we always present it with the solutions of how we will deal with it. Additionally, we can provide profit & loss statements and balance sheets upon request. We tend to do the first distribution after the 3rd quarter. That gives us enough time to do CAPEX projects, get bad tenants out, and get the property in its healthiest possible state. Granted, some heavier value-add projects would not allow for distributions until after the first year.
Example of financial information provided on our 2020 report for Norman Creek, beating projections by 29%.
At the end of the year, our investors expect to receive an end-of-year report a couple of months after the new year, taking the entire year into account. We will also turn in all the accurate financial information of the asset to our CPA early next year for taxes. Our CPA keeps our books up to date every month. The CPA will prepare each investor's K-1 based on specific ownership. We will distribute K-1s by the end of February each year.
Below is an example of a K1 from our last deal. This is for a 100k investment, and as you can see, it shows a -$67,272 loss. This is due to accelerated depreciation and shows paper losses while still making income. These losses can be used to offset other investment income. Please consult with your CPA.
We Keep Our Real Estate Investors Informed
Lastly, we try to provide all the necessary information to our investors so that they can feel informed and comfortable with what’s going on. We keep all this information in your investor portal so that everything can be referenced at any time from anywhere. We are always open to answering separate questions or taking suggestions on how we can be better.
At JB2 Investments, we feel strongly about measuring where we are regularly to make sure we are always making adjustments to run things as efficiently as possible. This hands-on approach has already been showing with Norman Creek by significantly beating expectations. We continue to improve our process to make things the best experience they can be.