Guidebook: Supportive Housing Asset Management

Put Your
House in Order
Securing Your Supportive Housing
Program’s Future through Effective
Asset Management

AIDS HOUSING

OF WASHINGTON

S E AT T L E 2 0 0 2

CONTENTS

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SHOULD YOU READ THIS GUIDE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
WHAT WILL YOU LEARN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
HOW SHOULD YOU USE THIS GUIDE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CAN YOU AFFORD TO WAIT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
WHAT DOES ASSET MANAGEMENT MEAN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
WHY DOES SUPPORTIVE HOUSING NEED ASSET MANAGEMENT? . . . . . . . . . . . . . . . . . 9
WHAT DOES THE JOB ENTAIL? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
HOW IS IT NOT PROPERTY MANAGEMENT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SUPPORTIVE HOUSING—ADVANTAGED OR DISADVANTAGED? . . . . . . . . . . . . . . . . . . . . . . 12
Before You Start . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DEFINE YOUR ASSET MANAGEMENT GOAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
START TO THINK LIKE A BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ANSWER SOME BASIC QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
FIND A LITTLE MONEY TO START . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FIND MORE MONEY AS YOU GO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DELEGATE ASSET MANAGEMENT RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PLAN FOR ASSET MANAGEMENT TO BE TAKEN SERIOUSLY . . . . . . . . . . . . . . . . . . . . . . . . . 20
First Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
EDUCATE YOURSELF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
HOLD A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
START A BINDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
WHAT GOES IN AN ASSET MANAGEMENT PLAN? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SPECIAL WORDS ABOUT THE PROPERTY MANAGEMENT PLAN . . . . . . . . . . . . . . . . . . . . . . 24
EVALUATE YOUR PROPERTY MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IF YOU CONTRACT OUT PROPERTY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
GET ORGANIZED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
START RESERVE ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PLANNING YOUR CAPITAL RESERVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Rise to the Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
THE NEED TO COMPARE YOURSELF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
PERFORMANCE STANDARDS TO CONSULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
RED FLAGS TO WATCH FOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Contents | 3

Look for Losses ................................................................ 41
FIND WHERE THE MONEY GOES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
YOUR CHOICE OF PERFORMANCE INDICATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
FIRST INDICATORS TO STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
INDICATORS PARTICULAR TO SUPPORTIVE HOUSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
OTHER INDICATORS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ANOTHER STRATEGY: BENCHMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
FINDING RELEVANT BENCHMARK DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Make Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
MORE WAYS TO MAKE AND KEEP MONEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
CUT YOUR OPERATING COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
INCREASE EFFECTIVE GROSS INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
REFINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SUBSIDIZE WITH FUNDRAISING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SUBSIDIZE WITH OTHER PUBLIC FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
NO OTHER WAY OUT: DISPOSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
A New Instinct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
THE NEED FOR A SELF-MONITORING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
THE BEST INTERNAL REPORTING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
CHALLENGES OF MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
A WORD ON PREVENTATIVE MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
STAY CLOSE TO YOUR BUILDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
MAXIMUM BENEFIT FROM SITE VISITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
COMMUNITY RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Just For Board Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
YOUR ROLE IN ASSET MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
NEW SOFTWARE OR NOT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
CHOOSING SOFTWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SOFTWARE RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
OTHER TOOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Do it Right the First Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ASSET MANAGEMENT STARTS IN THE DESIGN PHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Best Picks of Trainings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Best Picks of Guides and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Best Picks of Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Best Picks of Prototype Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

AC K N OW L E D G M E N T S

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

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

The research, development, and publication of this manual was funded
by the Housing Opportunities for Persons with AIDS (HOPWA) National
Technical Assistance Program in partnership with the U.S. Department of
Housing and Urban Development’s Office of HIV/AIDS Housing. The
substance and findings of the work are dedicated to the public. The author
and publisher are solely responsible for the accuracy of the statements and
interpretations contained in this publication. Such interpretations do not
necessarily reflect the views of the Government.

P R E FAC E

“Be careful what you wish for. Now that you have created housing, you have
the responsibility of owning and managing property. If you are going to be
a landlord, then you should be a good landlord. As a nonprofit, you don’t
have the financial cushion to do this work badly. Asset management of your
property is going to be a very significant enterprise. People who are in your
housing are dependent on you to hit your targets.”1

– John Vogel, Expert on Asset Management in Affordable Housing

1. Amos Tuck School
of Business, Dartmouth
College, Lecture at Lincoln
Filenes Institute on Com-
munity Development,
Medford, MA, 1999.

WELCOME

SHOULD YOU READ THIS GUIDE?
This guide is intended for anyone with a role in managing supportive
housing. By “supportive housing,” we mean residences targeted to persons
with special needs such as HIV/AIDS, mental illness, substance abuse, and
other conditions that frequently occur with homelessness. Typically, such
READERS OF settings combine housing with “supportive” services to stabilize and insure
THIS GUIDE the well-being of residents. If your group owns real estate that is used to
house and support special populations in this manner, this guide is written
• AIDS Housing with you in mind.
Providers
If you simply lease property for your housing program, this guide will be an
• Supportive Housing education in the long-term issues to anticipate, should your organization
Groups buy its own real estate in the future.
• Property Managers of Others who may have an interest are property managers associated with
Supportive Housing supportive housing and contract managers or underwriters working for
• Boards of Directors for institutions with financial investments in supportive housing.
Supportive Housing
WHAT WILL YOU LEARN?
• Contract Managers of
The material presented here is an introduction to basic concepts of asset
Supportive Housing
management. It translates practices from the more mainstream field of
• Underwriters of affordable housing to the specialized context of supportive housing.
Supportive Housing
It encourages supportive housing professionals to step outside their tradi-
• Staff of Supportive tional vantage point of measuring success in the exclusive terms of today’s
Housing tenants’ well-being. It includes specifics about predicting trends in your
property’s finances, operating more efficiently, using systems and tools to
improve operations, and tracking financial indicators. In general, the guide
provides ideas on how to think and operate more like a business. It also
presents the argument for why an asset management approach is necessary
to 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. Aspects
of property management are discussed in the guide but only insofar as they
intersect with ideas about asset management. For those looking for a guide
with more substance about property management, recommended resources
on this topic are listed in the Best Picks section at the back of this guide.

Welcome | 7

HOW SHOULD YOU USE THIS GUIDE?
First, browse this guide for the big picture of what asset management
means. Then, go back and read topics that appear to be realistic first steps—
or next steps—for your organization to begin asset management. Review other
parts of the guide with the expectation that you will not accomplish all tasks
at 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 are
numerous Best Picks that you can access for additional information related to
your particular supportive housing program. There is a wealth of publications
on individual aspects of asset management; look for materials specific to your
particular housing group, whether you operate in a rural community, are
financed by low income housing tax credits, or function as your own proper-
ty management company. Worth exploring are the listings of trainings on
asset management just for nonprofit housing groups. As a next step after read-
ing this guide, consider educating a staff or board representative to become
your in-house expert.
Share this guide with colleagues. Once you are convinced of the need for an
asset management approach, spread the word. The more that AIDS housing
and supportive housing promote asset management, the better understood
will be requests for financial resources to carry it out. Bringing this guide to the
attention of supportive housing colleagues and board members, both inside
and outside your organization, will help the AIDS housing and supportive
housing 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 studied
trends in the long-term stability of affordable housing indicate that asset
management is an urgent agenda for all nonprofit housing groups.2
Research shows that if housing groups wait to introduce their organization to
asset management, problems affecting financial performance may gradually
grow 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 affordable
housing. By comparison, preserving housing owned by nonprofit groups has
received relatively little attention. The concept of asset management is an
attempt to balance these two equally important agendas. It needs to be
applied to every sector of affordable housing.
Follow the lead of affordable housing groups doing asset management. 2. Rachel Bratt, Confront-
ing the Management Chal-
Traditionally, supportive housing groups have not identified closely with the lenge: Affordable Housing in
wider affordable housing movement. However, asset management is an agen- the Nonprofit Sector. New
School for Social Research,
da where supportive housing has considerable common ground with the rest 1994, p. 204. Available from
of the country’s affordable housing organizations. Supportive housing groups the Community Develop-
ment Research Center at
should seek out opportunities to gain knowledge, resources, and momentum the New School for Social
on asset management generated by mainstream housing groups. Research.

I N T RO D U C T I O N

WHAT DOES ASSET MANAGEMENT MEAN?
Asset management is in favor with today’s government funders and
housing groups nationwide. It is a concept that is borrowed from private
sector real estate and is increasingly relevant to nonprofit providers of low-
income housing. Yet, despite its growing popularity, asset management is
“Asset management
poorly understood. Often confused with property management, few groups
involves planning for know what asset management might involve for them or how they could
the long-term con- apply it. Supportive housing providers, particularly smaller organizations
cern for bricks and with backgrounds primarily in social services, AIDS care, or homeless pro-
mortar...the long- grams, seem least likely of all to know about asset management.
term economic and
physical viability of The term “asset” refers to a piece of real estate that has current and future
value. The asset management approach asks that you consider the proper-
the building.”3
ties you use for supportive housing in terms of their monetary value. Asset
management means taking the long view—meaning the next ten to fifteen
years—of whether your property’s value is stable, growing, or decreasing.
“The group’s horizon The idea is that things you do today will set the stage for financial perform-
for planning, budget- ance tomorrow.
ing, and monitoring
must be extended Conventionally focused on the short term, AIDS housing and supportive
housing groups in particular need to shift their perspective if they are to
into the future. We
adopt this long-term approach. Ultimately, the asset management mentali-
need to do things
ty translates into concrete practices and policies that will protect and
today to make sure enhance the viability of the asset’s future.
real estate endures
as supportive hous-
ing and achieves its
goals to benefit as
many people as pos-
sible in the long
run.”4

3. Bratt, p.86.
4. Bob Stone, “A Guide to
the Roles and Responsibilities
of an Asset Manager,” Occa-
sional Paper Series, Local
Initiatives Support Corpo-
ration, Organizational Devel-
opment Initiative, p. 3. New
York, 1997.

Introduc tion | 9

WHY DOES SUPPORTIVE HOUSING NEED
ASSET MANAGEMENT?
Many supportive housing providers have “backed into” the real estate
business with minimal experience owning and managing property.
Before getting into housing, most of your organization’s background may
have 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 of
homelessness among your service constituency. If you are like many sup-
portive housing groups, you have a social work orientation to your housing
work. While helpful in day-to-day management of residents’ needs, this pre-
disposes the whole organization towards short-term goals. Staff may turn
over with the relatively high frequency common among social service organ-
izations. This leaves your organization without a long-term “owner” with
memory of when the housing was created. These patterns diminish the long
view of where your program has been, in what direction it is going, and
what 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 government
funding mechanisms that have relatively short commitments. Thus, many
supportive 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 do
business badly. In these situations, careful monitoring of financial trends
through 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 on
a short-term basis, there are inherent financial problems that come with this
way of structuring the housing. High turnover rates of residents, while desir-
able from the perspective of these groups’ missions, result in many costs and
financial losses that are difficult to recoup. A compounding problem is the
fluctuating market for supportive housing groups who operate in a special-
ized niche such as HIV/AIDS housing. If you are a niche provider, changes
in the status of your target population may reduce the desirability of your
housing program in unanticipated ways and create financial losses until
your census recovers.

10 | Put Your House in Order

WHAT DOES THE JOB ENTAIL?
The practice of asset management is made up of a number of discrete tasks. In
planning 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 the
project 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 operations
and 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.

Introduc tion | 11

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 building
by carrying out rent collection, record keeping, and routine maintenance. Its
emphasis is on details and delivery of basic services. In contrast, asset man-
agement has an extended horizon for considering the property’s needs and
the big picture of performance trends over time. For example, this extended,
broader perspective includes creating a ten-to-twenty-year spreadsheet to
predict 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 asset
management. For example, as discussed in the next chapter, your choices of
property management arrangements should be dictated by your broader
asset management approach. Typically, property management is at the top
of a housing group’s to-do list and asset management is at the bottom.
Understanding the distinctions between asset and property management is
the first step toward correcting this imbalance.

Asset Management and Property Management Roles5

Areas
of Overlap Asset
Property Tenant Relations
Management
Management Annual Budgeting Hiring and Evaluating Property Manager
Rent Collection Capital Costs Study Developing Asset Management Goals
Day-to-Day Management Preventative Maintenance Refinancing/Disposition Decisions
Record Keeping Regulatory Compliance Tracking Standards, Benchmarks, Indicators
Financial Reporting Community Relations Managing Cash and Reserves
Routine Maintenance Crisis Management Fundraising
Security Communicating with Investors
Asset Value Increase Hiring Accountant, Lawyers, and Contractors
5. Maria Gutierrez and
John Vogel, “Nuts and Bolts
of Asset Management,” Pre-
pared for the Local Initia-
tives Support Corporation,
June 1998, p. 4.
Asset Management and Property Management Timeframes6 6. Jim Stockard and Bob
Engler, “A Guide to Com-
prehensive Asset and Prop-
Years: 1 2 3 4 5 10 15 erty Management: Manual
for Building Communities
Asset Management through Good Asset and
Property Management,”
Property Management Second Edition, Local Ini-
tiatives Support Corpora-
tion,1997, p. 173.


SUPPORTIVE HOUSING—ADVANTAGED OR DISADVANTAGED?
Supportive housing is in a unique financial position vis-à-vis the wider
affordable housing field. Your approach to asset management will need to
reflect the special strengths and weaknesses of this position. By noting
which ups and downs associated with supportive housing apply to your
“The asset manager
program, you will unearth areas to both focus your concern and build your
of supportive hous- confidence.
ing must understand
that their project
may need to oper-
ate with a ‘planned Ups and Downs of Supportive Housing’s
deficit.’ But these Financial Position
deficits are okay.
It is the unplanned Upsides Downsides
ones that are the
In many cases, supportive housing Without debt, there is no outside
problem.”7
is free from any debt. Without agent to help detect problems in
debt, there is no pressure from your financial status. Groups that
banks that monitor performance are debt-free need to be self-moti-
or impose required practices. vated and watch their bottom
lines.

A preponderance of deep rental Many deep subsidies come from
subsidies associated with residents short-term federal funding mecha-
who contribute minimally to rent. nisms. Reliance on these sources
These subsidies can offset losses may leave groups without access
when residents do not pay rent to longer-term funding mecha-
and mask inefficiencies of opera- nisms.
tions.

A preponderance of sponsoring Subsidization from sponsoring
organizations with charitable or organizations is an unreliable
social service missions. Typically, long-term strategy for meeting
such groups have the means of costs. Housing needs to be struc-
fundraising to pay for unmet costs tured so that it can pay for itself.
in the supportive housing pro-
gram.

A total portfolio of a few small Lack of a large portfolio of diverse
properties makes it easier for asset properties leaves the organization
managers to follow the details of vulnerable to the impact of prob-
each property. lem properties. Buildings operat-
7. Brigitt Jandreau-Smith,
ing at a loss cannot be balanced by
Corporation for Supportive income from other real estate.
Housing.

B E F O R E YO U S TA R T

DEFINE YOUR ASSET MANAGEMENT GOAL
Your asset management goal will dictate many of the decisions you
make. It will be the guiding principle for how you do business. It is not
to be confused with the programmatic goals your organization has estab-
lished for the services it delivers. Most supportive housing groups have a
goal statement related to desired changes in the status of their residents.
Asset management asks that you transfer that perspective to the property
itself. Ask what goals you have for the status of your property as an asset.

To begin, review what covenants exist for maintaining your building as
affordable AIDS or special needs housing and for what period of time.
For example, many supportive housing groups are obligated to maintain
their 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 with
AIDS.

Within the parameters of your covenants, define your asset manage-
ment goal. One group’s goal may be to maintain a building as AIDS
housing 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 intend
to 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 to
changes 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.


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 a
moment. 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 your
eye on the bottom line: profits.

In supportive housing, you are trying to balance two bottom
lines: (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 the
budget cannot support them.

The asset management approach offers a different perspective on the
double bottom line. It suggests that the two goals of excellent service deliv-
ery and cost efficiency can complement one another. Try to reconceptualize
your approach to services from a business perspective; see how effective
social services can strengthen the bottom line. For example, programs such
as case management, relapse prevention, workforce participation services,
and personal budgeting encourage residents to have lower impacts on your
property. That is, they ultimately save you money. On the other side of the
equation, residents who are helped to increase their earnings may reduce
the 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.

Before You Star t | 15

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 the
income statements for your property. Explore the simple
questions outlined below. Your answers to these questions
should help ignite concern for how you can continue to
provide a clean, safe, and comfortable environment, if you
don’t start evaluating and planning how to manage this
asset 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?


FIND A LITTLE MONEY TO START
Getting started on asset management will not be a costly endeavor. Your
initial expenses will be modest investments in training, publications, soft-
ware, etc.

Sample Starter Kit on Asset Management

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.

Larger organizations may want to put a line item in their budgets for per-
sonnel costs associated with asset management, perhaps an amount
equivalent to one-quarter of a full-time management-level employee. If you
can’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.


FIND MORE MONEY AS YOU GO
Plan on needing some grant money to do asset management. As your
group begins to implement asset management practices, the need for money
will become evident. In particular, raising money to invest in reserve
accounts is perhaps the biggest financial obstacle to overcome without some
external source of subsidy.

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

You may want to partner with other supportive housing groups in your
region 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 to
approach local government officials and sources of private financing in your
community 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 Sullivan
Housing 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 your
organization’s busy schedule makes it seem that there is no choice at all. In
fact, many supportive housing groups believe that asset management will be
an extra burden that their organization cannot bear with their current
staffing. But, in all likelihood, it will just require thinking creatively about
how the work can be accomplished. Keep in mind that asset management
is 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), heard
about the concept of asset management from colleagues operating afford-
“What is important able housing in his region of Texas. Interested in improving the perform-
is not who takes on ance of his organization’s housing, Don followed a recommendation that
the role but that it he enroll in a four-day class to become a Nonprofit Housing Management
is taken on explicit- Specialist (see Best Picks at the back of this guide). The course appealed to
Don’s belief that there is much to be learned about nonprofit housing out-
ly by someone and
side the AIDS housing field.
that the organiza-
tion finds ways to While it involved travel and time away from his organization, the course
support the func- proved worthwhile. Most importantly, it offered Don exposure to basic con-
tion.”10 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 be
exposed to what these terms mean when discussing financial issues with
real estate attorneys and funders.”

Don returned to Dallas with some forms and tracking sheets that he shared
with the facilities and maintenance staff of his organization. As a result, the
staff changed how they track work orders and “make-readies” (getting units
ready for new tenants). In general, he raised the staff’s consciousness about
the importance of tracking what it costs and how long it takes to turn over
and lease-up units. The staff now understand that this is an area where
money is saved or lost. However, because each of ASD’s properties operates
on 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 Initiatives
Support Corporation, “Guide to Comprehensive Asset and Property Man-
agement” (see Best Picks), to learn about asset management or to refresh his
10. Stockard and Engler, memory. He finds it well organized and easy to look up any topic and find
p. 176. quick answers.


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 is
also on Don’s longer-term agenda. As required by one of the organization’s
funding mechanisms, the Low Income Housing Tax Credit Program, one of
the organization’s properties already has such a reserve. Although he has yet
to 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 not
meet their costs independent of the organization’s reserves. AIDS Services of
Dallas has been fortunate over the years to “tap into a lot of freebies” and
benefit from successful capital campaigns. Nevertheless, this is not a secure
plan for doing business. Don’s long-term strategy for getting ASD properties
to pay their costs is to diversify the organization’s real estate portfolio to
include non-special needs housing that will have a healthier cash flow than
AIDS housing. He believes all supportive housing groups need to become
more 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 hold
for 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 also
demonstrates that introducing asset management is likely to be a gradual
process 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 formal
steps to heighten the awareness of personnel in your organization. For a
moderate-sized housing organization, it is estimated to take approximately
23 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 and
Bolts of Asset Management,
Lincoln Filenes Center for
Community Development,
Tufts University, 1999.
13 Stockard and Engler,
p. 176.

FIRST STEPS

EDUCATE YOURSELF
Invest time in reviewing materials about asset management. Realize that
this 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 management
in the nonprofit housing sector, all of which are available at afford-
able prices.

Questions to Anticipate from Staff
a. What does asset management mean? c. Why is it important?
b. How does it differ from property d. What will it entail to start?
management? e. How will this affect our current jobs?

HOLD A MEETING
Expect that it will take some focused time to introduce the concept of
asset 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 staff
and 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 reach
their 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 group
discussions, to help them grasp your message. Conclude your meeting by
outlining the first steps your organization will take and their anticipated
time frame.


Questions to Help Generate Staff Discussion on
Asset Management
• “How many of you can think of a special needs housing program of some
kind that has gone out of business in our community? What problems
contributed to its demise? What do you think the sponsor could have
done differently to avert these problems? What lessons for our work can
we 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 you
evaluate whether to stay with that company? How would you obtain the
information you need to make your career decision? What parallels exist
within this context and how should staff of our organization evaluate the
status of our properties?

START A BINDER
Experts recommend that housing groups create detailed Asset
Management Plans. Don’t mistake the need for such a plan as an empty
formality. Basically, the Asset Management Plan is a collection of written
strategies and policies for how the property will be administered.

Think of your Asset Management Plan as a work in progress. A simple
way to approach the task is to put in writing all the decisions that are made
along the way. Then create a binder with tabbed dividers and add elements
as 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 lasting
tool and standard that can be passed on to staff members who inherit the
responsibility of preserving your housing program. Whatever format you
follow, taking the time to write down how things get done is a worthwhile
investment of your time and energy. If your organization is like most sup-
portive housing organizations, it has a relatively high rate of turnover at the
managerial level. The Asset Management Plan will outlast such personnel
changes and pass on a permanent standard.

First Steps | 23

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, invent
names 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 from
reading 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

Bolts of Asset Management.


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 will
be 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 management
needs. 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 plan
to 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 own
documents for each housing program you operate. See Best Picks at the back
of this guide for publications and software that can help you create a fine-
tuned Property Management Plan.

First Steps | 25

Asset Management Advice Column

Dear Advice Guru,
I am the director of housing programs for a large social service agency. Among the
programs I manage is a small multi-family property used as special needs homeless
housing. The property was bequeathed to my organization, which is primarily a
social service provider, before I started working here. When they received it, my
organization had no experience, or strong interest for that matter, in managing
rental 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 outlook
for 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 how
long this can continue. In this vacuum of clarity, management is a challenge. It is
hard to know how to make decisions regarding improvements, clarify my role, plan
for the building’s long-term needs, and balance the double bottom line of excellent
service delivery with cost efficiency. What should I do?
Sincerely,
Housing Director
AIDS Series Committee, your town

Dear Housing Director,
You’ve come to the right place. If things continue along their present course, your
organization will probably be forced to sell its property some time in the future and
the residents will lose their home. Your organization needs to begin an Asset
Management 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, the
better. Then take your work, your concerns, and literature about asset management
to a meeting with administrators of your organization. Make your case for the asset
management approach and ask that your efforts be supported.
Advisedly,
Your Guru


Table of Contents for a Property Management Plan15

a. Marketing and Outreach Strategies n. Drug Policies
b. Eligibility Requirements and Required o. Guest/Visitor Policy
Documents p. Pet Policy
c. Tenant Selection Screening q. Storage Policy
d. Credit Check Process and Fees r. List of Furnishings
e. Waiting List Practices s. Pest Control Practices
f. First and Last Month Rent/Security t. Unit Inspection Practices
Deposit Policy u. Cleaning Practices
g. Leasing Procedures v. Grievance and Complaints Policies
h. Move-In Procedures w. List of Maintenance Priorities
i. Tenant Orientation x. Work Orders
j. Common Space and Building Rules y. Unit Turnover
k. Parking z. Security
l. Community Relations aa. Forms and Permits Required by
m. Resident Involvement Practices City/State/County

Bolts of Asset Management.

First Steps | 27

EVALUATE YOUR PROPERTY MANAGER
Reevaluate your current arrangements for property management with
the asset management approach. Whether to self-manage or contract out
property management is a key decision. This is because bad day-to-day
management situations can be damaging to the long-term status of a
property. You may assume that as an organization’s portfolio of housing
grows, property management is typically moved inside. However, many
nonprofit housing groups have not followed this evolution.16 There
are 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 and
property 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, administrators
should use information provided by the property manager to gain a per-
spective on the bigger picture of the property’s performance and the agency’s
goals.

If you choose to self-manage, do so with realistic expectations. Don’t do
self-management primarily as a cost-savings strategy. Furthermore, don’t
assume you will get better results. Nationally, there is no conclusive evidence
that 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. If
you 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
“You are not simply housing authorities in your area
a community group b. Private managers’ willingness to work with a nonprofit client
dabbling in housing c. Pressure from your financing agents to “go outside” for management services
and desperate to d. Your interest in staying close to your residents’ day-to-day lives
find someone to
solve management
problems.”18 IF YOU CONTRACT OUT PROPERTY MANAGEMENT
Those who contract out property management have special concerns. If
you follow this route, make sure that your organization does not divorce
itself from the property so much that you lose track of information needed
for asset management. In addition, think through the criteria by which you
will evaluate your property manager. Expect more than the minimum yard
work, 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 relationship
with 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.
17 Ibid. j. Outline the criteria on which the property manager will be evaluated.
18 Joan Wallstein,
“Selecting a Management
Firm: A Workbook and
Sample Forms,” Occasional
Paper Series, Local Initiatives Be vigilant in your checks and balances of property management ven-
Support Corporation, Orga- dors. As an industry, property management suffers from a reputation of ille-
nizational Development
Initiative, 1996, p. 11. gal activities such as kickbacks. Plan on verifying the property manager’s
19 Ibid., p. 5. work by visiting the site and checking with residents on a regular basis.

First Steps | 29

GET ORGANIZED
Asset management involves tracking indicators and monitoring trends in
the property’s performance. Gathering these data in a timely, organized,
and efficient fashion is key. Designing your system for data keeping may
bring 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 information
such as move-ins/move-outs and work orders. It is also useful to have forms
that 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 entering
all their data into an Excel spreadsheet. Switching to more carefully crafted
schedules and forms may produce more organized and thorough informa-
tion from which to make your analysis. For example, poorly structured rent
schedules are a common problem in supportive housing that can be easily
fixed 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 variety
of ideas about how to collect information. See Best Picks at the back of this
guide for a list of publications and software you can purchase that come
with ready-made forms both in hard copy format and on diskette. Among
the many useful forms available is one for creating a Monthly Asset
Management Report, available with Track-It! software. You can also create
your own with contents similar to those outlined below.


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

20 Track-It! Asset Manage-
ment Software Instruction
Guide, Local Initiatives
Support Corporation, 1998,
p. 21.

First Steps | 31

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 have
funds to pay for expenses that will occur in the future, whether anticipated
or not. This source of financial security will avert the financial problems and
“Regardless of how
disruptions to operation that occur when housing groups encounter expens-
es that cannot be covered by operating income, as they inevitably do. As well or poorly
with any form of savings, reserve accounts require doing without money in endowed your hous-
the short term so as to create long-term security. Similar to saving for a ing group is, there
child’s education, it is best to start making contributions as early as possible. will always be a ten-
Typically, you make monthly deposits into each of these cash reserves in a sion between spend-
standard amount. These funds grow over time to give your organization ing on operations
more value for its investment.
and contributing to
Supportive housing has few examples of ample reserve accounts. In fact, reserves.” 21
for some supportive housing organizations, they are an unknown. If yours
is 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. These
adverse conditions require a concerted effort if supportive housing groups
are to catch up to other parts of the housing sector in protecting their assets
through reserve accounts.

Low Income Housing Tax Credit properties have a better outlook. Groups
with this form of financing are an exception. For one, they are mandated to
contribute 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 the
capital budget.

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

21 Terry Gagnon, Paul
Sullivan Housing Trust.


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.

First Steps | 33

PLANNING YOUR CAPITAL RESERVE
The need for a capital reserve deserves special priority. Research into the
longevity of affordable housing resources reveals that groups who lack ade-
quate capital reserves have an uncertain future.22 For-profits in the real estate
industry have heard this warning and are generally better prepared to pay for
what they will need. The practice of saving large sums of money in a capital “Do not turn away
reserve generally runs contrary to common practice in nonprofit housing, from the establish-
where practitioners are constantly trying to do more with less. Reserve plan- ment of a capital
ning is an area where nonprofits would do well to mimic more closely their reserve—it will not
for-profit counterparts. go away. Do not let
the account slide.
Start your capital reserve by estimating savings goals for the amount of
This would be sign-
money you want to accumulate and maintain in your reserve. Keep in mind
that moderately rehabilitated properties will need capital infusions much ing a death warrant
earlier than buildings developed as new construction or complete rehabili- for your property. If
tation. All the major elements of your property will ultimately need repair necessary, cover the
or replacement. need in phases. But
do cover the need.”24

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.

22 Bratt, p. 86.
23 LISC, p. 119.
24 Text from Institute
for Real Estate Management
Course #305, p. 16.


Major Building Elements of a Capital Cost Survey

a. Roof g. Air conditioning m. Major appliances
b. Exterior paint, siding h. Plumbing n. Weather protection
c. Windows i. Wiring o. Trees, shrubs
d. Furnishings j. Carpets, flooring p. Fire extinguishers,
e. Elevators k. Security systems alarms
f. Heating systems and l. Required system q. Compactors, dumpsters
water heaters upgrade

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, no
capital reserve to tap for major building improvements. However, here in
Connecticut, we are lucky in that there was an initiative to create a statewide bond
fund to pay for major capital expenses in HIV/AIDS housing. First, there was a
process of systematically assessing the needs of all the properties. Then the state
floated a general obligation bond to pay for those repairs and refurbishment. For
25 David Mensah, us, this has been a great resource.”25
Connecticut AIDS Residence
Program.

First Steps | 35

Exterior Building Component Analysis (for 2001)26

Item Cost Life

Roof – pitched $.75/sq.ft. plus $1.00 per 15 years
sq.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 – Indefinite
units Electric – 20 years

Air Conditioning – Variable 15-18 years
central

Air Conditioning – $600/each 15 years
individual

Hot Water System – Variable 15 years
central

Hot Water System – $240 each 12 years
individual

Elevators Variable Indefinite – 30 years

26 Institute for Real Estate
Management Course #305.
27 Ibid.


Interior Small Items Building Component Analysis28

Item Cost Life

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

Carpet in 8 years
common areas

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

Tile in common areas 12 years

Cabinets $150/linear foot 18 years
minimum

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

28 Institute for Real Estate
Management Course #305.

R I S E T O T H E S TA N DA R D

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 do
business. These performance standards prompt an organization to
push itself towards optimum efficiency and financial stability.

Performance standards are not to be confused with service
delivery standards. In fact, in many cases the performance of the
asset can be hidden from tenants, who may feel well served
and satisfied with their experience in your supportive housing
facility. A program may be functioning at a high level in terms
of 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, you
will find some recommendations related to asset management issues that
will be worth your attention. Consult Best Picks at the back of this guide for
a listing of standards-of-care publications.

For now, supportive housing groups need to look outside their own
housing niche for performance standards. As there are, to date, no official
standards for the specialty of supportive housing, you will need to start by
consulting those of the broader field. Note those standards with which your
group is consistently out of line. Ask yourself if there is anything about the
profile of your housing that makes these standards not applicable. Consider
adopting those standards that seem relevant to the context of your work and
write them into your Asset Management Plan.


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.

Rise to the Standard | 39

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.


RED FLAGS TO WATCH FOR
There are indicators that problems may lie ahead for your property. It is
helpful to have an idea which of these indicators may signal problematic
trends. 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.

Guidebook: Supportive Housing Asset Management

Guidebook: Supportive Housing Asset Management

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