With the ability to effectively centralize and compare the budget, contracts and costs, a developer can prevent future issues on a development project.
The Real Estate Developers Handbook: Anticipated Cost Tracking in Rabbet Reports Made Easy
Tracking In Rabbet
If you haven’t already, check out the previous blogs in this series, The Real Estate Developers Handbook: Budget Tracking Best Practices in CRE.
Picture this: a majestic skyscraper reaching for space or a serene community nestled amid lush landscapes. These captivating visions start as blueprints and evolve into something tangible.
A real estate development project combines creativity, strategy, and resource management to transform visions into reality. From groundbreaking to ribbon-cutting, every step holds the promise of a thriving property that will stand as a testament to your vision and determination. However, amidst the excitement and anticipation, one aspect often stands as the bedrock of project success: budget tracking.
In this series, we delve into the compelling reasons why meticulous budget tracking is the cornerstone of prosperous real estate development projects. From its role in ensuring fiscal discipline to its power in anticipating and mitigating potential challenges, we will uncover how budget tracking empowers developers, investors, and stakeholders to navigate the often unpredictable terrain of real estate development with confidence and finesse. So, let’s embark on this exploration, where numbers tell a tale, and financial acumen lays the foundation for real estate success.
Rabbet was built to ensure proper centralization of your information, to drive project insights, and ensure stakeholder confidence.
This is done through three key steps:
- Detail Your Project Budget – Making it easy to track the proper detail of your project is the first key step. You can detail it for your use and then roll it up quickly for summary level to external parties.
- Properly Manage All Agreements – Whether it is a contract, a change order, or an exposure, tracking everything you have agreed to pay (and expect to pay) to vendors on a project is key for rolling up your project budget.
- Track All Costs to Agreements – As invoices and pay applications come in, you quickly ensure that not only the amount is in budget, but also in contract so you immediately know when vendors are exceeding their contracts or billing for out-of-contract costs.
Once you track the proper budget, agreement, and cost information, you can now easily visualize whether the project has enough budget (including contingency) through our various “Anticipated Cost Report” options. For this, let’s talk about how you can understand the various information and its relationship.
Current Budget versus Anticipated Costs versus Amount Paid and Remaining to Be Paid
Your current budget on the project is the original budget net any reallocations / adjustments you have done to get to your current budget. Ideally your current budget is always greater than your Anticipated Costs which are the net of all of your contract commitments (contracts and executed change orders) + potential change orders + exposures + out of contract costs. Your potential total costs can also be viewed by looking at the amount that has been requested to date and any remaining potential change orders and exposures.
By comparing the total of current budget and anticipated costs (either by contract or amounts paid to date), you can confirm the amount of money remaining is sufficient to cover the budget and then simply reallocate the money from line items that have surplus and contingency to line items that have an overrun.
To simplify this comparison, we have created the “Anticipated Exposures” column that finds the greater of the Current Budget and the Anticipated Costs or the Amount Requested and Outstanding Agreements (Potential Change Orders, Exposures, and Out of Contract costs). If Anticipated Exposures is the SAME as your Current Budget, you are in Good Shape.
Tracking Your Anticipated Budget
If you prefer to have your budget be exclusive of Outstanding Agreements, we have created the Anticipated Budget column that finds the Greater of the Current Budget and Committed Costs and adds the Outstanding Agreements to calculate the true Anticipated Budget if you are NOT accounting for Outstanding Agreements in your budget adjustments.
We recommend that you try to account for Outstanding Agreements as soon as they come up and therefore recommend the use of Anticipated Exposures in the Anticipated Costs Report.
As we wrap up this exploration into the realm of budget management and anticipated cost reports in real estate development, we’re reminded of the pivotal role these practices play in the successful execution of your projects. The journey from vision to reality is one with potential challenges, twists, and turns, and it is through meticulous financial oversight that you can navigate this path with confidence.
Your commercial real estate development journey begins with establishing a robust budget that comprehensively captures the myriad costs involved in bringing your vision to life. This budget serves not only as a financial guide but as a strategic map that ensures fiscal discipline, accurate cost reallocation, and a solid foundation for decision-making.
Contracts, change orders, and exposures weave the intricate fabric of your project’s financial landscape. Vigilant management of these elements ensures that your project remains aligned with your vision while adapting to the dynamic circumstances that are inherent in real estate development. By exercising prudent vendor and contractor management, proactive change management, and transparent reporting to stakeholders, you bolster your project’s resilience and its ability to thrive in the face of uncertainties.
And at the heart of it all lies the power of technology. Leveraging advanced project management tools such as Rabbet enables you to centralize, track, and analyze your budget, agreements, and costs in real-time. This empowers you with actionable insights and foresight, transforming data into a strategic advantage.
As you embark on your next real estate development journey, armed with the knowledge shared in this blog post, remember that budget tracking and anticipated cost reports are not just administrative tasks – they are critical elements to turning dreams into tangible success stories. By embracing these practices, you’re not only ensuring financial prudence but also forging a path towards a legacy that stands as a testament to your vision, resilience, and expertise.
So go forth, navigate the challenges, and let your budget and anticipated cost reports be your guiding stars on this thrilling voyage through the world of real estate development. Your success awaits on the horizon, and with the right tools and strategies, you’re poised to seize it. Happy developing!
Check out the first blog in this series, The Real Estate Developers Handbook: The Role of Budgets in CRE or visit rabbet.com to learn more.