Keeping Construction and Renovation Costs on Budget


Managing replacement reserves in the real estate industry is getting easier and less time-consuming.

Processing draws and payments manually have long been a time-consuming process, in some cases requiring full- or part-time administrative personnel to process paperwork and cut checks.

In real estate accounting, replacement reserve accounts fund repairs or placement of components that wear out or break as property runs through its normal lifecycle. Typically, expenses are for HVAC systems, roofs, parking lot surfacing and other big-ticket items.

Replacement reserves are also important when an apartment community or portfolio undergoes renovation.

Until recently, managing replacement reserves has been labor-intensive and prone to mistakes and miscalculations. Checks have to be matched up to invoices, journal entries tracked and draw packages must be neatly and professionally prepared for financial institutions and investors.

It is a lot of work.

Eliminating time and energy for replacement reserves

In the recent RealPage webcast, “Easy Does It: Financial Suite Replacement Reserves,” a viewer poll revealed that the majority of viewers spend at least one day and as many as five preparing draws. Many viewers were simply unsure how much time they take.

Eliminating the time and energy to manage replacement reserves is the big advantage of the newly introduced Replacement Reserve feature in the Job Cost module of the RealPage Financial Suite. The formerly manual process has been automated to help increase efficiency, tap unused funds, and gain better visibility in projects and operations.

Reserve accounts can quickly be defined, and approval workflows for change orders and more can be created and tracked in one place. Draw packages are created for reimbursement from ledgers while maintaining thresholds by account. Also, a real estate portfolio can set up reserves for multiple lenders, capture invoices that have been coded to reserve accounts and build documents needed to claim funds.

The solution is a big time saver and easily creates a clear, organized draw package for lenders and investors.

“The value of Replacement Reserves is that it will help you track your reserves and reduce the effort needed in building your draw package,” Vice President RealPage Financial Suite Dan Newbern said. “Spending hours working on spreadsheets figuring out what invoices have been submitted, and making copies is not a valuable use of your time.”

The value of automated Replacement Reserve

  1. Reduce inaccuracy by specifying accounts for invoices to be used in reserves. It clears up that confusion of what should or should not be included in a draw.
  2. Mitigates risk by enforcing account maximums to keep you from overdrawing in specific categories. It also allows you to input a minimum that will keep you from overdrawing funds.
  3. Reduces preparation time for draw submissions
  4. Provides greater visibility into available draw amounts
  5. Enables your team to include invoice support on draws without additional effort.

Simple, easy to implement real estate solution

Newbern says the Replacement Reserve feature is simple and easy to implement. With simplicity comes a lot of other benefits.

“A simple solution is easier to train on, easier for staff to use and they realize the benefits of the solution faster,” he said.

Watch the webcast to learn more about how replacement reserves can save valuable time and increase business efficiency.

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