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Forecast

This article explains how the forecast functionality works.

1. Overview of Objects vs Forecasts

When you create objects (Association, Leases, Loans, Insurance, Property Tax, & Service Contracts)  in Property Tools, a financial entry is made to capture those expenses for the periods in which they are active.   So when you look at the financial reporting or dashboards, you will see the lease income or expenses start to trail off.  (This isn't the case for Loans because we have the entire amortization schedule until maturity).  So in order to have a full, accurate projection, we built the forecast to use those objects as the starting point, and apply assumptions for how they will change into the future to build a long term forecast.


2. How to create a forecast

Navigate to the Forecast page, under Financials in the Sidebar Navigation and click Create Forecast.   

1. You will start by giving the forecast a name, forecast end date and property valuation growth assumption.  The forecast end date defines how far out the forecast will go and the valuation growth assumption will be applied to your property values so you can see projected appreciation and equity.

2. Lease Assumptions:

The Lease forecasts will take a set of assumptions and simulate the lease renewals for you.

  • Renewal Probability:  The system will look at your existing leases and simulate if each lease renews and repeat that renewal evaluation process out until the forecast end date.  If the lease renew, the annual rent increase assumption will be applied.  If it doesn't renew, the system will factor in other assumptions (outlined below).
  • Annual rent increase:  Applied when a lease renews or new lease is simulated
  • Expected Vacancy Months:  If the lease doesn't renew in the simulation, the forecast will apply this assumption to show a gap in lease income while a new client is found
  • Expected Tenant Improvements:  If there is a vacancy, the forecast will include this amount as estimated repairs before the new tenant is added
  • Property Management Fee:  You can enter this if you want the forecast to apply a property management fee expense to your forecast
  • Repairs and Maintenance:  You can enter this if you want the forecast to apply a flat rate of lease repairs and maintenance expense to your forecast

After entering these assumptions, you can select the leases you want to include in the forecast.  Unless you are planning on creating seperate forecasts for different properties, you would typically just select all active leases.

3. Insurance, Property Tax, Association, and Service Assumptions:

  • These 4 forecast all work the same, you simply enter an expected expense growth rate that is applied to them and select the ones you want it applied to.  

4. When the forecast is created, the system will populate your financial entries under the Forecast source in the financial reporting so that you can always see which numbers are coming from the original created object and which were generated by the forecast.

The forecast created is populated at the detailed level of property and mapped chart of accouts.   So you can drill into a detailed financial report by both account and projection.   you will be able to see a full forecast of Taxable Income and Operating Cash Flow.