As your commercial real estate business grows, you will likely try to attract and retain investors who can help you develop your properties and your portfolio.
Creating a good relationship with these investors is crucial for maintaining growth and building a positive business reputation. This means that keeping your investors in the loop about both successes and problems through reporting is an extremely important task.
But what information do investors actually want to see? Below, we’ll run through the most important details and report types to include, as well as basics for effective reporting and communication.
It’s not just that you report, it’s how you report. Owners and investors rely on helpful, detailed communication to get the full picture of a property or portfolio’s performance and to decide on future strategies. Use these tips to make your reporting as effective as possible.
Successful commercial real estate businesses share investor reports on a frequent, predictable schedule, often weekly or monthly. This way, reports are consistent and don’t leave gaps in information, making it much easier to track trends and spot potential issues. Plus, a reliable reporting schedule builds trust with investors, as it demonstrates your commitment to understanding the performance of your business and ensuring that they are kept up to speed.
The best reports strike a balance between detail and clarity. It’s important to provide investors with all the data they need, but ensure that it isn’t so overcrowded that information becomes confusing or impossible to find. Additionally, you may want to provide analysis, not just raw data, especially if your investors aren’t specifically experts in commercial real estate. Analysis points them to the most important information and can indicate a path forward.
Investors are looking for transparency. If reporting reveals a performance issue, don’t try to hide or downplay it. Giving an accurate view of the situation is crucial to make strong decisions about how to approach it. That said, indicating potential solutions and growth opportunities in initial reporting can be very helpful. It keeps owners and investors focused on the actionable steps you and they can take for success.
Reports need to be helpful for both you and your investors. If you receive feedback on your reporting, take it into account next time. Responding to investor needs helps build trust and streamline the reporting and decision-making processes, since there will be less confusion or need for additional information.
You may think that you can just send your investors a simple profit and loss (P & L) statement every few weeks to keep them in the loop, but the reality is that investors want and need more. In order to really understand what’s going on in the complex commercial real estate business, it helps to provide a variety of reports depending on investor preferences to ensure everyone is on the same page. Here are some common types of reports you might include.
The P & L statement is a good starting point of information to give your investors. This document provides an overview of revenue, expenses, and net profit since the last report. You can create a P & L statement for a single property, a group of properties, or your entire portfolio to get a good basic idea of its financial health. Still, it’s smart to supplement this document with others that give more detail or a different angle on the financial situation.
Cash flow statements specifically focus on the money coming into and moving out of a property or portfolio, as well as where that money comes from and moves to. Usually, cash flow statements have three sections:
Aside from these well-known report types, investors may have specific requests about data they want to see. It’s always best to build reports around these requests so that investors receive exactly the information they need. They may want to see key performance indicators (KPIs) including return on investment (ROI), debt service coverage ratio (DSCR), and even occupancy rates. Together, these different measurements provide a more complete picture of a property or portfolio’s health.
One aspect of reporting that commercial real estate businesses may miss is attention to all levels: portfolio, property, or sometimes even individual units, depending on what the investor is looking for. Offering these options to get a broad financial view or a deep dive into a specific area shows an investor that you are open, honest, and have a thorough understanding of your business’s performance. It also helps both you and the investor spot potential issues early.
Generating and tracking reports is time-consuming and difficult if you don’t have the right tools. As your business grows, it’s time to leave spreadsheets and manual data entry behind. Instead, turn to commercial property management software options. Many of these programs automatically track important information about your finances, properties, and tenants, freeing up your time to focus on strategy. Commercial property management software like STRATAFOLIO even offers investor-specific reports and an investor portal, creating a helpful, professional place to communicate.