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Turn Around Action Plan

Landlord turnaround action plan
The 8 Key Ingredients of a Turnaround Action Plan that Will Entice Your Banker or Investor to Become a Believer

How to create a convincing story that will influence and persuade your banker or investor. Use this 8-Step guideline to help you sell your story so that you can secure time and money to turnaround your property.
Your property has been suffering over time creating cash problems and you need financial help from others.
These eight key ingredients will help you put together and very convincing story on how it would be in your bankers or investors best interest to work with you.
Your story will include information about what happened to cause the financial problems, what's happening now, and what's going to happen as a result of your new strategy plan.
1. Summary of the Financial Requirements: This section of the action plan is normally a brief statement what the property is seeking based on its internal capabilities. The statement would qualify the amount, timing, and type of funding desired.
The types of funding could include equity, long term debt, short term debt, or a line of credit. A brief discussion would then follow, explaining how the new injection of funds would be utilized to put the property on solid footing.
2. Discussion of the Property: The property discussion section of the plan normally tells the reader how long the property has been owned and provides historical and financial data showing, at a minimum, an income statement.
Its purpose is to demonstrate that the business was well managed prior to the crisis. A discussion of the property particulars including capital improvements generally follows.
3. Management and Ownership: This section of the plan should include detailed information about the ownership, and the management company.
Particular emphasis should be given to experience and success in dealing with this type of property. Keep in mind that potential investors are concerned about the ability of management to effectively utilize the new funding they will be providing.
4. Causes and Nature of the Financial DifficultiesWhat Happened: This is a difficult section of the action plan to write because it will demonstrate how well you, as management, understand why you got into trouble.
Are you problems due only to outside forces in the economy? Did management inadequacies play a great part in creating the financial problems? The cause of your losses must not only be identified but be quantified.
The potential equity or debt investors must believe that the causes of your losses were “one-time” occurrences and that the root of the problem has been corrected.
Unfortunately, if your property has had poor accounting and management reporting system, it will have great difficulty developing the information needed for this section of the plan.
The first step is to identify the external causes of the problem. The external problems could include:
  • A slow down in the economy
  • Soft rental market
  • City construction in front of your property
  • Governmental changes
  • Shift in the local market demographics
The second step is to identify the internal causes of the problem. The internal problems could be:
  • Poor financial controls
  • Incorrect marketing
  • Poor management
  • Poor pricing
  • Heavy resident turnover
The list is endless, but it is important to clearly identify in your plan the significant causes of the loss in order to take the next step. Don't be shy; put all the good and bad into your plan so that potential investors can feel comfortable that you've at least found the problems.
5. Industry Outlook: This section of the action plan is designed to give external support to your analysis and conclusions regarding external causes of the problems; discussed in an earlier section of the plan.
Include detailed charts of the supply and demand of apartment units in your regional as well as local trade area. Also, include information on new construction developments planned in the coming year.
Properly written, this section of the plan can reassure potential investors that someone besides the management agrees with the industry outlook.
6. Competitive Market Analysis: A detailed market survey of all the apartment buildings that are competitors is the focus in this section. Communicate your understanding of the local market and how your property competes in the market in this section. Pay special attention to pricing, marketing, concessions, and occupancy in your comments on the survey.
7. Current Financial SituationWhat's Happening Now: In this section of the plan include a detailed cash flow statement and income statement showing how the property currently is performing. Your cash flow statement should show the financial problems with which the business must deal. Also, include a detailed summary of all the capital improvements that have been done to the property in the last 12 months.
8. Strategy to Solve the ProblemWhat's Going to Happen: Many fine books have been written about this subject. Potential investors now understand the nature of the property, how you are organized, what created the financial problems, where the property currently stands, and what the overall industry outlook appears to be. This section of the plan will tell them your strategy to fix the problems.
All strategies outlined in your plan should focus on generating cash flow. Your property is struggling and cash flow should be the focus if you want to generate interest from potential lenders and investors.

12-month Property Cash Flow Forecast
Since cash flow is the result of the strategies you will implement in your plan, a detailed 12 month cash flow forecast should be included. Also, include any other forecast and assumptions that support your strategic plan.
Putting these eight key ingredients into your plan will help you gain the upper hand in dealing with your lender. You will be proactive with your information and it will come across as if you have a good handle of the problems and how to solve them.

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