Page 174 - Trump University Commercial Real Estate 101

TRUMP UNIVERSITY COMMERCIAL REAL ESTATE 101

When banks finance you, they will require that your debt coverage
ratio be 1.20 or better in good times, and around 1.25 in lean times.
It ’ s also a good rule of thumb for you to use, even if you ’ re not fi nanc-
ing through banks.

Don ’ t Persuade Yourself into Failure

I already talked about the dire consequences of ignoring deferred
maintenance. Here are three other situations that you absolutely must
stay on top of:

1. Collections
2. Occupancy
3. Attitude

Collections

It ’ s realistic to expect your management company to have a few out-

standing rents in the first part of the month. However, they should be
zeroing out by the end of the month. In other words, they should have
collected all rents by then.
I ’ m not suggesting that tenants be told they have until the end of
the month. Instead, I ’ m referring to your internal reporting standard.
If you ’ re not at 100 percent, you must be on top of the situation. It ’ s
your job to manage the manager.
Even with the goal of 100 percent collections by the end of the
month, it ’ s common to have up to three percent in delinquent rents. Just
make sure the manager is actively pursuing these tenants. Rents that go
uncollected for more than thirty days are likely to go uncollected
permanently.

Occupancy

The first job of your management company is to fill up the prop-
erty. The second job is to collect rents, and the third job is to keep that
property full. Your biggest expense will be tenant turnover.

154

10/14/08 10:56:20 AM
c07.indd 154
c07.indd 154 10/14/08 10:56:20 AM