So you are ready to manage a HUD property? Now you need software that can handle it. (click here to see what else you need) Most real estate management software does not have the capability to handle an affordable housing property and so we will need to get one that does. From certifications (including calculations income, assets, dedications, verification, etc) to ledgers (imagine trying to maintain a ledger when the tenant/voucher portion keeps changing) to the monthly voucher submissions (if your software can't speak to TRACS then you will not get your money), having a good software is vital. In this post I want to walk you through some of the things I've learned while navigating this process that will hopefully help you make a decision.
First of all I must tell you that the real truth is you don't need an affordable housing software. You can hire a third party company to enter your information into their software and submit things for you. If the one property you are buying has very few units and you don't plan on buying any more then you may want to consider that approach*. You can even hire a third party company to take care of your entire compliance, including certifications (contact us for more info). But once you have a decent number of units or buildings, it makes sense to do this yourself**.
So now the question is what software should you get?
The first thing you should find out is what software the current management company is using. Since this is your first HUD property it may be easiest to just keep what the current property has. That is especially true if you are keeping the current staff in place. You may as well keep the software that staff is already familiar with. Obviously if are already using a software that can process HUD properties, it makes sense to switch your new property to your existing software***. But then if you have an existing HUD software you would probably not be reading this post.
When it comes to Affordable software - some of the more popular ones are Onesite (Realpage), Yardi, MRI. There are others so I will try and keep this post generic and not focuse on any one specific software. I will also not be making a specific recommendation. I will just be discussing different features that you should consider and look into while shopping around.
1. Accounting
Most affordable software will be part of a comprehensive property management software. That means that there will be an accounting feature to handle all your payables and reporting. In some sofwares (like Realpage) it is a separate accounting system which integrates with the affordable system, while in others it is one system. Many of the smaller companies that we work with have decided against using their affordable software for their accounting. There are several reasons for this. The primary one is that if a company has been managing conventional properties they do not necessarily want to switch those over to their affordable software. Affordable software tends to be much more expensive than a basic property management software (such as Rent Manager, Remote Landlord etc.) and so moving your entire portfolio to it may not be a good idea. And if you are keeping you current software for your other properties, you will probably want to use if for the accounting of your affordable property as well. This way your bookkeeping/accounting team can run everything (reports, vendors, bank reconciliation etc.) through one system.
This arrangement does not work for everyone but it is the cheaper and better option for most smaller companies, especially those with mostly non affordable units. It is the arrangement I recommend to most clients.****.
What this entails is, using the affordable software for you certifications and vouchers, and also for tenant ledgers, while using your accounting software for payables and everything else. Obviously you will need to enter tenant rents into both systems. You want to enter it in you affordable software because that is the place where you calculate certifications and tenant rents. It is the affordable software that will keep tracking of the changing rent/subsidy amounts and will be able to make the necessary adjustments should you process complicated Interim Certifications (i.e. you discover a tenant had unreported income going back two years which creates a bunch IRs and corrected ARs and GRCs).
But you also need your accounting software to know what your receivable are. And so you need to enter the tenant rents and voucher payment into this system as well. Now obviously you do not need to create individual tenant ledgers and enter each separate deposit because remember - you are doing that already in your affordable software. All you need to do is enter the total deposit amount (each batch) into your accounting software. I would recommend reviewing the deposits from both softwares each month and comparing them, to make sure that everything matches us - but other than that it is only a little bit more work.
2. Other Add-Ons
As with accounting, softwares offer a wide range of options to integrate with your core package.
Very often software companies will buy up multiple softwares and then write some code that allows the various different systems to communicate with each other. Examples are screening, payment processing and facilities. The giant tech companies tend to buy up any successful start ups and figure out a way to integrate them into their total package. The integration is not always so smooth but over time they get better. Each management company is going to have to decide what add-ons they want and what they don't.
Let's use screening as an example. If you have other properties then you almost certainly have a company you use to screen your applicants for credit and criminal. So now with your new affordable software you need to decide if you want to use their screening feature or use the one you use on your conventional property. (This is of course assuming that the affordable companies allows you to opt out of screening and does not consider it part of their core package.) Here are things to consider when making that decision.
a. Price. If your current screening company charges $15 per screen and the affordable one charges $20 then there's your answer (remember that with affordable you probably screen more often than traditional because not everyone is eligible for affordable and so you may end up turning away a lot of applicants). In my experience, when it comes to screening, the prices are pretty much the same.
b. Compliance. Is the feature you are discussing subject to HUD compliance rules? If it is then you definitely want to use the affordable software because they understand the regulations and build it into their system. With screening, there are many HUD regulations that govern what you must screen for (i.e. you must screen for sex offender registration in any state the household members have every lived in), and what things you are allowed to deny an applicant for (more on this in a future post; HUD here has done a complete 180).
c. Company Structure. How does your company divide up the various responsibilities? If your corporate office handles a specific task then you might want to keep the system that they are the most familiar with. With screening (to keep to our current example) most companies handle that on the site level and so it doesn't matter that much if your affordable property has a different system than the rest of the company.
For screening I definitely recommend you use the affordable software's system. For the others its really a case by case decision and hopefully the points above can help you chose. Just make sure you consider the specifics of you company, the specifics of HUD properties, and the specifics of the software.
As another example - consider Work Orders. Using the above criteria ask yourself:
a. What is the cost of the affordable software's facilities package?
b. How do work orders affect HUD? (The answer to that question is that it doesn't really. The only time HUD gets involved is REAC inspections, where you have to fix every finding within 30 days and it is a good idea to document that the work was done - but any work order system should work for that. As of now there are no HUD regulations pertaining to work order*****.)
c. How does your company handle work orders? Do tenants call the property office or the corporate office? Do your supers have smartphone apps which they use to receive work orders (which your affordable software might not have)? How/Does your work order interact with your accounting system? Try and understand how each system will affect the efficiency and flow of your company's operations******.
3. Waiting List
A very important part of the compliance in HUD properties is the waiting list. Getting the government to subsidize your rent is obviously very valuable and when government money is up for grabs there are opportunists for abuse and corruption. Managers might be tempted to allow their friends and family to move into the property and receive the valuable subsidy (one of my clients has a property in NYC with rents close to $4,000 - and since a tenants pays 30% of their income towards rent regardless of the price, and a minimum payment of $25, this subsidy can be worth close to $50,000 a year!).
And so HUD implemented the waiting list. Every application needs to get time stamped and applicants must be entered onto the waiting list and it cannot be altered. Any changes on the waiting list are suspicious.
Affordable softwares have addressed this and other complexities with affordable applications by offering an electronic waiting-list which HUD allows (unlike electronic files that HUD does not allow). This is a good feature to have but since HUD does not require it, some property managers have chosen to stay with the paper. They feel that paper offers them more flexibility and is subject to less scrutiny. This is not the place for that discussion but this is another consideration when choosing softwares and features.
4. Document Management
As previously mentioned, HUD does not allow electronic tenant files to replace paper ones as of yet, but that does not mean that a good file management system is not vital. Many softwares offer them and I highly recommend you get one.
If you know even a little bit about tenant files you know that they are complicated, cumbersome, and confusing. There are so many pieces of paper that need to be added to this monster of a file that even seasoned managers get written up on MORs for missing paperwork. It is almost impossible not to miss something.
A good document management system will create a packet of documents that you will need for each certification type and will allow you to print them directly from the software. In addition, many will make it easy for you to upload the signed documents back into the system so that you can confirm that you have it (and reprint quickly on a MOR!) and can also allow corporate to review whats going on. They will see which documents are missing and which still need to be signed.
The system will only be as good as the preparation you put into setting it up correctly and I hope to write a full post on this one day. But the bottom line is that document management is a great tool and will really help you manage your property well.
As always, if you need help implementing a new software and or have any questions regarding software , feel free to contact us. We are here to help!
*The only company I know of that does this is Shofcorp, but I'm sure there are others.
**If you don't want to do the compliance then you are probably better off just hiring a third party manager.
***Of course there are exceptions. If you currently manage a small building and you are buying a much larger building, you might want to switch you existing building the new buildings software. It would all depend on how much you like your existing software and how easy it will be to train you staff in either one.
****You can always upgrade your affordable software to include accounting later.
*****I say "as of now" because with the new REAC regulations, I suspect there may be some requirements with regard to tracking tenant complaints.
******Just want to point out that when it comes to a payments system, having it integrate with your tenant ledgers can be helpful with affordable properties because tenant portions can change several times a year and it can be hard to keep track of in a traditional payments/ACH system.
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