When investing in commercial real estate, partnering with a property management firm can offer a variety of benefits. Managing an asset can be time intensive and straining on an investor’s resources. An owner must wear many hats to ensure that the needs of the tenants and the building itself are addressed, which requires a level of expertise not every investor has.
These companies offer services that may increase operational efficiency and save the investor time and money. It may also give the investors piece of mind that their asset is being looked after and potentially increasing in value and success.
One important distinction to make is between a jack-of-all trades that handles a variety of real estate types, like single family homes, apartments, and mobile homes, and those that specialize in managing commercial properties. While many companies might claim to specialize in commercial buildings, there is a vast difference between residential and commercial tenants. It can pay dividends to have managers who specialize in commercial properties.
A management company works on behalf of the landlord, or owner, and can negotiate solutions with tenants regarding any problems they may have. This saves both time and stress, while also providing expert advice for owners who may not have the time to stay up to date on recent, applicable legislation.
Managers can also handle rent, maintenance requests, upcoming vacancies, and the paperwork associated with operating a commercial real estate asset. They provide many more benefits in addition to these services.
The cost of is a major consideration for any investor. In many cases, however, investment in this service can pay off. A great property manager or management company can potentially provide a greater return on the cost. Below are some examples of how a manager can help increase your overall ROI.
Part of keeping tenants happy is offering expert maintenance services, especially because it also helps preserve the value of your assets. No matter how old or new your building is, eventually something will need to be repaired.
Property management companies have skilled employees who can respond quickly to tenant requests, and often have partnerships with trusted vendors and contractors that meet insurance requirements and have pre-determined, negotiated rates. This allows them to find the best solution to your maintenance problem in the most cost-effective and timely manner. By responding to tenant’s maintenance concerns as quickly as possible, the property manager shows that you, the owner and investor, care about their needs and your building. Happy tenants are more likely to renew their lease at the end of its term, reducing vacancy and associated turn over costs.
These companies can also save owners countless hours. Investors rarely have time to keep up with routine maintenance and tenant requests. Urgent and emergency requests add to this strain and can make it more difficult to manage a commercial real estate asset. By handing over the asset to a third party, the burden of maintaining and repairing every aspect of the building or buildings can be handled internally by the manager.
Forming strong, positive connections with tenants is another important aspect of managing commercial real estate assets. Investors may not have the time to do this, but property managers do. They can form and secure relationships between tenants and owners through strong communication and courteous services.
As the saying goes, no two people are alike, and this holds true with commercial real estate as well. Each building, business, and tenant is going to have different needs, different lease expiration dates and present different challenges. Depending on the negotiated terms of the lease, the investor may have different responsibilities for each tenant. Managing these can be a challenge, especially for an investor with multiple properties in their profile.
Property management companies, on the other hand, have software programs and the manpower to easily manage and keep track of these needs. They also offer easy ways for tenants to contact them and request things such as lease renewals, maintenance requests and more. With a click of a button or automated system, tenants can be notified of a large-scale maintenance concern or change to your building. As a result, tenants are likely to share their positive experiences and recommend the property to others who may lease it.
Commercial property management companies invest heavily in marketing their brand and individual listings, which may greatly benefit both them and the investors who hired them. These companies often use multiple platforms to advertise their vacancies and listing status. They can handle creating professional-grade content to distribute to interested tenants, such as ads, banners, and brochures.
Because they advertise multiple properties at once on multiple platforms, the potential tenant pool can be much larger than what an individual investor would have access to. This also acts as a benefit, because if a renter is not satisfied with one property, the company can refer them to your own. By capitalizing on the management company’s market presence, vacancies can be filled more quickly and avoid long periods of vacancy.
Experienced commercial real estate investors know that a single bad tenant may lead to a great deal of financial and legal problems. That’s why it may be beneficial to have some measures in place to protect them from liability.
Hiring a skilled manager or team with the knowledge and expertise to identity potential vulnerabilities and avoid issues is one of many actions an investor can take. Not only can the manager negotiate these vulnerabilities, but they can also screen tenants, order regular safety inspections, handle defaults and evictions, lease signings, and rent collection.
Tenant screening can be a complex process, and without the right experience, you might end up choosing a bad tenant. This can cause problems, especially if you want to make them leave. Excellent property management companies have reliable and verified screening procedures that helps them select tenants who will rent long-term, pay rent on time, minimize the wear and tear on the asset, and cause fewer problems overall.
Bookkeeping can present an array of challenges for many real estate investors. Unfortunately, expert bookkeeping and invoice handling are essential for minimizing taxes, keeping the best vendors, and tracking the cash flow. Some property managers may offer to provide bookkeeping as part of their included services.
As with every other aspect of managing an asset, it takes time and experience, which investors may prefer to outsource to a company. These companies will track your income and expenses each month and provide you with comprehensive reports that show you how your investment is performing. These reports can make it easier to compare your monthly cash flow to your budget, have access to all property invoices paid, and easily budget money to pay expenses such as taxes and insurance.
The property management software programs can do more than help tenants, too. They can monitor CAM expenses and other important information you need as an investor to evaluate your asset’s success. When it comes time to sell, it will be significantly easier to do if the books are in order.
Investors are familiar with the benefits of knowing a region well, especially when it comes to the market and how it affects their investments. Effective managers also benefit from knowing and actively monitoring the commercial markets, so they can adjust rental rates and terms accordingly. Knowledge of the city or county where your asset is located can also increase the operational efficiency, increasing its profitability.
When it comes time to sell the asset, the value most commonly used in determining the listing price is by the net operating income (NOI) generated.
Many property managers find there is an advantage to show their expertise through professional designations that demonstrate they have met the strictest educational requirements in their field providing added value to their clients.
Investment property management companies, especially good ones, can be worth the time it takes to research, vet, and choose a property manager for your commercial real estate investments. They can help an investor save money and increase the value of their properties through regular maintenance and good tenant relations. Though it may seem more like a cost, a good manager can be an investment that improves both the investor’s portfolio and the manager’s portfolio simultaneously. It also frees up time for the investor to focus on the investment part of this industry, rather than having the added responsibility of managing their real estate asset.