What to Look For in a Commercial Property Management Firm
For the perfect fit, a management company’s expertise should match an investor’s needs. Is the real estate investment an office, an industrial building, a multifamily housing complex, or a suburban strip center? Does the building have a vacancy problem, a maintenance problem, or a marketing problem?
Investigate the experience of a firm by asking what other properties like yours (or your client’s) it manages, how long it has managed the properties, and what have been the results of its management.
Find out the type of investors with whom the property management firm usually deals. Does it manage for individual investors or does it specialize in working with institutional investors? The firm you are considering must have expertise in serving your type of investor as well as your type of property because the reporting requirements of each investor type will be different.
What Services to Expect When Hiring a Commercial Property Firm
Property management firms can provide a broad array or a limited number of services, depending upon a client’s needs. Do not assume that a certain service is provided automatically by the firm. Ask what specific services it will provide and, once you or your client decides on a firm, work out a comprehensive written management agreement with the firm. The agreement will outline services the firm will provide, letting the owner know exactly what to expect from the property management firm and what the services will cost.
Commercial property management firms typically provide the following services.
Management Planning. A commercial management company can analyze the business environment and the specific property within that environment, set out a marketing strategy, and recommend how a client’s objectives can best be fulfilled.
Financial Reporting. Record keeping and financial reporting are key services provided by management firms. Ask to see samples of the firm’s reporting documents.
Budgeting. The management firm develops and monitors the property’s budget, which covers everything from maintenance to marketing, personnel to operations. As the year unfolds, the manager should inform the owner of any necessary budgetary adjustments and explain why they are needed.
Maintenance Programs. Commercial property management firms provide monthly maintenance cost monitoring and the development and implementation of preventative maintenance programs.
Market Rent Analysis. Management firms will provide an analysis of market rents and those of the competition, changes in area demographics, and anticipated absorption levels.
Marketing Programs. Firms can develop and implement marketing programs that improve the image of properties and ensure successful leasing. A comprehensive program may include such essential marketing tools as brochures, advertisements, special events, property newsletters, videos, maps, and site signs.
Rent Collection. The collection of rent, including a daily record of deposits, is a basic service provided by management firms. A cash management system, which includes investment returns on rental dollars collected, should also be implemented.
Lease Negotiation. A firm is usually responsible for negotiating all tenant leases and renewals, or, in the alternative, for recommending the best leasing company in the area and coordinating leasing activities with that company.
Tenant Relations. The professional property management firm is attentive to tenants’ needs and responds to their concerns immediately. It should have a written policy for receiving and resolving tenant concerns.
Purchasing Procedures. Firms establish procedures for the purchase of all equipment, supplies, contracted building services, and insurance coverage.
Remember that property management fees are directly proportional to the quality and quantity of services provided. Management fees generally are based upon a percentage of collections, though they vary in different parts of the country for different types of properties and are strictly negotiable between the parties. Percentage fees can be based on different portions-or all-of the income stream. For example, with shopping centers, the fees for basic services can be a percentage of net rent collections, gross rent collections including triple net expenses and advertising and marketing fees, a flat fee up to a certain level of income, and a percentage after that, or some other calculation. There can also be a percentage administrative fee applied only to triple nets, in addition to a basic percentage of net or gross income.
For additional questions about Commercial Property Management in Mobile, Alabama please contact us.