What You Need to Know About Commercial Property Management - The Essentials
I’m going to come right out and say it-managing a commercial property is not as easy as it seems. Although the tenant is usually responsible for most of the outgoings, you have to do more than just make sure the rent is paid on time.
If you're already a commercial property investor, chances are you know a thing or two about property management and that it extends far beyond just sitting back and looking pretty.
But if you're new to the game or are thinking about hiring a property manager for the first time, you may want to know exactly how they can help you succeed.
Here are the essentials of commercial property management that you need to know.
What Does It Take to Manage a Commercial Investment Property?
While it may be tempting to think that your work is done once you've bought a commercial property, the reality is that there's still a lot to do. You need to effectively manage
The tenants and their rent payments, outgoing payments, rental increases, lease renewals and any breaches of lease.
Record keeping including rent receipts, outgoing receipts, rates notices, regulation notices such as fire checks, council permits and updates to the Retail Leases Act.
Repairs and maintenance such as organising repairs, liaising with the tenant, engaging local maintenance contractors, understanding maintenance costs and quotes and becoming familiar with the building.
Rental payments which includes knowing the current market and the Retail Leases Act, managing rent reviews and lease options, keeping track of rental arrear and doing bank reconciliations.
Tenancy disputes for which you’ll need dispute-resolution skills, a high level of communication skills and negotiation ability.
Finding new tenants when the time comes which involves marketing, advertising and vetting.
Is It Better to Self-Manage or Hire a Property Manager?
Any savvy commercial property investor knows that the key to success is having a good team in place. But what's the best way to manage your property? Should you self-manage or hire a professional property manager? The answer, of course, depends on a number of factors.
Most people choose to self-manage their rental properties in order to save money on professional fees. While this may work in the short term, it can often end up costing more time and money in the long run. Poor property management can lead to unvetted tenants, missed rent payments, and damage to the property.
If you’re time-poor and your effort is better directed elsewhere, a property manager may be the better answer.
Having said that, though, if you have the time and the necessary personality traits, you may be able to manage the property better than a property manager would-especially since, for you, it’s a personal investment. So you’re more likely to be invested in making sure it’s well-maintained and successful.
But as you can see, there is a lot involved in being a landlord. You need to be able to commit 24/7 for your investment to succeed.
You’ll just need to weigh up the pros and cons of what is going to work for you.
Selecting a Property Manager
If you do decide to go the property manager route, you need to remember that this person is essentially going to be your business partner. If you’re leaving the management to them, you need to trust that they have your best interests at heart and that they want to help you succeed.
So, selecting a property manager is not a small feat.
The right property manager can help you maximise your profits, minimise your expenses, and avoid costly mistakes. They can also provide valuable insight and advice to help you make the best decisions for your investment. So, how do you choose the right property manager? Here are a few things to look for:
First, make sure they have experience managing properties like yours. Different types of properties require different approaches, so you want to make sure your property manager knows what they're doing.
Second, ask about their fees and services. What do they include, and what will they cost you? Be sure to get a comprehensive list of all the services they offer.
Finally, take some time to talk to their current and past clients. Ask about their experiences working with the property manager, and see if they would recommend them to others.
How Much Does a Property Manager Cost?
The cost of hiring a commercial property manager will vary depending on the size and location of your property, as well as the services you require. Generally speaking, you can expect to pay between 3% and 7% of your monthly rental income for property management services.
It’s worth noting that most property managers calculate their percentage using a tiered approach. In other words, if you think about it, managing a lower-rent property requires the same amount of work as managing a property, so managers charge a higher percentage to earn the same money.
For example, if you have a tenant paying $300,000 a year, the fee will be closer to 2%, whereas if you have a tenant paying only $30,000 a year, you’ll most likely be paying closer to 7%.
Most property managers will expect to be paid $1,500 to $5,000 a year.
The great thing for you is that this fee is tax-deductible.
Key Takeaways
Commercial real estate investing is a lot of work. There's no two ways about it. But it can also be an extremely rewarding endeavour, both financially and personally. To be successful, though, you need to have the right team in place to support you.
And that starts with considering whether or not you want to hire a property manager.
A good manager can save you time and money by taking care of the day-to-day details of running your rental property. They'll also provide valuable insights and advice to help you make the best decisions for your business.
Unless you’re sure you can completely commit to successfully managing the property yourself, a good property manager can be an indispensable part of any successful real estate investing team.
So, if you would like to learn more about how I’ve helped thousands of investors successfully acquire and manage commercial properties, get in touch today.