Whether you are a new or seasoned real estate investor/developer if you think you can manage your own commercial real estate and investment properties by yourself the answer is you will not be good at it and you really do not want to go that route with very few exceptions! By choosing the right property manager, a real estate investor can both dramatically boost THEIR profits and increase THEIR success in THEIR real estate investment business.
When I first entered the brokerage business, I was told that a good entry point is through property management. It pays you a steady salary and you get the opportunity to learn the business. This strategy that is still advocated by many today in the industry is flawed in two major ways;
- The skill set to be a good property manager is very different than a brokerage leasing or salesperson.
- A real estate investor/developer does not need a property manager who is not focused on a lasting career in property management.
I started with a small company who took on the management efforts of a few properties that we sold to investors and handled the leasing on their behalf. I quickly learned that no tenants will ever call and say that the property manager is doing a great job, but they will call when the roof is leaking, HVAC is broken, the parking lot needs repair or a myriad of other defects. A property manager gets very little positive feedback from the tenants they serve. I knew I enjoyed the leasing part of the brokerage business, but I did not enjoy or feel suited for property management. I guess spending one Christmas morning pushing water out the door of a retail bay sealed my career in leasing and sales brokerage, but also increased my respect for quality property managers who must respond 24 hours a day 7 days a week to emergencies.
A good property manager is key to any commercial real estate team, whether management of an asset is done in house or outsource to a third party property management firm. I will add my disclaimer that not all property management firms or even property managers within a reputable firm are created equal. I have known many property managers who I would not trust any real estate asset to and others who I feel are critical to the real success of many properties and in my success and ability to lease and/or sell a property. As a real estate investor/developer you do not want to go with the lowest cost option when choosing your property manager. I believe that you get what you pay for and that property management is professional position within an investment/development team that should be paid consummate to the value they may bring to the investment and team. This is not where you want to cut costs! Too many small developers or investors think they can do this function themselves and save some money. This is rarely the case!
How does a good property manager add value to your team and real estate investment?
- They help reduce risks of owning a commercial real estate investment
- They help increase profits and reduce costs associated with operations
- They keep tenants happy and increase tenant retention
- They focus on increasing rents and decreasing vacancies
- They take care of all the routine maintenance on timely and schedule fashion. This reduces long term problems that may incur with deferred maintenance.
- They are current on the laws dealing with Landlord-Tenant relationships.
- They understand the financials and tax regulations
- They help the Landlord choose better tenants to lease to.
- They are responsive to Tenant concerns
- They act as a facilitator between the Landlord and Tenant providing the necessary communication.
- They reduce the stress of owning commercial real estate
- They visit the property on a regular basis and stay on top of any maintenance issues including keeping the property clean.
The simple fact is that properties or portfolio of properties simply perform better under good and active property managers who are educated and trained to do their job in a professional manner. By leveraging the property management function, you not only save TIME and MONEY, but it will allow YOU to concentrate on new deals that are the basis of your core business.
It is also important to choose the right property manager for you. This includes; choosing the right company, and taking the opportunity to interview the actual property manager who will oversee your property. If you cannot get a company to tell you who will be assign to your property than I would highly suggest looking at another company. One of my favorite and best property managers in Memphis goes out every Saturday morning (his kids are now grown up) to drive all the properties in his area. This allows him the opportunity to see how the properties look and jump upon any issues early in the next week or if critical immediately. It is unfortunate the properties that are unclean or poorly managed are usually the hardest to lease.
I think that every leasing broker and other members of a development/investment team should walk in the shoes of the property manager for a little while as it would help them make better decisions when negotiating their deals that could make operating the property more expensive in the future. Although, any good investor or developer with a good property manager on board will include them in any strategic decisions on the front end as they would any key member of their team and prevent some future problems that may arise.
Shawn Massey, CCIM, SCLS From http://retailrocksinthemidsouth.com/good-property-managers-worth-their-weight-in-gold/
