Commercial Real Estate News for Wednesday June 13

In Wednesday’s commercial real estate news – we’ll give you a look at what an AT&T Time Warner merger could mean for CRE, why Fannie and Freddie should hold billions in capital, the over $1 billion CRE properties in Romania, and so much more. Read More

Commercial Real Estate News for Thursday, March 29

In Thursday’s commercial real estate news – we’ll give you a look at the thoughts on the new tax reform from banks themselves, the 4 types of asset management, tips on how to deal with the changing market, and so much more. Read More

Building to Appeal to Millennial Shoppers

“All Businesses need to be young forever…”

 

Amazon’s own CEO, Jeff Bezos said it himself, in order to appeal to the younger generation of shoppers and cliental, businesses have to stay forever young, and frankly he’s not wrong.

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Multi-Family Amenities Evolving with Technology

There are a number of new and innovative technologies that are hitting the multi-family property market. These new and improved gadgets are changing the way multi-family residents live their everyday lives; not necessarily by creating brand new technologies but taking old systems and applying a completely new spin on them. Allowing multi-family properties and its residents the ability to adapt their living arrangements to this new and evolving world that is technology.

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Technology in The Multi-Family Sector

It’s no news that technology is completely changing the way live our lives on a day to day basis, but what not many have come to realize is how technology has come to completely change the way we live and function in our own homes. Read More

Why You Should Hire a Property Management Company

As the multi-family sector of commercial real estate continues to grow the demand for these types of properties become more and more attractive to real estate investors who want to expand their portfolios and generate a nice steady flow of additional income. But if you have multiple properties in your portfolio, managing them all can become increasingly difficult and time consuming for any one person. Read More

Top 5 Tips for Property Managers

Responsibilities of a Commercial Property Manager

Managing a property is just like performing in a circus act of spectacular proportions — often, managers feel as though they’re balancing on a tightrope while juggling the needs of tenants, unexpected property repairs and complex leasing agreements. It’s a lot to handle, but in the end, their work satisfies the masses.

If you’re new to the field, here are a few tips for property managers to get you started:

Tip 1: Set the Right Tone From the Start.

It’s crucial to establish parameters with the owner of the property you’re managing. This should come in the form of a formal agreement that outlines the duties of each signing party.

In essence, both you and the property owner should agree that management covers the operation, control, rent and leasing items associated with the property. Never attend to issues that fall outside of your responsibility as a property manager and as outlined in the formal agreement.

Tip 2: Get to Know Your Tenants.

tips for property managers

This is one of the most important tips for property managers. The phrase “tenant screening”comes up often in property management for a reason.

Interview potential tenants in person and ask them to complete a rental application. Run a background check, credit report and take the time to call professional and personal references.

Ideally, you want to find someone that makes three times the rental cost each month and has a clean criminal record and rental history.

Once you’ve selected a tenant, don’t forget about them. Maintain an open line of communication to ensure they’re comfortable contacting you; try to use email to keep conversations on record.

Tip 3: Don’t Let You or the Tenant Take Charge of Repair.

One of the biggest risks a property manager can take is bypassing the hire of a contractor to handle on-site maintenance. Tenants and property managers alike are not experts in the field and both parties are subject to accidents, which can result in severe financial penalty. In the end, this type of risk can end up costing managers large sums down the road.

Tip 4: Hire the Right Person to do the Job.

tips for property managers

Just as you’ve chosen to invest time in finding the right tenant, also invest in the right service providers to handle repairs. Build relationships with the contractors in your area. Eventually, you’ll have a valuable resource available to you when you need it most.

Developing a close core of help nearby can also save you money. Contractors have the authority to list their own price and when they’re newly hired they’re more likely to tack on hire prices for spot fixes.

Tip 5: Inspect Your Property on a Routine Basis.

Stay on top of inspections, whether it be for new or long-term tenants. Property managers run into cases all of the time where a long-term tenant failed to address a preventative maintenance problem that eventually unfolded into a costly and timely expense.

Negligence is one of the biggest risks you can take in property management. Keep detailed records of inspections and complete them on a quarterly basis, in the presence of the tenant.

Learn more tips for property managers in our commercial property management series.

Tips for Making Your Next Open House Count

Commercial real estate open house

Despite living in an ever-expanding digital world, real estate investors still rely on the in-person perks of an open house to land a sale, fast.

Sparking an interest among buyers requires much more than a veggie tray and snap tour. Instead, an open house should allow audiences to engage with you and the property first-hand.

My clues to you: be present, answer questions and don’t distract from the main attraction.

Opening up a commercial property to the public eye requires special care, particularly in the case of an open house. With high demand and larger financial stakes at hand, it’s crucial to be prepared and plan ahead.

To get started, you’re going to need to know how to advertise effectively.

With commercial properties selling like hotcakes these days, it’s crucial to get the word out when the time is right. Typically, I let the listing simmer for planning open house on calendarabout a week before I publicly air an open house date.

Advertising can be executed through a number of means, whether that be through word of mouth, digital communications or through physical signage and mailings.

These days, everyone is looking to the web for the most up-to-date listings and news in the business — I recommend harnessing that capability. Announce your open house on social media, through a listing service and even in an email blast.

 

Make use of signage. Attract prospective buyers with your brand and your offer. Schedule the open house for about two hours over the span of about two days and make that timeline clear in your advertisement.

Before an eager crowd of buyers steps foot into the property, be sure you’ve set up a scene that’s both clean and encouraging of visitors.

Prepare a small table of food and leave out some informational materials for your audience. Just like you would a fine art gallery, avoid distracting the crowd with noise, food or other offers and let them gaze at the main attraction on their own.

Once you’ve peaked buyer interest, it’s your time to shine.

Be prepared to not only answer questions, but to ask them yourself. Now’s the time to build relationships with prospective buyers while offering them assistance in getting acquainted with the property specs.

Commercial investors meet open house

Conclude your open house experience with a warm ‘thank you’ to attendees — whether it be in the form of a postcard or email, let your prospective buyers know that you appreciate their interest and company and are willing to assist with any questions moving forward.

Take your time in accepting offers, and stay considerate through the process. It’s normal to turn down the first, or even second offer.

Always remember, patience, planning and proficiency is key in mastering the art of the open house.

 

Download this myNOI article.

Hiring a Commercial Property Manager

hiring a commercial property manager

This week, I’ve covered the responsibilities of a property manager and the skills they should possess. As I mentioned when we began, there are two paths to take with property management. With the first, you take charge yourself and adopt the responsibility of overseeing your buildings. The other route is to pay a property management company to handle all the nitty-gritty for you.

Today, I’ll cover the questions to ask when hiring a commercial property manager. This is a huge decision and should be approached slowly, with a plan in mind. The company you hire will either help your business grow or be a roadblock to your success.

Questions to Ask:

Are They Licensed?

When hiring a commercial property manager, set the bar at least high enough that a broker must be licensed for you to consider them. This generally means they have taken a property management course and passed a state licensing exam. This is important because licensed brokers have a state regulated system to handle your rental income and security deposits.

How Many Properties Do They Manage?

Find out how many properties they are managing now. If their staff is small, but they’re handling a large number of buildings, you’re probably not going to get the best service. Secondly, visit a few of the properties under their watch. Are they in good shape? Is this a place you would want to live? Put yourself in a tenant’s shoes.

How Much Do They Charge?

hiring a commercial property manager 10 percent

Of course, you’ll want to know how much they are charging you to manage your properties. While there is no such thing as a standard management fee, most firms will charge you between 5 – 10% of the monthly rental income. Make sure to specify with them whether this is the expected monthly rent or the amount of rent actually collected (in case of tenant vacancies.)

How Often Do They Perform Routine Property Inspections?

Ask them how often they check on the properties. Buildings you own should be inspected on the inside at least once a year and on the outside every few months. This is an important way to catch small issues before they become big issues. If your management firm is lazy with their inspections necessary improvements can slip through the cracks.

How Often Do They File For Eviction?

This important question gives you insight into the quality of their screening methods. If they’re evicting a large number of tenants, they’re not doing a quality job of interviewing and background checks. With a wild, rotating roster of tenants, you’ll never have the stable, reliable income on your property that you need to grow your investments.

Do You Get Along With Them?

hiring a commercial property manager handshake

While this is may seem less important when compared to the other items listed, it’s vital that you get along well with your property manager. It’s easier to solve disagreements with someone you respect and can work easily with. These are the people effectively running your properties for you, you’ll want to maintain a healthy relationship.

Conclusion

If you have lots of free time on your hands, and you want to keep a close eye on your investments, then being your own property manager is probably the way for you to go.

However, if you have many rental properties, live far from them, and don’t enjoy micromanaging, it’s well worth the money hiring a commercial property manager to relieve you of the stress.

Skills of a Commercial Property Manager

Skills of a Commercial Property Manager

Yesterday, I covered the responsibilities you take on when you adopt the role of property manager. Today I’ll cover some of the skills of a commercial property manager. These are the talents they should have and the behaviors they should exhibit. Before you decide to do the job yourself, make an honest evaluation and see if these are characteristics you possess:

Skills:

Multi-Tasking:

If you have a single track mind and devote heavy attention to the task at hand, then being a property manager isn’t for you. A manager must be able to quickly switch from project to project as new demands sporadically arise. Prepare to be interrupted a lot in your job.

More than a few times, you’ll be in the middle of drafting a contract when a tenant will rush into the office with news of a big problem somewhere in the building. You’ll be forced to put down the contract, pick up the phone and possibly not return to your paperwork until the following afternoon.

If shifting mental gears quickly is uncomfortable for you, consider turning to a third party for your property management.

Organization:

Skills of a Commercial Property Manager organized files

One of the most vital skills of a commercial property manager is organization. There will be lots of different activities going on in your building to keep track of. Tenant files, maintenance repairs, inspection dates, rent payments, and more will all need to carefully filed and maintained.

To succeed as a property manager, you will have to create a system to keep it all organized and quickly available. Trust me, if an issues arises with a lease, you’ll want the paperwork in your hands as soon as it can be.

If organization isn’t your strong suit, a third-party property management firm should be hired. They will file the paperwork and take the stress of tracking it all off your shoulders.

Can-do Attitude:

Property managers are constantly thrust out of their comfort zone and into new experiences. The best are those who dive in head first and tackle them with gusto.

As manager, you will wear many hats around your building. One day you may be shaking hands with the mayor, while the next you’re frantically reading about plumbing as one of your toilets erupts sewage onto your newly renovated floor. To excel as a property manager, you must learn to treat these moments of panic as learning experiences.

If you enjoy your comfort zone and experience anxiety leaving it, a third-party firm will relieve you of the worries.

Relationship Building:

Skills of a Commercial Property Manager relationships

As a property manager, you’ll be interacting with your tenants frequently. If you’re rude or difficult, they may not be so quick to sign the lease again when it expires. And then you must spend your valuable time searching for a new tenant to fill their spot!

To succeed as a property manager, you must be an active listener who cares about a tenant’s experience in your building, but a shrewd negotiator when the situation calls for it. Occasionally, you may even be called to act as arbiter in confrontations between two tenants. These circumstances are always easier when there is a mutual respect between you and your renters.

If interacting with potentially dozens of people doesn’t sound appealing, save yourself the hassle and talk to a third-party management company.

 

If you feel like you have the skills of a commercial property manager and have time for the responsibilities, give property management a try! For those who don’t feel the same, I’ll spend time tomorrow covering how to find a good property management company.

Responsibilities of a Commercial Property Manager

Responsibilities of a Commercial Property Manager

The ink is fresh on the contract, and you’re now the proud owner of a piece of commercial real estate…but now what? Property management! Over the next few days, I’ll cover the important the responsibilities of a commercial property manager, the skill set it require, and what to look for when hiring a third party.

There are two approaches to commercial property management. With the first, you take the responsibility upon yourself to maintain the property and ensure its tenants are happy (and paying their rent.) The second approach is to hire a property management firm to take care of all the busy work for you.

To help you decide which direction is for you, I’ll first cover the responsibilities of a property manager.

Check the Laws

First things first: check your state’s laws regarding property management. Many states require that property managers either have their real estate broker’s license or work under a certified broker. If you don’t meet your state’s requirement, a third-party firm is the direction you’ll have to take.

Responsibilities

Property managers are in charge of nearly every aspect of the building and are often juggling several different tasks. As a property manager, some of your responsibilities would include:

Finding Tenants:

Responsibilities of a Commercial Property Manager tenant hunting

If your building isn’t populated, it’s hard to make money off it. So the first responsibility of a property manager is to fill vacancies with qualified, trustworthy tenants. This begins by marketing the property. This can be done online, in the newspaper, through flyers—anywhere the manager feels potential clients may be looking.

The first business that responds may not be the right fit, which it why managers are also responsible for screening tenants. Screening a tenant involves multiple steps. There’s usually an initial interview where you get a feel for the kind of people who would be working or living in your building. If the clients get through that stage, the next step is generally a background and credit check to protect yourself from any future financial concerns.

If the tenant has passed all these, the property manager informs the client they’ve been chosen and handles all the move-in details like the date, keys, etc.

Rent:

Another one of the responsibilities of a commercial property manager is handling all aspects of the rent collection. This begins with setting the rent. Too high, and you’ll never find tenants. Too low, and you’re not maximizing your potential profit. Setting the rent requires research into the current market prices and an understanding of your building’s place within it.

Property managers must then collect the rent. And make sure tenants are paying it on the day it is due. Any perpetually late rent-payers are their problem to deal with through methods like late fees or even eviction

Finally, property managers adjust the rent as time goes on. Some state laws allow you to increase it by a set percent a year, others may require you to wheel-and-deal with those who signed your lease.

Maintenance:

Responsibilities of a Commercial Property Manager maintenance

After tenants are found, the property must be maintained to keep it fresh. Tenants want a building they can be proud to work in, and you want a property you’re proud to lease! It’s a property manager’s job to make that happen.

Property managers may suggest cosmetic changes to the building’s interior and exterior to keep its appearance modern and attract more tenants and traffic. There’s also the unflattering minor tasks like keeping the lawn mowed, the paint fresh, and all those other touch-up jobs.

Finally, in a worst case scenario like a broken elevator or burst pipe, it’s the property manager’s responsibility to fix it or find someone as soon as possible who can.

If none of these things intimidate you, and you have the time, then you may have what it takes to handle the responsibilities of a commercial property manager! But before you decide, visit MyNOI again tomorrow to see if you have the right skill set to pull it off.

So You Want to Invest in Small Commercial Real Estate: Tips on Vetting a Property Management Company

interviewing property manager

Defining real estate markets is a bit of a fuzzy game. In many cases, they are defined as primary, secondary, and tertiary with regards to volume of sales, population, and transaction volume amount.

In general terms, Primary markets have over 5 million people, secondary markets have 2 – 5 million people, and a tertiary market has under 2 million. A given location might change category based upon other factors. For example, Detroit, which has over 5 million people, is considered a secondary market because of declining investment activity. A place like Austin, TX which has a population of under 2 million, is in the midst of a boom and could be considered a secondary market due to activity.

denver real estate

While commercial real estate is largely concentrated in large buildings in primary markets (from the standpoint of investment sales and press coverage), those buildings represent a small proportion of the overall stock of commercial buildings. The commercial space most of us encounter – supermarkets, small offices, warehouses, and other commercial space that is important to local communities (under 17,000 sq feet) – represent approximately 80% of all commercial space.

According to a recent Commercial Real Estate Outlook report by the National Association of Realtors, large commercial real estate markets are facing a decline in sales volume, whereas small commercial real estate markets are bullish: 2016 Q1’s 8.5 increase in sales volume was followed by Q2 rising by 8.4 on a yearly basis.

This growth is fueled in part due to upward pressure on prices, stemming from a shortage of available inventory. If you are interested in making an investment in SCRE markets and properties, this might be the right time.

In the case of many larger buildings (which you might invest in as a part of an REIT or Real Estate Investment Trust), it is likely that an existing arrangement will have been made with a property management company and a sub-set of contractors (building engineers and maintenance etc).

But, if you’re on your own and getting into commercial investing, you may have to find a property management company yourself. If this is the case, it’s important to know how a property management company could (or should) approach the management of your investment before you start shopping around.

There are potentially three types of property management scenarios you’ll be looking at: office, industrial, and retail. Of the three, Office and Retail can become very complicated.

You’ll be considering many different tenants and leases, and you must understand the potential multiple streams of income that will be coming in from your asset as a result of these contractual arrangements.

You and your property management company will seek to maintain and control a number of factors including: leases, tenants, vacancies, property maintenance activity, critical dates in leases, reporting requirements (from your PM to you), compliance and risk factors, and income and expenditure sheets.

house-management

In the case of leases, you have different types: Gross leases, Triple net leases, or hybrids of the two.

As defined by investopedia.com, “a gross lease is a type of commercial lease where the landlord pays for the building’s property taxes, insurance and maintenance. A gross lease can be modified to meet the needs of a particular building’s tenants. For example, a gross lease may require the tenant to pay the utility bills.”

Investopedia defines a triple net lease as “a lease agreement that designates the lessee, which is the tenant, as being solely responsible for all the costs relating to the asset being leased, in addition to the rent fee applied under the lease. The structure of this type of lease requires the lessee to pay the net amount for three types of costs, including net real estate taxes on the leased asset, net building insurance and net common area maintenance. This type of lease can also be referred to as a net-net-net (NNN) lease.”

There are also lease arrangements which combine elements of both gross and triple net leases. These can be negotiated between landlord and tenant.

When it comes to tenants, the lease (and the terms and conditions thereof) and tenant requirements (eg the option to expand into new space or contract as needed) will have to be negotiated. You’ll want to find right cluster of tenants – anchors (larger businesses) and specialty tenants (merchandisers or small restaurants, for example) to ensure that your property maintains its value and cash flow.

You’ll want to closely monitor vacancy, and ensure a low vacancy factor for your property. Market factors will come into play, and you’ll want plans in place to help resolve vacant space and find new tenants. Vacancy can also give you time to renovate or refurbish your property, so it can also be beneficial – if anticipated.

Strategic lease renewals will also be useful. If you’ve locked a tenant in for a 5 year lease, don’t wait until that lease is nearly expired to re-negotiate – step in a year or two early and extend to ensure your cash flow.

Last of all, property maintenance will be an important factor in your commercial real estate investment. Each fiscal year, you’ll establish budgets to track the expenditure side of cash flow, itemize your capital expenditures, prepare for planned and unplanned maintenance costs, and allocate reserves on an annual basis.  This amount will vary depending on the age, quality and amount of deferred maintenance of the property

As you can see, there are a lot of considerations that come into play after you’ve decided to make your initial investment in a new property. Make sure you’ve done your research and find the right property management specialist – your investment has a much better chance of flourishing with the right team in place.

Be able to ask questions as you interview a potential project management co, such as: “What is your policy and rate for establishing strategic lease renewals?” Or “What, if anything, do you do to market vacant space or planned vacant space?” This will give you a better idea of the nature of your potential management firm, and how they approach property management.

The Dos and Don’ts of Property Management Software

Central to the business of brokerage, leasing and investing is property management. To maintain a smooth operation, it’s crucial to pick the right property management software.

As an owner of a property management company, in addition to my brokerage and development business, I can tell you the dos and don’ts of property management software options online today.

Do: TenantCloud

tenant cloud property management software

The software is free to use for up to 75 units and operates on the cloud. With just a few clicks, you can access details on the property, rental regulations and more. Not only that, but the software allows users to pay bills in minutes. TenantCloud makes it easy to record payment information into a concise report that can easily be stowed away for record keeping.

The small team at TenantCloud also offers a service to renters, looking for an efficient application process and easier route of communication to landlords.

Do: Buildium

buildium property management software

Dubbed the “property management software designed by property managers,” the software excels in usability. Buildium is also cloud based and is an optimal option for all types of computer users, making it easy to introduce the software to employees and others new to the portal.

In 2015, the software received recognition by Inc. 5000 for the fourth year in a row and has grown its user base to more than 12,000.

Don’t: Yardi Systems Inc.

yardi property management software

If you’re looking to save a buck, don’t look here. The price point begins at $10,000 to $15,000 just to implement the property management software and an added $15,000 to $25,000 to purchase it. I’ve reviewed the trials and while it comes in handy for residential and commercial management, the barrier to entry is just too steep.

The company has a staff of 5,000 with offices in 30 locations throughout North America, Europe, the Middle East, Asia and Australia and claims to have set the standard for real estate software solutions.

Do: AppFolio

appfolio property management software

I’ve been using this software for more than two years and, by far, it’s my favorite. The software is managed through the cloud and can be easily accessed on a mobile device. At any time, I can login and get a clear snapshot of the status of a property, including details on delinquencies, rent collection and more.

To say the least, it’s a time saver. It even helps out with the dreaded triple net reconciliations which need to be completed by the end of the year. Before purchasing the software, which costs $1 per unit, my staff and I spent months tallying up the costs. Now, with just the tap of a button, it’s done in a matter of seconds—forget the pen and paper.

I recommend testing out all of the software I’ve mentioned on the list. Talk to people, do your research, ask the right questions and see what works for you.