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.
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:
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.
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.
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.