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Commercial Real Estate Management for the New Investor

By Colby Goetz
August 16, 2017
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If you are dipping your toes into commercial real estate management for the first time, there are some big decisions you need to make. Will you manage the property yourself, or hire a property manager? There are pros and cons to each option, but sometimes managing a property yourself just isn’t feasible due to geography, time, or capacity. Here are some things to consider:

1. Doing the homework.

Do you have time to personally vet each potential tenant? If not, hiring a property manager might be the way to go. They will be responsible for handling the lease paperwork, running background checks, running credit checks, verifying rental history, verifying income, and having a stated debt to income approach. And of course, this is the bare minimum of background information you should be obtaining from any potential tenant. Being as thorough as possible and building a great rapport with tenants will reduce turnover and lead to better satisfaction for all parties.

2. Handling repairs.

This is arguably the most important part of property management. Can you or your property manager handle repairs in a quick, efficient, and cost effective manner? This is where building relationships with local contractors and service providers is essential, and where having a local property manager with established community connections is invaluable. It’s also important to have repair escrow in place, which is a discretionary fund for repairs so that your property manager can make small decisions quickly without having to ask the investor for approval. Depending on the nature of your property, usually $500 in repair escrow will meet your needs.

3. Keeping eyes on the property.

Can you reasonably expect to keep eyes on your property at least a few times a year? If not, having a local property manager in place can solve this problem for you by ensuring your investment is in good hands and is being treated well. Most property managers charge a fee for each inspection or “drive by,” but it is usually much less than making the trip yourself.

4. Consider the costs.

Property managers will always charge a management fee, which is usually 8-10% of the gross monthly leasing cost. They will also charge additional fees to handle tenant renewals and, (heaven forbid), evictions. This is where only you can weigh out the pros and cons of hiring a trustworthy property manager, or choosing to manage the property yourself. Remember, sometimes a lack of experience can end up costing more than paying to hire the experience.

If you’d like help with commercial real estate management, please contact us today! We would love to speak with you.

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