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5 Ways Property Management Companies Add Value

by | Feb 7, 2016 | Investing, Management

When people think of property management, they often think of paying the bills, collecting the rent, putting out fires, etc. Unfortunately, that doesn’t come close to representing what a good management company does for its clients or how a management company can add value for them.

It’s hard to come up with a title that adequately portrays real estate professionals who monitor, protect, and enhance your asset while systematically handling all the daily financial and operational tasks, utilizing years of experience and resources to maximize the profitability of the asset. Those professionals work to prolong the life of your asset so it can perform at the highest level for the longest time possible and in a way that makes the income you receive as passive as possible. Maybe Asset Maximizing Management is a better term.

Regardless of the semantics we use, here is our list of the top five things a management company should do for you to add the most value:

1. Understand the Market

Unfortunately, the commercial real estate market is not as transparent and accessible as the residential market or the stock market. Whether it’s retail, office, industrial or multi-family, each sector of the commercial real estate world has its own nuances and challenges.

Depending on supply and demand, the values of these niches can and do fluctuate with the strength of the economy, creation of new business or the exit of old. Seasonality, historical patterns and the ability to strike while the iron is hot are all things that must be kept at the forefront when managing an asset. If a manager isn’t keenly aware of the overall and niche markets, that equals lost opportunity for the client.

2. Negotiating leases and contracts

The longer I’ve worked in the professional real estate world the more I am amazed you are not required to have a law degree to get your real estate license. Have you ever read a commercial lease? Did you feel like you needed a translator to tell you what you were reading? Do you understand the difference between a Triple Net, Gross or Modified Gross lease? Better question, were you able to continuously read and understand what you were reading for more than 15 minutes without having to take a nap?

Reading, understanding, and negotiating all the legal documents that come across our desks are intricate parts of management, for which there is no manual. The education comes through practice and the people I work with have been doing it long enough to where they find reading legal documents somewhat leisurely. It’s imperative that you have a management company that understands and is comfortable negotiating these agreements on your behalf.

3. Legal Matters

One of the best ways to succeed in commercial real estate investing is to avoid the courtroom. This sounds simpler than it is. With so many people these days looking to get something for nothing, litigation is rampant. You need a management company that understands how to stay out of the courtroom and has proven the ability to do just that.

4. Resource Utilization

If you had a hot water heater blow up in your attic and water was pouring from your ceiling like a mini Niagara Falls, how quickly could you get a quality maintenance technician to the site? When every passing minute is another five gallons of water pouring onto a carpet and soaking the foundation, drywall and studs of your building, could you do it in less than an hour? How about less than 10 minutes? Unfortunately, these types of things happen frequently. It’s important to know that your management company can quickly address the various situations that present themselves and can do so in a way that saves you money.

5. Less Stress, More Freedom

This is my personal favorite. I don’t think anyone plans to buy commercial real estate just to end up with a job. It doesn’t matter if you own an eight unit apartment complex or a 5,000 square foot retail building with two tenants, you now have a job if you manage it yourself. There’s a distinct difference between being an investor and being an operator. Investors want passive income that grows their wealth. They want to make money while they sleep. They don’t want to wake up at 4 a.m. to answer an emergency maintenance call from one of their tenants whose cat is stuck in a tree.

If you’re an investor or want to be an investor, hire a quality property management company that will take care of your property and maximize its value so you have more peace of mind and more freedom to spend time on things that really matter to you.

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