the value of your investment in terms of the rental income and physical building upkeep.
From first eyes on any structural problems to the first point of contact for potential lessors, finding a management firm that's both trustworthy and reliable is key to commercial real estate. That search requires time and due diligence, but the payoff has the potential to make your building the premium lease on the block.
1. Ask Around
Like any hiring process, sometimes your own network can surface the best options. Ask friends, including those who own businesses; if they rent space, they might have suggestions of management companies that oversee their buildings. Also inquire with local real estate agents, who may have a sense of the popular options in your area. Check with professional associations, such as the Institute of Real Estate Management , whose members have different levels of training and certification.
2. Vet the Options
Once you have a list of recommended firms, do some digging. Check with the local Better Business Bureau to see if there are any complaints against the management firm. And do some sleuthing of the firm's social media feedback on Facebook, Google, and Yelp. One bad review may not mean much, but several comments about a lack of building cleanliness, for example, could serve as a red flag.
Visit their properties if you can, and check out any ads for space at a property they already manage. How they list and handle their current work can show you how they may handle the same for you. It's also advisable to check their certifications starting with the Real Estate Commission in your state.
3. Meet in Person
You probably wouldn't buy a building sight-unseen. Take the same level of pro-activity with your property management hiring practice. If company representatives lack professionalism or promptness with you, is that how you'd want them representing themselves to the businesses that sign leases with them?
Have a list of questions ready about their experience and their process. What software platform do they use (if any)? What would they do in specific situations should problems arise, such as a fire or a tenant who wants a discount? While you're asking questions, notice if the management company's representative interrupts you or dismisses your concerns. If so, you may want to think twice about if they are a company worthy of your business and trust.
4. Review the Contract Carefully
Whether this is your first commercial property deal or your fifth, make sure you fully understand the property firm's proposed terms. If it's common for a property management firm to take their fee as 7 to 10 percent of the gross apartment lease income, ensure that is based on signed leases and not the total potential of the building.
In addition, confirm that you're on the same page about fixes, including the repair amount that would require your pre-approval first, payment dates, how to handle delinquent tenants, and who will fix any problems (the property manager or an outside firm), etc.
While all of these steps—asking around, vetting a firm, interviewing the lead, and combing through all the fine print—takes time, remember that this time is also an investment in your property.
It's better to take a few more hours now, then to have a crisis on your hands, mass lease turnover, or a property manager taking fees you didn't even know about—all of which is money out of your pocket. Invest some time in your property management search, and the payoff can be invaluable.