To paraphrase Forest Gump, property management companies are like a box of chocolates. The reality is, you never know what you’ll get. As the title of this article suggests, these problems aren’t obvious and evident.
You may not know that there are problems with your management company until it’s too late.
Although there are many excellent property management companies with exceptional staff who offer excellent service, there are also many less-than-stellar companies. In this article, we review some hidden problems with commercial property management companies. We also offer some tips for choosing the right management company for your needs.
1. Inconsistent Financial Reporting
One of the major hidden issues is inconsistent financial reporting isn’t consistent. From company to company, regular, consistent reporting varies. Even within some management companies, the quality of financial reporting may vary from month to month
2. The Shifting-Staff Shell Game
Another hidden problems with commercial property management companies is their practice of moving staff from site to site. There may be several reasons for doing this, not all of which are above board. For example, a management company may move excess staff from other projects to conduct work at buildings that don’t need them. One of the reasons for this practice is to shift payroll costs.
3. Fudging Budgets
Coming on the heels of these other inconsistencies is an intolerable hidden problem — fudging budgets. Sometimes inaccurate budgeting stems from lack of competency. In and of itself, this incompetence is unacceptable. Yet some management companies purposefully fudge on budgets, even going so far as to doctor their budgets each month to match their spending.
4. Failing to Update Rent Rolls
Another hidden problem with commercial property management companies is not keeping rent rolls up-to-date. When rent rolls aren’t updated annually, they don’t reflect true-ups and common area maintenance increases. In the end, this failure to keep updated rent rolls can lead to numerous issues like.
5. Managers Focus on Too Many Properties
Whenever you hire a company to manage a commercial property or a portfolio of properties, you want to know that they’re dedicated to you and your assets. Yet some commercial property management companies aren’t as dedicated as you want to believe. Because of this, another hidden problem is managers focusing on too many properties. In some cases, property managers split their time on other buildings. Sometimes, they also spend time servicing your competitors’ buildings in the same neighborhood
Choosing the Right Commercial Property Management Company
Finding a reputable property management company can mean the difference between maximizing your commercial real estate investments and seeing them suffer.
Without a doubt, the quality of service can vary greatly between commercial property management companies. Overall, you want a company that has a solid reputation and that can deliver great service. To help you choose the best management company for your commercial assets, below are a few issues to consider:
- Experience — The first thing to learn about a commercial property management company is their experience. Find out how long they’ve been in the business, what properties they’ve managed, and their history.
- References — Learning how others view a company is important. As you’re learning about the company, ask for references from current and former clients. Keep in mind that if a commercial property management firm can’t or won’t provide references, there may be good reasons. Stay away from companies without references.
- Expertise — Different property management may specialize if various types of properties. Some may focus on multi-tenant retail while others focus on office buildings. At the same time, some firms handle all sorts of properties, from medical office buildings to industrial properties and everything in between. Basically, look for a company that can manage your specific asset or assets.
- Financial Reporting — Get an idea of the management company’s financial reporting process. Find out how often you’ll receive reports and budgets. Also, find out what details these reports contain. As stated above, inconsistent financial reporting is unacceptable. What’s more, lack of transparency in financial reporting is also unacceptable. To get a better idea of what you’re dealing with, could ask the firm to walk you through their financial reporting process.
- License and Affiliations — Find out the company’s credentials along with its professional affiliations. Lack of licensing and affiliation could be a red flag. As a result, ask about licensing and affiliations, both the firm’s and the staff’s.
- Management Systems — Commercial real estate can be complex. To help deal with these complexities, reputable firms use management software and systems. These systems usually integrate a range of tasks such as tenant information, accounting, and maintenance tracking. If asked, the firm should be able to provide a demonstration of their system.
- Tenant Retention — Ask about their tenant retention plan to see what steps they take to keep tenants in your assets. If the firm doesn’t have a solid strategy to retain tenants, look elsewhere.
- Tenant Relations — Learn how they relate to tenants. Specifically, ask how they handle issues like move-in and move-out policies, tenant conflicts, after-hours contact, and emergencies.
- Maintenance — As a building owner, you don’t want tenants waiting endlessly for maintenance requests to be fulfilled. Inquire about the specifics of how the commercial property management company handles maintenance issues.
- Services — In addition to all the above, ask for a detailed outlined of the services offered.
- Fees — Although the price of their services may not always be the deciding factor, ask about fees. The firm should be able to provide details for the final cost for all of their services.
Lumicre helps owners market and sell commercial properties across the Texas Triangle — Houston, Dallas–Fort Worth, San Antonio and Austin — to buyers of choice, pursuing superior terms, pricing and surety of close.