If you’re looking to hire a property manager, there’s a lot to consider, and the importance of property management in commercial real estate cannot be overstated.
As a property owner, deciding whether to hire a property manager is crucial. There’s a lot to consider (and as an early note, if you don’t want to worry about all of this alone, I highly recommend reaching out to us to help you).
That said, this blog post explores the pros and cons of engaging a professional property management company, factors influencing fees, and tips for selecting the right manager – so let’s dig in.
The Pros of Hiring a Property Management Company
Expertise in handling property management tasks
One of the main reasons to hire a property manager is their expertise in managing commercial real estate and managing rental properties.
Property managers are well-versed in the day-to-day operations of commercial properties, including collecting rent, managing tenants, and handling maintenance requests. They also have a deep understanding of the local real estate market, which can help you set a competitive rent price.
Network of Contractors & Support Personnel
A good property management company will have an extensive network of reliable contractors, suppliers, and support personnel. This means that they can quickly address maintenance issues and provide high-quality services at competitive prices.
In addition, experienced property managers can often negotiate better deals with contractors due to their volume of business.
Tenant screening and management
Hiring a property management company means that they will handle the tenant screening process, ensuring that only qualified tenants occupy your commercial property.
This can save you time and minimize the risk of problematic tenants. Additionally, property managers are experienced in handling tenant disputes and can help maintain positive tenant relationships.
Compliance with laws and regulations
Property managers are knowledgeable about the various laws and regulations that apply to commercial real estate properties. They can help ensure that your rental property complies with all relevant rules, minimizing the risk of legal issues.
Maximizing rental income
An experienced property manager will be able to help you set a competitive rent price and minimize vacancies in rental units. They can also help you make strategic improvements to your property, attracting higher-paying tenants and increasing your rental income.
The Cons of Hiring A Property Management Company
Property management fees and costs
One of the main drawbacks of hiring a property management company is the associated cost. Property management service fees can vary based on the services provided, the size and location of your property, and the management company you choose. It’s essential to carefully consider the property management fees and weigh them against the potential benefits.
Potential lack of control for property owners
By hiring a property management company, you may feel a sense of reduced control over your commercial property. Some property owners may struggle with delegating the responsibility of managing their property to a third party.
It’s essential to establish a strong working relationship with your property manager and maintain open communication to alleviate this concern. It’s also worth remembering that your time is valuable, and giving up some control to a trustworthy property management company can free you up to focus on other things.
Possible conflicts of interest
Some property management companies may manage multiple properties, which could lead to potential conflicts of interest. For example, a property manager may prioritize one property over another due to higher commissions or a personal relationship with a specific property owner. Because of this, it’s crucial to carefully research property management firms and interview potential property managers to ensure their commitment to your property’s best interests.
Varying quality of service among property managers
Not all property managers are created equal, and the quality of service you receive can vary significantly from one manager to another.
You should always carefully research and interview potential property managers to ensure you find a professional who will provide high-quality service and meet your expectations.
Factors that Affect Property Management Fees
Property size and location
The size and location of your commercial property can have a significant impact on property management fees. Larger properties or properties located in high-demand areas may command higher fees due to the increased workload and complexity involved in managing them.
Property management fees can vary based on the services provided by the management company. Some companies offer comprehensive packages that include everything from rent collection to maintenance, while others provide more limited services.
Be sure to discuss the specific services included in the fees and any additional costs that may arise.
New Tenant Placement Fees
Some property management companies charge a separate fee for finding and placing new tenants in your commercial property. These fees can be a flat fee or a percentage of the first month’s rent.
Be sure to discuss these fees with your prospective property manager and factor them into your overall property management costs.
Leasing and maintenance fees
Leasing and maintenance fees can also affect your property management costs. Some property managers may charge a flat fee for leasing services, while others may charge a percentage of the monthly rent.
Maintenance fees can be either a flat monthly fee or based on the actual cost of repairs and maintenance performed.
It’s crucial to understand the fee structure and any additional costs before signing a property management agreement.
What Are The Benefits Of Hiring A Property Manager?
Time savings for property owners
One of the most significant benefits of hiring a property manager is the time savings for the real estate investor and property owners. Managing a commercial property can be time-consuming and stressful, especially if you own multiple properties.
By hiring a property manager, you can delegate these tasks and focus on other aspects of your real estate investment or business.
Managing tenants, handling maintenance requests, and dealing with other property-related issues at own properties can be stressful.
Hiring a property manager can significantly reduce the stress associated with managing commercial properties, allowing you to enjoy the benefits of your investment without the headaches.
Better tenant retention
A professional property manager can help improve tenant retention by promptly addressing their needs and concerns.
This can lead to longer lease agreements and fewer vacancies in rental properties, which can ultimately result in higher rental income.
Lower maintenance costs
Property managers can often negotiate better deals with contractors and suppliers due to their volume of business managing multiple properties.
This can result in lower maintenance costs for your commercial property.
How to Hire a Property Manager
Assess your needs and goals
Before hiring a property manager, take the time to assess your needs and goals for your commercial property.
Determine the level of involvement you want to have and the services you require from a property manager. This will help you find a property management company that aligns with your needs and expectations.
Check Reviews and Online Presence
Research prospective property managers by checking their online presence, including their website and social media profiles.
Look for client reviews and testimonials to get an idea of their reputation and the quality of service they provide.
Interview Prospective Property Managers
Interview multiple property managers to ensure you find the best fit for your commercial property. Ask about their experience, services offered, fees, and how they handle common property management issues.
It’s also essential to ask for references from current or past clients to get an idea of their performance and reliability.
Review Property Management & Lease Contracts
Before signing a lease agreement or property management agreement, carefully review the contract terms, including fees, services provided, and termination clauses. Ensure you understand the property management fee structure, lease agreements, and any additional costs or responsibilities.
Frequently Asked Questions about Property Management
Answers to the questions provided in the instructions
- What is a property manager’s first responsibility to the owner? A property manager’s first responsibility is to protect the owner’s investment by effectively managing the property and maintaining its value. This includes finding and retaining tenants, collecting rent, overseeing maintenance, and ensuring compliance with laws and regulations.
- How often should a property manager inspect the property? The frequency of property inspections can vary depending on the property manager and the specific needs of the property. Generally, it’s a good idea for property managers to conduct inspections at least once or twice a year, or more frequently if there are ongoing maintenance issues or tenant concerns.
- What is the average property management fee for commercial properties? The average property management fee for commercial properties typically ranges from 4% to 12% of the monthly rental income, depending on the size and location of the property, the services provided, and the management company. Some companies may also charge additional fees for leasing and maintenance services.
- Can a property owner terminate a property management contract? Yes, a property owner can terminate a property management contract. However, the specific process and terms for termination will depend on the agreement between the property owner and the property management company. It’s essential to review the termination clauses in your contract and ensure that you follow the proper procedures to avoid any legal issues or penalties.
Weighing the pros and cons of hiring a property manager for your commercial real estate investment is an important decision that depends on your unique situation and needs. By considering the benefits, potential drawbacks, fees, and the process of hiring a property manager, you can make an informed decision about whether property management services are right for your investment property.
Remember to thoroughly research and interview prospective property managers to ensure you find the best fit for your commercial property and have a successful partnership.
And if you’re ready to start looking for a property management company, call us. Speed Commercial Real Estate always provides high quality property management services and valuable experience.