March 28, 2014
How do you choose the right apartment or commercial management company? Will your management company run lean and mean for you? Will one of its priorities be that your investment makes a good profit? Will it keep your tenants happy by handling requested repairs and maintenance items quickly and thoroughly? Will it keep the property in pristine condition so that future tenants want to live there and the current tenants are proud to live there?
Let’s start out by realizing that a commercial property is a business. The number one reason businesses fail is due to poor management. And yes, that is the number one reason commercial properties fail, too. At Apartment Loan Store, our clients either seem to love or dislike their property management companies. Here are the three quality control factors to think about when choosing a property management company:
1. Is the property manager you are interviewing going to run your commercial property as a business and be a good steward over its profitability? When interviewing management companies, ask them to provide you with a rental survey showing what your competitors are charging for comparable rents in your submarket. Ask them if they feel confident that they can raise rents in the near future. If the rental survey shows that your property is running at below market occupancy, ask the management company its recommendations for getting occupancy up. Also ask them to estimate what the cost will be for all the major expense categories. Then do a pro-forma (projection of income and expenses) for a full year of operations. See if the management company is willing to partner with you to reach your financial goals.
2. Is the prospective property management company going to keep your tenants happy? Start surfing the internet and looking at the reviews for your competitors. If the reviews are overwhelmingly bad, read them and find out why. Then go to the website of that apartment complex and find out who the management company is. Most tenant complaints are due to poor response to urgent repair issues like, “After 5 days my toilet still hasn’t been fixed,” or from management ignoring and not handling complaints about other tenants, such as noise problems. Keep in mind when reading the complaints that more people complain than compliment when posting reviews. That is just human nature. But overall you should get a feel for how the management company is taking care of the tenants.
3. How is the prospective property management company taking care of the physical condition of its properties? You will have to actually inspect some of its managed properties, or find someone to do this for you, to determine this. The items to look for are poor quality maintenance on landscaping, parking lots, walkways, stairways, exterior paint, gutters, etc. Also, are some of the tenants piling junk on their patios? Is there trash strewn in some places? Keep in mind that some properties are not maintained because the owners will not authorize the repairs. The better management companies will not take on landlords that desire to be slumlords.
By Terry Painter, President