Adding Asset Value Via Sound Property Management

By Scott A. Naugle

Today's tough economic times requires owners of income producing real estate to focus on sound property management practices to ensure that their investment remains income producing. With the continuing tightening of business credit, to increasing costs of conducting business for the user of commercial real estate space, owners must insure that their investment is continuing to operate on a profitable basis month-to-month and returning the desired annual return for the owner.
It is critical that owners understand property management best practices to achieve financial and investment asset returns year after year. The best way to insure success is to implement a comprehensive property management program. Most owners hire experienced property management firms to manage all aspects of managing their assets if they do not have the experience nor the time and knowledge to do so. It is imperative to fully understand various legal, administrative, landlord-tenant relations/laws, building codes and a host of other aspects of owning investment real estate for success, not to mention to keep the owner out of potential legal trouble.

This article is meant to provide a summary of some of the most important elements of a comprehensive property management program that not only provides benefits for ownership, but also benefits users (tenants) as well. The following represents some key elements of such a program:

1. Proper tenant screening: credit checks, review of financial statements, review bank accounts (past 60-90 days), names of current and previous suppliers for reference checks, business plan (if start-up), existing client/customer base.
2. Understand tenant's business structure: sole proprietor, LLC, S-corp, C-corp.
3. Fit their space requirement and line of business to your property: understand how tenant's business (industry, hours of operation, etc.) fits with you property type and current tenant mix if not standard office property, retail, etc., will the tenant request/require expansion space in the near future, for high profile tenants, what kind of tenant build-out will be required and cost.
4. Operating costs: what, if any, property operating costs can be passed through to tenants, energy efficiency/rebate programs from local utility companies, monitoring energy usage, property tax assessments, proper insurance.
5. Lease negotiations: an experienced management firm is invaluable here with the many issues and requirements that make-up a well drafted and comprehensive agreement.
6. Routine vs. emergency maintenance issues: preventative maintenance program, contractor relationships, and in-house personnel.
7. Marketing/Leasing: market knowledge, broker, user contacts, and advertising/promotion programs.
8. Tenant retention: existing tenant/property management reporting system, lease renewal program, property enhancement program.
9. Landlord-tenant requirements: compliance with federal, state and local laws.
10. Fire/life safety and building codes: compliance with national, state and local laws and ordinances.

The foregoing represents some important considerations for managing any investment property. A properly implemented and maintained property management program is a critical component for ownership success for any type of investment real estate. Especially in these tough economic times, it is smart to fully appreciate how a professionally managed property can add value to your investment as well as add value to your tenants and will go along way toward tenant retention, which under any circumstance will result in profitable real estate returns.

For more information on Mr. Naugle, related real estate investment and management tips and strategies, please visit: www.rpimllc.com

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