What Does a Commercial Property Management Company Do?
September 8, 2011
(Part
1)
Have you
ever wondered what a commercial
property management company does? Or better yet,
what they should be doing?
If you’re
asking either question and reading this article, then it’s safe to say you
probably own commercial
real estate or are considering purchasing
commercial investment property. The answer to this question is quite simple,
“Whatever you want them to do”. Ok, it’s not quite that simple. Practically
speaking, the range of service varies quite a bit from company to company,
depending on who you speak with. However, there are some basics that are
essential and necessary regardless of your reason for needing or wanting
professional property management. In this article you will find the answers to
what you should expect from a commercial
property management company.
THE BASICS:
Accounting
Services
Reporting - Monthly
accounting reports that include, a balance sheet, income & expense
statement, general ledger, rent roll, rent ledger, expense ledger and a copy of
the bank statement are the basics. There are various other reports you may want
or need depending on the property and ownership type. For instance, with a
self-storage property you will want in addition to the above, a copy of the
audit and daily deposit report.
Narrative
Report – This is a narrative monthly summary of exceptions in the
budget, income and expenses or any unusual activity on your property that is
prepared by the property manager responsible for your property.
Collections
(AR – Accounts Receivable) – Collecting rents and other monies owed. This function is
generally considered an accounting function, until the point there is a problem
(which can be quite frequent these days). You will want a company that has a
clearly defined process and system of responsibilities when it comes to
collections, ask them-
Who? – Who will do what in the collection process?
What? – What will be done?
When? – When will it be done?
Payments
(AP – Accounts Payable) – Now that they have collected your money, you will want
them to pay the bills. Again, you will want them to clearly define, who, what
and when this will occur. You may want to define for the accounting staff the
details concerning payment of your expenses, including when and how much to
disburse to you, as well as other details such as reserves for taxes, insurance
or capital improvements.
Lease
Processing – This task is generally a group effort, with a defined
patterned or specific routing to a number of people within the commercial
property management company, including the
accounts receivable department and property manager. Each has a specific
function and items they are looking for. However, one person generally inputs
the lease into the computer. This part of the process is extremely important,
as a missed date or dollar amount could result in serious repercussions down
the road. Detail and a process that includes multiple layers of people checking
the input process is Key.
Management
Services
The
Property Manager – This person should be “one” of the focal points by which
you make your decision concerning whether you hire a company or not. The
property manager is the person that will make the critical day to day decisions
that go into operating a property. Their responsibilities include –
relationships with your tenants and vendors, physical condition of your property,
oversight of the collection of rents, payment of bills, budgeting, lease
administration, monthly reporting, generally all aspects of the operation of
your commercial real
estate. Most importantly they will be your
contact and source of information regarding your real estate investment. Make
sure you feel completely comfortable with this person and their abilities.
Site
Visits – site visits are a critical part of any property management
contract, minimally you want your property manager to be on your site once per
month, weekly is preferred. Many things happen during the course of a week on a
commercial property. The frequency of the managers’ visits will depend on the
type of property they are overseeing. The purpose the property managers’ visit
will vary from property to property as well, however, here are a few tasks your
manager should be attending to while on your property:
•
Checking Vendor performance
•
Checking for Maintenance / Health and Safety issues
• Be seen
and talk with Tenants (this topic needs more discussion than is possible in
this article, so it will be covered in Part 2).
Those are
the basics of what a commercial
property management company does – remember you
have a choice and your choice has a profound impact on the success of your commercial real estate investment.
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