As a property investor, you’re faced with a lot of tough decisions. From selecting tenants to deciding which new properties to invest in, it can be easy to come down with “analysis paralysis.” As your business grows, you may find that managing the day-to-day and developing your business is just too much to handle on your own. If this sounds like you, it’s the perfect time to consider hiring a building management company.
The multifamily real estate market is bigger than ever. More than 2 million new units were constructed in the last ten years alone. According to Buildium’s 2021 Renters’ Report, 19% of all renters live in a multi-family style building, with 30.7% of renters living in medium to large residential buildings. In 2020 alone, nearly 400,000 new units were completed. As more and more people move into urban areas (both in primary and up-and-coming secondary markets), the demand for apartments and condos will continue to grow, making it a great time to be a residential building investor.
If you’re a seasoned investor, you’re probably already familiar with the three asset classes for multifamily and commercial properties. These are:
The class level of your investment property will determine both your initial investment and the management strategy to help you get the most overall earning potential. If you’ve been in the game a while, you’ll also know that these properties also require more labor-intensive management. The maintenance of these buildings requires much more time and energy than that for single-family homes or even smaller multi-family buildings. Making sure your occupancy rate is high requires more time and energy than other residential investment properties. When it comes to managing a larger scale property, hiring a building management company will save you time and energy and help your business stay profitable.
If you’re an experienced property investor, you already know that a property manager can handle collecting rent and fielding resident phone calls. However, building management companies are equipped to do so much more.
Building management companies can significantly improve your ROI (return on investment). Through impactful marketing, they can improve your properties’ online presence and attract prospective tenants. By choosing the right building management company, you’ll have a reliable partner with the expertise and connections to support your business as it grows. While qualified property managers will all be able to help you lease your rental properties, building management companies are experts at marketing, leasing, and maintaining multifamily buildings. Many building management companies also have a foothold in the real estate community. Using their network of real estate professionals, they’ll be able to get your property in front of potential tenants and their rental brokers. This gets your units rented quickly.
Building management companies ensure that your units are occupied by reliable and responsible tenants by screening them during the application process. Most property managers will handle everything from reviewing references to running credit and background checks on your applicants, so you don’t have to. Larger management companies have the resources needed to handle the higher volume of tasks efficiently. This takes a huge load off your shoulders when you’re dealing with a large-scale residential building.
Additionally, they’ll know how to accurately price your buildings’ units, such that they earn a profit while still attracting interested tenants. Tapping into their knowledge of local rental rates, the amenities that your tenants might be looking for, and what your competitors are charging, they’ll be able to set a profitable but competitive rental price. This will keep potential tenants interested and help you maintain a low vacancy rate.
The sheer volume of maintenance orders and requests that come with multi-family and apartment buildings is far too much for a single person to handle. A building management company will be able to take tenant phone calls, handle emergency requests, and keep your buildings maintained and in great condition. With an in-house team of maintenance professionals or a trusted network of vendors, a building management company can keep these kinds of tasks off your plate while guaranteeing that your building is properly cared for.
If you plan on taking a “value-add” approach to your property investing, a building management company can help in a few ways. Firstly, your building management company can help to oversee any capital improvements you plan on making. Secondly, your building management company can take care of all bookkeeping and accounting, in order to make sure your project stays on time and on budget. Thirdly, your building management company may be able to offer you financial guidance and investment advice as you seek to grow your real estate business.
The title “commercial property” can be used to describe many different kinds of buildings. Retail, office, warehouses, industrial, and mixed-use buildings all fall under this umbrella. Commercial properties have huge income potential, with an average annual return of between 6% and 12% of the purchase price. While rates have no doubt shifted since the start of the pandemic, these properties will most likely remain solid investments, especially as businesses recover and adapt to new circumstances. However, a real estate business built on commercial properties requires a specific skill set.
Commercial properties are, by definition and use, more diverse than residential properties. They require more spatial optimization and a deep understanding of the particular needs of a wide variety of tenants. Ideally, you should consider leasing your space to businesses that offer complementary services rather than competitive ones. This way, your building’s tenants won’t be in direct competition with one another and, instead, may actually fuel each others’ success.
Additionally, the screening process for tenants should be far more rigorous. Retail and restaurant tenants’ screening should include a check of their sales and tax returns. If the rent is higher than 6-8% of their revenue, their personal assets should also be analyzed. Due to Covid-19’s impact on small businesses, it’s more important than ever to keep in mind that if your tenant’s business fails, your own business might be in trouble.
Commercial properties are unique in their leasing laws, as well. Commercial leases are generally more negotiable than residential leases, as businesses often need to update or change spaces to fit their needs. Commercial leases can also be customized to the landlord’s needs and there are fewer consumer protection laws for commercial leases than for residential leases. You may be able to sign your tenants to triple net leases, rather than gross leases so that your tenants are responsible for real estate taxes, building insurance, and maintenance. In the long run, this can save you money on maintenance and upkeep. Building managers have the legal knowledge necessary to help you draft your own leases, keeping in mind national, state, and local laws.
When it comes to managing a commercial property, landlords should also implement a proactive property maintenance plan. This plan should include replacing old hardware and appliances, testing security and emergency systems, monitoring electrical systems, checking HVAC and ventilation, and regularly having pest control visit the property. Additionally, property owners should make sure that none of their units are violating local and state health and safety codes. A skilled property manager can take care of all of these tasks for you.
In large part due to the pandemic, there has been a shakeup in the way that commercial properties are leased and managed. Property owners have to be far more scrupulous when it comes to selecting tenants. A qualified building management company can assist you by determining whether or not a prospective tenant’s business is “recession” or “pandemic” proof. In other words, their unique perspective and expertise can help you decide whether a potential tenant is a financial risk, or not.
In addition to screening clients, a building management company will take on the task of managing tenant expectations. Through the use of property management software, they’ll be able to collect rent, communicate directly with tenants on your behalf, and field any maintenance or building requests. Your tenants will appreciate this streamlined approach to property management, keeping them happy.
One of the risks involved in owning commercial property is that a property intended for commercial use receives more public visitors than a residential property. With more public visitors come more opportunities for them to get hurt or to damage your property. A building manager can help mitigate that risk by implementing maintenance checks and updating the property regularly. Additionally, a building manager can oversee all security of a property, further reducing the chance of you being held liable for an on-site incident.
A good building manager will take charge of controlling maintenance expenses and managing operating costs. Your manager will provide you with monthly profit and expense reports, keeping you updated on the status of your business. Skilled building managers will also be able to offer accounting, budgeting, and financial advising services. With the financial well-being of your company secured, you’ll be able to grow your business.
Hiring a building manager can help you secure your investments’ profitability, but only if you find the right building management company.
Finding your local building management company doesn’t have to be difficult. Tapping into an online marketplace for property management services lets you search for vetted management companies in your zip code or state. These services will match you with qualified building management companies in your preferred area. From this list, you can begin narrowing down your choices based on your unique needs and preferences.
When choosing a building management company, consider the needs of your unique property holdings. Look for a building management company that specializes in the types and sizes of properties you invest in. Additionally, consider working with a property management company that embraces technology. According to Buildium, 2 in 3 multifamily renters would like to have access to an online resident portal. A building management company that’s tech-savvy and trend-conscious can provide this resource to your future tenants.
When considering the benefits of a small versus larger management company, keep in mind that larger companies frequently have in-house maintenance staff who can take care of your tenants’ needs as soon as they arise. They may also have efficient leasing processes that will get qualified tenants into your vacant units quickly. However, it’s important to find out how many other properties and what types of properties they’re overseeing. If they’re managing a large portfolio of multi-family buildings, they may be experts in multi-family management, but they may also be stretched thin. Referrals and interviews can be helpful in understanding how well-staffed a company is. You can also look at reviews and their online presence to get a better sense of their reputation.
The future of your commercial real estate business may depend on the skill with which it’s managed. Hiring a qualified building management company to take on daily tasks, marketing, maintenance, and more, can help make your properties profitable and passive sources of income, giving you the time you need to focus on growing your business. If you’re ready to take your real estate investing business to the next level, find a local building management company today.