When it comes to C&I property management, I’ve witnessed some fundamental and quite extraordinary misconceptions, both by the Landlords and by some inexperienced practitioners.
There is a common denominator for all of the mistakes listed below and it lies in the fact that the damaging impact is not immediately noticeable. If and when discovered, it is usually too late to fix without paying the high price of not thinking it through earlier. Having a structured, industry tested and recognized approach is most often the key for success.
1. I know how to deal with it; I already have plenty of experience managing residential properties
This is a very common, but at the same time, a very wrong attitude. As a matter of fact, successfully managing commercial or industrial properties requires a broad and multifaceted combination of skills and knowledge that are very different to the ones required for handling residential properties. Any amateurism or ignorance will result in inefficiency, disputes, frequent vacancies and/or building deterioration.
2. Tenancy mix is not very important; I am not concerned about it as long as I don’t have vacant units
If you want to create a safe and harmonious environment, properly assembling the tenancy mix is a very important step. Successful accomplishment of that task will secure long term stability and predictability for you, and at the same time, add to the prosperity of your tenants as they benefit from the complementary nature of their neighbour businesses. On the other hand, having an under-planned tenancy mix means a lot of wasted time, energy and money spent putting out fires such as handling complaints, resolving disputes and refilling the frequent vacancies. Following the similar logic, for single-tenant properties, matching the tenant use with the building features is equally important.
3. Fix it only when broken
This is the ancient and outdated way to deal with all maintenance issues. It has proven to be most expensive and could significantly decompose the Landlord’s bottom line. In today’s world, skilfully combining preventative, programmed and reactive maintenance will enable you to manage your property professionally and efficiently with the ability to control maintenance expenditure.
4. So what if the tenant is requesting something outside of the leasing arrangement; he is securely “tied”with a long term deal
We are in a tenant’s market and vacant properties are in abundance. Understanding and responding to your tenants’ business concerns and requirements is a key for developing and grooming your tenants’ loyalty and their respect for you and your property. Sometimes that includes restructuring leasing arrangements or refurbishing the property, but the same situation often presents the opportunity to also improve Landlord’s position.
5. If I can collect the rent on my own, I don’t need a professional to oversee my property
A commercial property practitioner conducts many more duties than just collecting the rent. Commercial property management is a complex mixture of ongoing processes. Some of them are administrative, dealing with tenants’ arrangements and leasing requirements such as rent reviews and lease renewals. Others include taking care of the condition of the property and it’s compliance with current legislative requirements. The ideal commercial property will always be presentable, compliant and have proper and current records with orderly documentation.
6. Common areas on the property… Maintaining it only costs me money; it does not generate any rent; therefore I don’t want to know about it
Maintenance of common areas is very important for a safe and healthy environment as well as the professional building appearance. Poor maintenance practices could also lead to accidents and potentially expose the Landlord to significant liability risk. Also, in taking care of the common areas, you advertise the way that you conduct your business as a responsible Landlord and ultimately set by example what you expect from the tenant.
7. I am well protected by my leases. Nothing bad or unpredictable could happen to my assets
That is not always the case. Unfortunately, protecting your commercial assets often means minimising damages caused by some unfortunate, undesired or unforseen events. Preliminary investigation carried out on a tenant at the time of the lease application does not mean that it will stay unchanged several years down the road. When it comes to dealing with rogue or distressed tenants, please remember that even acquiring a Court judgement does not guarantee that you will recoup financial losses caused by an unfortunate set of circumstances.
8. I maintain the insurance policy so I know that I am covered for the unpredictable
Very often the insurance policy for the building is acquired when the property is purchased and the terms, conditions and actual coverage of the policy are rarely (if ever) reviewed again! This is happening more than one would think and is unfortunately usually discovered after a claim has been lodged. Then it is usually too late.
9. The tenants are paying rent on time and they are not asking me to do anything for them therefore my interest are protected
If leasing obligations were ever that simple, the average Lease Agreement would not be spread over 30 pages (in most cases), and sometimes over 100! It is important to keep in mind that lease covenants are obligatory on both parties. The most common mistakes by Landlords who manage their properties by themselves are: failure to ask for reimbursement of outgoings, improper billing, failure to provide mandatory documentation, poor record and documentation keeping and not complying with current legislation. Many of those issues are exposed when the property is placed on the market again.
10. All real estate agents are equally bad so the best thing is to manage the property by myself
This is a very narrow and entirely wrong opinion. Some of Adelaide’s Agencies are among the best commercial and industrial practitioners in the country.It is not that difficult to find a good one. A few phone calls, search on the net and a check with the respected professional associations will help you to find an Agency that suits your needs.
In conclusion; while you can manage your commercial properties on your own, it makes better sense to use a company that specializes in commercial real estate management. This will help you to free your time, increase your profits, reduce vacancy rates and harmonise the relationship with the tenants. The agency will take all the necessary steps to ensure that the rent is collected on time and all of property expenses are paid.