How to Buy Your First Commercial Property in 5 Steps
A quick recap on the 5 steps to buying commercial real estate: · Educate Yourself on Commercial Real Estate Investing · Learn How to Underwrite ...
hire a management company
Having an outstanding property manager on your side makes all the difference when you’re investing in commercial real estate. I highly recommend keeping a property management fee in your underwriting, regardless of whether or not you intend to <anchor>hire a management company</anchor>. You never know what could happen and if the deal doesn’t work with a management fee, it probably doesn’t work at all.
5 Reasons You Need to Hire a Commercial Property Manager — Parasol Management
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May 12, 2020

5 Reasons You Need to Hire a Commercial Property Manager

# 5 Reasons You Need to Hire a Commercial Property Manager

# 5 Reasons You Need to Hire a Commercial Property Manager

Owning and investing in commercial real estate can be quite rewarding.

Managing the property, on the other hand, can be rather time intensive and emotionally & mentally straining.

That’s where commercial property managers save the day.

5 Reasons You Need to Hire a Commercial Property Manager_ They Handle The Day-To-Day Operations.jpg

## 1. They Handle the Day-to-Day Operations

You didn’t invest in commercial real estate just to give yourself another job, right?

Sure, learning new skills and taking on a new venture can be fun.

But managing the daily operations of your investments is not scalable.

Looking to acquire more properties?

Let your manager free you up and handle the day-to-day operations.

### Maintenance Calls

Let’s be real- maintenance calls can be the worst part of owning commercial real estate.

You’ll likely have to fix something, that’s a given.

But you’ll also have to:

- Communicate with the tenant

- Inspect the issue

- Determine the best way to handle it

- Coordinate the repair

- And keep track of your expenses

A good property manager will take on all of that responsibility on your behalf.

The most you’ll have to do is read your manager’s notice.

### Rent Collection

Collecting rent can be awkward.

Especially if you don’t have the proper systems in place to automate it.

And if you’re friends with your tenants, which isn’t uncommon for smaller investors, it can become very awkward if anything goes sideways.

Your property manager will keep you at arm’s-length, helping you distance yourself from that side of the relationship, while automating rent collections and deposits.

You’ll just be checking your bank account each month - that’s almost mailbox money.

### Property Inspections

If you’re new to the investment game, you likely don’t know everything that you need to inspect when visiting your property.

That’s why you should lean on an expert.

Your manager will visit the site regularly to keep an eye on everything.

They’ll even institute a preventative maintenance plan to fix and replace parts of the building before they become an issue, which can save you a significant amount of money.

5 Reasons You Need to Hire a Commercial Property Manager_They Bring A Book Of Proven Vendors.jpg

## 2. They Bring a Book of Proven Vendors

Do you have all of the subcontractors you need in your contacts?

Managers do!

Don’t waste time skimming through Google reviews to find someone to come out and help when you’re in a pinch.

I’ve seen plenty of property owners get taken advantage of this way!

Rely on your manager and their book of proven vendors.

### Get The Job Done Right the First Time

Mistakes can be expensive.

And fixing mistakes can be even more expensive!

Getting the job done right the first time can often determine whether you’ll profit, break even, or lose money on your investment.

Your manager will:

- Receive multiple bids

- Coordinate the repairs

- Oversee the work

- And ensure it’s done properly

Do it once, do it right.

### Saving You Money

Much like taking your car to the repair shop, it’s easy to get stuck paying for repairs or maintenance that you don’t actually need.

Why replace an entire water heater when it may simply need to be flushed out?

Your manager will be able to make these calls and help keep costs low, saving you money.

5 Reasons You Need to Hire a Commercial Property Manager_They Help Qualify Incoming Tenants.jpg

## 3. They Help Qualify Incoming Tenants

How do you qualify incoming tenants?

Most landlords will ask for tax returns or business financials, which certainly help.

Property management companies also review applications and assist in qualifying incoming tenants to help ensure that the landlord has a high quality tenant incoming.

Commercial properties are tough investments without good tenants!

### Credit & Background Checks

Most of the property management software out there permits credit and background checks.

No matter how outstanding you feel a tenant may be, you should always run them through the system.

You may be surprised at what will come back.

Tenants may be able to forge financials and skirt around references, but it’s very difficult to hide from credit and background checks.

### Reviewing Tenants’ Financials

Tax returns and business financials often require FBI level investigative skills.

It’s not uncommon to find wealthy or well-off tenants showing little to no income on their tax returns, which is why it’s important to get the full picture.

When reviewing a tenants financials, you should at a minimum ask for:

- Two to three years of tax returns (business and personal)

- Personal financial statements

- Profit and loss statements

- Balance sheets

And those should come from each partner in the business.

5 Reasons You Need to Hire a Commercial Property Manager_They Compile Your Financial Reports.jpg

## 4. They Compile Your Financial Reports

Proper financial reporting is worth its weight in gold.

It helps paint a crystal clear picture of how your property is performing, which can make it easier (or more difficult) for you to refinance or sell the asset.

If you’re reporting to investors, it can also make your life much easier.

### Monthly, Quarterly, and Annual Reporting

Depending on how you set up your relationship with your manager, you’ll likely be receiving monthly financial reports at a minimum.

These reports may include:

- A rent roll

- Profit and loss statements

- Balance sheets

- Cash flow statements

- And more

You’ll get a solid snapshot of the financial performance of your asset, which will help you build a financial history.

### Preparing for Tax Season

These financials will help significantly when preparing for your taxes.

Instead of having to pay an accountant to dig through your bank account to figure out what to write off or depreciate, they’ll be able to review these financial statements to prepare your return.

Any questions?

They’ll be able to reach out to your property manager to dig further into the records.

Keeping you out of the stress of tax season.

5 Reasons You Need to Hire a Commercial Property Manager_They’re A Second Set Of Eyes.jpg

## 5. They’re a Second Set of Eyes

It never hurts to have a second set of eyes.

Especially when you’re talking about some of the biggest investments you’ll ever make.

Property managers have an abundant amount of experience in the acquisition, operations, and disposition of commercial assets.

You’ll find that advice invaluable.

### When You’re Buying the Property

Buying another property?

Your property manager should be on your list of calls to make once you get a site under contract.

Like your inspector, contractor, and leasing team, they’ll be able to provide a different perspective on the pros and cons of the property.

Be sure to lean on that expertise to catch anything you might miss!

### When Your Broker is Recruiting Tenants

The property manager will be a second set of eyes reviewing not only their financials, but whether or not that tenant will actually be a fit for your project.

Not every tenant makes sense for you to have and your property manager can assist in making those decisions.

### When You’re Looking to Maximize the Property’s Value

Thinking of making an addition or renovating the property?

Your manager will be able to make recommendations based on what will actually maximize your property’s value.

Sure - the updates may look nice and make the tenants happy.

But is the cost justified by an increase in value?

That’s what your commercial property manager is there for - to help you make the most of your investment.

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