Property management firms are vital for commercial real estate investors, especially as their portfolios grow.
Selecting a commercial property management firm shouldn’t be undertaken lightly. By appointing a property management firm, an individual or business is essentially placing their investment—in this case, one or more pieces of real estate—directly into the management firm’s hands. An attorney and property investor based in Federal Way, Washington, Andrew Cratsenberg recommends taking several key steps when hiring a commercial property management firm. These steps include reviewing screening procedures and company protocols and begin by immediately discounting any management firm which is not well established.
A well-established firm, he explains, should also have a demonstrable reputation, and be able to provide references from other clients. Indeed, while anyone may start a property management firm and appear professional on the surface, an excellent reputation is not merely a matter of appearances and must be earned.
Furthermore, a well-established commercial property management firm and experienced staff go hand in hand. This is especially important as employee turnover is considerably higher than average in the property management industry. Accordingly, it’s helpful to hire a management firm with a long-standing roster of staff, where possible.
Next, Cratsenberg advises addressing a commercial property management firm’s screening procedures for prospective tenants. While many management firms are incredibly thorough in this area, others are less so. A commercial property management firm which puts proper effort into its screening processes is also likely to be much more diligent going forward in other areas, says Cratsenberg.
Of areas of screening to look for, Cratsenberg recommends selecting a management firm which performs reference, credit, and full background checks as a minimum. Any further checks are a bonus, and generally speaking, the more screening, the better.
Once it has been ascertained how well a commercial property management firm screens prospective tenants, it’s time to do a little further screening of the firm themselves, according to Cratsenberg. The Washington-based attorney and property investor recommends asking questions surrounding marketing and vacancy rates, in addition to looking into their existing client base. An extensive client base, for example, he says, suggests that a property management firm is not only highly capable but also likely to be well connected locally.
Any commercial real estate investor looking to hire a property management firm is also advised to review their internal policies and protocols, as well as their contract outlines. Policies, for example, should address matters such as past-due rent, while protocols should cover out-of-hours emergency procedures and suchlike.
Of contracts, Cratsenberg advises looking closely at both the proposed agreements between a property owner—or real estate investor—and the management firm, plus the agreements put in place between the firm itself and successful tenants.
It’s also important, he suggests as a final point, to select a commercial property management firm whose general approach to business is in line with that of the real estate investor. This, Cratsenberg suggests, should help to foster and sustain a strong professional relationship between the two sides moving forward.