What You Should Know About Property Management

Now that you have made an offer to acquire a commercial property and are waiting to close escrow, you may want to start looking for a property manager to professionally manage the property. Your real estate investment advisor should present you with 2 or 3 local companies, each with its own proposal. Your job is to decide which company you will hire. The property manager will be the main point of contact between you, as the landlord, and the tenants. Her main job is to:

1. Receive and collect the rents and other payments from your tenants. This is typically simple until a tenant does not send the rent check. A good property manager will somehow get the tenant to pay the rent while a lousy one will throw a monkey on your back!

2. Hire, pay, and supervise personnel to maintain, repair and operate the property, e.g. trash removal, window cleaning, and landscaping. Otherwise, the property loses its appeal, and customers may not patronize your tenants? businesses. The tenants then may not renew their lease. As a consequence, you may not realize the expected cash flow.

3. Lease any vacant space.

4. Keep an accurate record of income and expenses, and provide you with a monthly report.

A good property manager is critical in keeping your property fully occupied at the highest market rent, the tenants happy and in turn helps you achieve your investment objectives. Before choosing a property management company, you may want to:

1. Interview the company with focus on how the company handles and resolves problems, e.g. late payment.

2. Talk to the person who will manage the property day to day as this may be a different person from the one who signs the property management contract. You want someone with strong interpersonal skills to effectively deal with tenants.

The property managing company normally wants a contract for at least one year. The contract should spell out the duties of the property manager, compensation, and what will require the landlord?s approval.

Agent?s Compensation: you will have to pay someone to manage and lease the property. You may have one company to manage the property and a different company to lease the property. However, it?s best to work with one company that handles both managing and leasing to save time and money.

1. Management fee: the fee varies between 3-6% of the base monthly rent for a retail center, depending on the amount of work needed to manage the property. For example, it takes much less time to manage a $2M retail center with just a single tenant than a $2M retail strip with 12 tenants. So, for the center with 12 tenants, you may have to pay a higher percentage to motivate the property manager. You should negotiate the fee as a percentage of the base rent instead of the gross rent. Base rent does not include NNN charges. Ideally, you want a lease in which the tenants pay for their share of property management fee.
2. Late fee: when a tenant pays late, he is often required by the lease to pay late fee. The property manager is allowed to keep this fee as an incentive to collect the rent.
3. Leasing fee: this fee compensates the property manager to lease any vacant space. In a typical lease contract, the leasing company wants 4-7% of the gross rent over the life of the lease. It also wants the leasing fee to be paid when the new tenant moves in. In addition, the leasing company wants around 2% of gross rent when the lease is renewed. The tenant may also ask for Tenant Improvement (TI) credit, typically between $10-20 per square foot to pay for construction expenses. So if a new tenant with a 10-year lease goes under after one year then you may lose money. As the landlord you should:
   • Approve a long term lease (10 years or longer) only when the tenant?s financial strength is solid. Otherwise, it may be better to reduce the lease to 3-5 years.

   • Make sure the new lease has a provision for some kind of rent escalation, preferably based on Consumer Price Index (CPI), i.e. inflation which is 3-4% a year instead of lower fixed 1-2% annual increase.

   • Consider TI request from the tenant as one of the factors to approve a lease. The TI credit depends on whether you need the tenant more or the tenant needs you more.

   • Negotiate for a flat rate renewal fee, e.g. $500 instead of paying a percentage of the rent for the life of the lease. The negotiation is easier with one company that handles both leasing and management.

   • Negotiate to pay the leasing agent a lower percentage, e.g. 4% when no outside leasing broker is involved.
     

You can see that it?s very important to minimize tenants? turnover rate as it has a direct impact on the cash flow of your commercial property. A good property manager will help you achieve this goal.

Monthly Report: each month the property manager should send you a report on income received, expenses incurred, and property status. You shouldReview the report to see if the numbers make sense. You should:

1. Request a report showing both rent and CAM fees received.
2. Request a separate bank account for your property and have a monthly bank statement sent to you. Without this, the property manager will deposit and commingle all the rents from all properties that she manages into her company?s bank account.

If you instruct the property manager to send you the excess cash flow then you will also get a check.

Landlord?s Approval: the management contract should specify the dollar limit for exceptional maintenance expense above which would require your approval. This amount varies from landlord to landlord as well as the type of property. However, it?s typically somewhere between $500 to $2,000 dollars.

Communication with property manager: in the first few months, you and the new property manager should communicate often to make sure things go smoothly. You should give instructions in writing, e.g. email, to your property manager and keep records of all your correspondence. If the property manager does not do what you instructed, you may refer to your records and minimize disputes.

If you want to work hard for your money, you may want to manage your own property. However, if you want to work smart, your partner should be a good property manager.

David V. Tran is the CEO eFunding Inc., a commercial real estate brokerage, commercial loan broker, property management, self-directed IRA investment, TIC and syndication company in San Jose, CA. His website is http://www.efundingcom.com. He may be contacted at (408) 288-5500. eFunding does business in all 50 states. He is selected as Pensco Trust?s (a major self-directed IRA custodian) Preferred Professional. David is well-known for his 3 FREE real estate investment seminars:

1. How to invest in commercial real estate for retirement income NOW.
2. How to maximize cash flow with 1031 tax-deferred exchange.
3. TIC/Syndication: strategy for small investors and self-directed IRA investors to acquire high-valued properties.
   

   You are welcome to share this report, unedited and in its entirety, with anyone you like. You may not remove this text. ? 2007 eFunding, Inc.
   Andrew La is a real estate and tax attorney, CPA and Real Estate Broker in San Jose.

Costa Del Sol Property Management

Now that you have purchased a villa or apartment on the Costa del Sol, Spain, you now face another decision: property management or finding a company to look after your property. Whether your villa is in Fuengirola, Mijas Costa, Benalmadena or Marbella, you need to be sure that the property management company will provide you with all the services you require such as maintenance, cleaning, property administration, holiday rental services, building and refurbishment.

Multi Property Services - gives owners of Costal del Sol property who are interested in letting out their villa or letting out their apartment the confidence and piece of mind in knowing that they can gain the financial rewards of short- or long-term rentals while protecting their property and interest. Here are some tips for you if you are looking for a company in Fuengirola, Mijas Costa, Benalmadena or Marbella to manage your property or letting your villa or apartment.

Property inspections - the company you select should check your property on a weekly basis. Inspections should include a check of all plumbing, baths, toilets and making sure all showers are off and all other fixtures are in working order. It should also include an inspection of electrical outlets and small appliances, again to ensure that they are in perfect working order.

Outdoor inspections – includes the checking of lawns, gardens, and the pool for any damage. The rental property management company should make sure that the sprinkler systems and pool filters are working. The company should also regularly inspect for any pests or vermin.

Property administration - The rental property management company will ensure that utility payments, taxes, and other bills are paid in a timely manner. They should also provide you with a monthly report.

Property inventory - the property management company will go through the property with you, making a thorough property inventory and using that as the basis for checking the apartment or villa after guests have departed.

Cleaning services - Prior to the arrival of guests, the rental property management company should arrange to have your villa or apartment cleaned and prepared for letting. Some companies may, for an extra fee, also offer a greet and meet service for guests.

Mail pick-up – Any mail should be picked up from the property and forwarded on to the owner.

When you do find the right rental property management company, then owning a property in Fuengirola, Mijas Costa, Benalmadena or Marbella will be both a personally and financially rewarding experience. To learn more about subjects like costa del sol property management please visit the web site at: http://www.multipropertyservices.com

Georgi Mollov - SEO and Web-Design services - http://www.spainseo.com

Selecting a Property Management Company

If you've spent any time in a resort community, you've probably encountered a good number of vacation rentals. These can vary, from cabins to condos and perhaps even a seaside bungalow. These are properties frequently owned by absent investors and rented out to guests on a nightly, weekly or monthly basis. In a busy resort community these homes can not only be a gracious lodging experience, but often more economical than hotels especially at "high season" rates.

If you're among the many considering investing in a rental property you must make a choice. Prepare to spend the time to maintain the unit and arrange for reliable housekeeping services, advertise your little getaway on the internet and in the local media, and provide facilities for checking guests in and out. The alternative is the preference of a majority of out of town owners...hire a reputable property management company to help maximize your ROI.

Here are a few guidelines to help in selecting the management company that best meets your needs.

• Naturally, word of mouth can help you in your research. Talk to locals and other rental property owners. Most will be happy to share their experiences with you.

• Note the visibility of the management company in the market. Are they easily located in the local phone book? How many units do they manage? Do they have actual office facilities or are your guests reporting for check-in to someone's garage? Do they advertise in the local travel guides and other area publications?

• Technology plays an important part in property management success. Does your candidate have a solid internet presence? Can you see ample photos online to help selecting an appropriate retreat? Can you easily check availability and book online? Most important, how easily can your candidate be found in the online community? Target a search engine and a search term that you feel people might actually use to shop for a property.

In Ruidoso, New Mexico a mountain resort community the most popular vacation rental is the mountain cabin.

Select, for example MSN...and the simple search phrase "ruidoso cabin". If your property management candidate shows up in the first page, you've located a firm that has the marketing savvy to help your investment succeed. If the company you're investigating is number one on the first search page you've found an aggressive, professional marketer with the tools you need to maximize the return from your investment. If they do not appear in the first three pages of search results...move on. They may have a website, but it is not positioned to help you make reservations.

• What is the rental experience like for the guest? Is the initial contact with a friendly, knowlegeable reservationist? Here's where your own powers of observation come into play. Call your candidate and actually book a stay in one of their managed properties. How were you treated? Was the property well maintained and clean? Would you rent from them again? This simple technique can be a real eye opener.

These basic questions will help you get started in selecting the property management that can help you realize your investment plans.

Bob Huntington works in property management in Ruidoso, New Mexico. Visit his websites at http://www.casasderuidoso.com and http://www.ruidosocentralreservations.com Bob also authors the blog Visiting Ruidoso at http://www.visitruidoso.blogspot.com