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.

Property Management Considerations for College Housing

Property Management is not easy, but there are ways to make your job easier if you will understand a little about human psychology and work with the tenants whether they be business owners or residents. One group of properties that is an industry sub-sector is managing properties for college housing. The students will be renting the properties for the school year about nine months. So you need to average your costs over twelve months and total it up and then divide by nine for your costs.

Next you need to figure in the problems that occur and get busy signing people up for next year. Of course remember these are party animal kids and therefore you will need a substantial deposit from them up front and guarantees from their folks that you will be paid. If anything goes wrong you zap the deposit and let the parents know that one more incident and they are gone. Of course all this must be done swiftly, efficiently and without aggressive action. Warnings will help and nice polite staff is the key to diverting potentially hostile problems from these kids.

Being on good terms with the College or University is certain to help fill up the buildings thru referrals from the student information offices. Finding additional properties can be tough if the area is not use to massive numbers of young adults in the area. Most citizens nearby will complain and attempt to prevent that type of usage, as it adds lots of traffic, parties and just over congestion to the area. These are all interesting considerations to be discussed when contemplating property management strategies for College Housing Units.

Lance Winslow, a retired entrepreneur, adventurer, modern day philosopher and perpetual tourist.

Real Estate Property Management Software

Property management is made much easier with the specialized help of property management software. It not only gives the virtual image of the whole property, but also gives the errorless calculations and accounting works, the cost factors, the management planning and such other works.

Real estate property management software solutions are helping people across the country to perform real estate property management tasks more efficiently than ever. Real estate property management software alleviates many of the problems that residential property managers face every day. Resident portal, resident pay, and resident works are the usual real estate property management matters that the software can help handle. Also, in order to save more time and money and to ease the work of maintenance, real estate property management software can help a lot of companies in creating customized web sites.

It is the real estate company that decides what they should pay attention to: some companies pay attention to the acquisition and disposition of properties, while others focus on long-range forecasting for invested capital. The real estate property management software gives solutions to all these issues: the customized online and offline data are carefully maintained, updated and processed to facilitate the company management to make decisions and actions. Apart from this, software solutions also provide the two major information workflows unique to the real estate industry. They are:

Asset Valuation: The real estate software solutions help in building the valuation models.

Budgeting & Forecasting: The software simplifies this by organizing and analyzing the data involved.

Property Management Software provides detailed information on Property Management Software, Real Estate Property Management Software, Rental Property Management Software, Property Management Accounting Software and more. Property Management Software is affiliated with Healthcare PM Software.

What to Look for in a Property Management Company

?Management is nothing more than motivating other people.? -Lee Iacocca

If you are interested in making money through rental properties you may want to consider hiring a property management firm. New investors want to believe they can do it all themselves and in the process save money. Unfortunately, they get overwhelmed quickly and their exciting investment venture turns into way more work then they expected it too. Property management companies to all the dirty tasks for you. This frees up time for you to seek out your next profitable investment. If you are interested in hiring a property manager you might want to consider the following questions.

Make sure you ask the management company how much their fees are. The national average for management fees is about 4% of the income made on large rental properties. However it can be a good deal more for single family homes, sometimes over 12%. Make sure you understand the fee, payment schedule, and services upfront before you sign a contract and hand over any money. Ask about direct withdraw from you checking account. Streamlining your business is the best way to make sure you are using your time wisely and on the right things.

Be sure to ask them what other properties they managed and the address for a couple of them. This way you drive by and see the kind of outdoor work they do. In addition, you do not a company which usually handles apartments to take care of your family residences or vice versa.

You want to ask who will actually being handling the property and speak directly with that person. It is never too soon to open the lines of communication with the people you are hiring. Make sure this person has experience and can prove it.

Ask what types of advertising do they use. Do they place ads in newspapers, online, magazine, or on the television. How much will advertising cost.

What is the typical cleaning fee for a vacancy and how much time will it take to prepare the place to be rented again.

When are they open and how can they be reached after hours.

Renting properties is a great way to make extra income. The smart and experience investors can even quit work and live entirely off real estate options. However, do you not let yourself become overwhelmed. If you feel like you can not handle your properties yourself hire a management company. This will allow more time for you to do what you want and enjoy the fruits of your labor.

Visit the Global Investment Institute and signup for our free Online Investing For Beginners E-Course at www.Global-Investment-Institute.com Investment webmasters or publishers, please feel free to use this article provided this reference is included and all links remain active.

Real Estate Property Management: Is There a Tenant in the House

 You?re about to take the plunge and buy your first investment property. Should you buy something that you can live in, something you can develop and sell on, or should you buy a designated rental property? If you are going to choose the last option then you need to do your homework first. There are different types of tenancies and every one of them should be handled differently. If you do decide to opt for rental property investment then check out the property investment forum at http://www.singingpig.co.uk/articles.aspx#propertyInvestment
to find out more. It may be more complicated than you think. So before you make your final bid, or put your money on the table, you should ask where there is a tenant in the house.

Some properties that are sold at auction already have sitting tenants. Real estate property management is not for the beginner. To begin with you would need a substantial sum of money behind you if you have set your mind on rental property investment. Then, if you still think you are up for real estate property management you need to do your homework. The property investment forum will give you some insight on what you need to know. For a start rental property investment is not the same as other investments, real estate property management can be a big headache for the uninitiated. The market changes from day to day so what works for one person at a certain point may not work for you at another. You should make sure that your finances are such that they can support you through a period when property market prices go down rather than up.

So you take the plunge and you?re now in the business of real estate property management. You need to make sure that you?ve done your cash flow forecasts because you have to have sufficient funds for property maintenance. Landlords who don?t carry out proper maintenance not only upset their tenants, they could fall foul of the law and find themselves in a worse financial position. Rental property investment may be a good proposition if the place is empty when you buy it because sitting tenants may have a regulated tenancy which means that you could find yourself getting less than the market rental rate. This where the property investment forum can be really helpful because it gives a breakdown of the different types of tenancies.

Sometimes people are anxious to make money in property development but are not fully prepared for all the hard work that needs doing or the problems they may encounter. You shouldn?t be too quick to give up the day job. As this article has already pointed out the property investment market is not static and unless you have some money to fall back on you could find yourself in a lot of trouble. When it comes to rental property, as contributors to the property investment forum point out, if the property has sitting tenants then you will not make the money you might have anticipated. You may see tenants as your bread and butter but sometimes they are more of an expense than an investment.
Julie-Ann Amos is an international professional freelance writer/author and consultant, writing for www.singingpig.co.uk. She recommends their property investment forum at http://www.singingpig.co.uk/articles.aspx#propertyInvestment. For more information on her writing services visit www.exquisitewriting.com.