Owning and managing commercial real estate can be a great investment opportunity, but it also comes with its challenges. There’s a lot that can go wrong with a property, which will inevitably cost you money. As a landlord or property manager, it’s important to establish systems and procedures to effectively operate your properties. Here are some best practices to follow.
Tenant Relations
Having strong relationships with your tenants is crucial. Communicate regularly to understand any issues they are having and work collaboratively to find solutions. Be responsive to maintenance requests and address any emergencies right away. Send periodic surveys to get feedback on how you can improve. Consider hosting tenant appreciation events or find small ways to add value for your tenants. This will lead to longer lease renewals and less turnover.
Property Maintenance
Stay on top of regular inspections, maintenance and repairs. Conduct walk-throughs of your properties to identify any issues. Establish preventative maintenance programs to replace worn elements like HVAC systems before they fail. Keep the exterior and landscaping well-maintained as this is the first impression of your property. Keep detailed records of all maintenance activities.
Financial Management
Maintain meticulous financial records including operating expenses, income from rents, capital expenditures, taxes and the cost of insurance for commercial properties. Use accounting software and procedures. Review financial reports regularly to identify issues. Bill tenants accurately and on time. Enforce late payment policies. Set rental rates at competitive market prices and adjust based on market conditions when renewing leases.
Compliance
Commercial properties must comply with various federal, state and local regulations covering aspects like safety, accessibility, zoning, and environmental impact. Stay updated on requirements. Conduct audits to catch any areas of non-compliance. Maintain proper insurance coverage at all times to protect you from losses caused by property damage, tenant damage, and other risks. Enforce lease terms regarding use of the property.
Vendor Management
Cultivate relationships with trusted vendors for services like HVAC, electrical, plumbing, landscaping, waste management, cleaning and security. Get multiple bids for larger projects. Verify licenses, insurance and bond requirements. Use written contracts and monitor vendor performance. Pay vendors on time to maintain goodwill.
Risk Management
Implement procedures to minimize risk and liability for your properties. Conduct regular inspections and address safety hazards. Keep facilities secure with features like locks, lighting, alarm systems. Clean up spills or trip hazards immediately. Maintain adequate insurance coverage. Create an emergency response plan. Comply with all legal and regulatory obligations.
Leasing Activities
Keep properties well-occupied by advertising vacancies, showing spaces, processing applications and signing new leases promptly. Use a lease template that protects your interests. Define policies on security deposits, pet policies, rental insurance, and more. Conduct move-in and move-out inspections thoroughly. Enforce lease terms related to use, maintenance and timely payments.
Technology
Leverage technology to improve efficiency in areas like collecting rent online, tracking work orders, managing vendors, analyzing financial data and communicating with tenants. Invest in systems like property management software, building automation and security cameras if warranted.
Energy Efficiency
Look for ways to reduce utility expenses and create more sustainable, eco-friendly buildings. Perform energy audits to find savings opportunities. Implement features like high-efficiency HVAC, lighting occupancy sensors, programmable thermostats, solar panels, reflective roof coatings and low-flow plumbing fixtures. Market your “green” features to attract tenants.
Managing commercial real estate involves both day-to-day operational excellence and long-term strategic planning. By following best practices around maintenance, finances, compliance, risk reduction and tenant relations, landlords and property managers can maximize the performance of their commercial assets. A proactive approach and use of technology helps surface and resolve issues quickly. With proper oversight, commercial properties can generate stable returns for years to come.
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