So you just acquired a new commercial real estate property? As a newcomer in property management, you’re most likely aware of the many challenges that you’ll encounter as you manage your new building.
Without all the necessary controls, property owners and managers struggle to maintain full occupancy and tenants. Dealing with the outgoing costs can be a real headache, too, and may negatively affect net income.
Don’t worry. With hard work and expert advice, you can make the learning process a lot easier! Here are some of the things you need to know.
1. Avoid the most common mistakes when setting your commercial property’s budget.
Your budget for your property must be studied and updated every financial year. Monitor it throughout the year and make adjustments, if needed. Many investors make the mistake of evaluating the annual budget by comparing it with the previous years and overlooking funds needed for repairs and renovations. When creating your commercial property’s year-long budget, don’t think about your expenses from the previous cycles.
2. Reduce your operating costs.
Commercial real estate properties require an investment in regular utilities, taxes, maintenance, and facility management to operate efficiently. Gas, water, and energy costs can increase, so once in a while, there’s the need to make technology changes around your space to save money from your expenditure budget.
3. Focus on preventative maintenance.
Preventive maintenance keeps the property’s assets in good working order. Review all of your systems, from cooling and heating equipment to lift and security systems, to prevent failure and prolong their service lives. This step eventually reduces downtime and overall maintenance costs.
4. Make sure your tenants pay on time.
Tenants paying on time suggests you have enough money to do repair and maintenance work. The most effective way to encourage your tenants to pay on time or way beyond the deadline is by making payment convenient for them. Try offering different payment methods and incentives for paying ahead of time. For many commercial real estate owners, enforcing a late fee is also part of the best practice.
5. Understand the lease documents inside and out.
Drafting a binding lease demands legal knowledge and a strong background in the particular industry your property serves. In some cases, different tenants may even sign multiple versions of leases. Do your part. Diligently analyze and follow through on all the contract provisions before having your renters sign them.