Monday, 14 May 2012

What Does a Commercial Property Management Company Do? (Part 1)



Have you ever wondered what a commercial property management company does? Or better yet, what they should be doing?

If you're asking either question and reading this article, then it's safe to say you probably own commercial real estate or are considering purchasing commercial investment property. The answer to this question is simple, "Whatever you want them to do". Ok, it's not that simple. Practically speaking, the range of service varies quite a bit from company to company, depending on who you speak with. However, there are some basics that are essential and necessary regardless of your reason for needing or wanting professional property management. In this article you will find the answers to what you should expect from a commercial property management company.

The basics:

Accounting Services

Reporting- Monthly accounting reports that include, a balance sheet, income & expense statement, general ledger, rent-roll, rent ledger, expense ledger and a copy of the bank statement are the basics. There are various other reports you may want or need depending on the property and ownership type. For instance, with a self-storage property you will want in addition to the above, a copy of the audit and daily deposit report.

Narrative Report- This is a narrative monthly summary of exceptions in the budget, income and expenses or any unusual activity on your property, this report should be prepared by the property manager responsible for your property.

Collections (AR - Accounts Receivable) - Collecting rents and other monies owed. This function is generally considered an accounting function, until the point there is a problem (which is quite frequent these days). You will want a company that has a clearly defined process and system of responsibilities when it comes to collections, ask them, Who? - who will do what in the collection process. What? - what will be done. When? - when will it be done.

Payments (AP - Accounts Payable)- Now that they have collected your money, you will want them to pay the bills. Again, you will want them to clearly define, Who, What and When this will occur. You may want to define for the accounting staff the details on payment of your expenses, including when and how much to disburse to you, as well as other details such as reserves for taxes, insurance or capital improvements.

Lease Processing - This task is generally a group effort, with a defined patterned or specific routing to a number of people within the company, including the accounts receivable department and property manager. Each has a specific function and items they are looking for. However, one person generally inputs the lease into the computer. This part of the process is extremely important, as a missed date or dollar amount could result in serious repercussions down the road. Detail and a process that includes multiple layers of people checking the input process is Key.

Management Services

The Property Manager - This person is "One" of the focal points by which you make your decision on whether you hire a company or not. The property manager is the person that will make the critical day-to-day decisions that go into operating a property. Their responsibilities include - relationships with your Tenants and Vendors, physical condition of your property, oversight of the collection process, payment of bills, budgeting, lease administration, monthly reporting, generally all aspects of the operation of your commercial real estate. Most importantly they will be your contact and source of information about your real estate investment. Make sure you feel completely comfortable with this person and their abilities.

Site Visits - site visits are a critical part of any property management contract, minimally you want your property manager on your site once per month, weekly is preferred. Many things happen during the course of a week on a commercial property. The frequency of the managers' visits will depend on the type of property they are overseeing. The purpose of the property managers' visit will vary from property to property as well, however, here are a few tasks your manager should attend to while on your property:

  • Checking Vendor performance

  • Checking for Maintenance / Health and Safety issues

  • Be seen and talk with Tenants (this topic needs more discussion than is possible in this article)


Well, those are the basics of What a Commercial Property Management Company Does - remember you have a choices and your choice on the company that manages your commercial asset has a profound impact on the success of your commercial real estate investment.

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