Burt M. Polson - Commercial Real Estate Broker

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The value of a property manager

I have a client who owns a strip center that I have been managing for many years now. When he first hired me I found a $45,000 opportunity in income he was overlooking. Not only did he receive a lump sum payment from a tenant, but each and every year he is receiving an additional $12,000 in income from a discrepancy I found in one of his leases. This additional income is paying for my services tenfold.

Not all of my management accounts had this apparent of an outcome. Oftentimes the increase in value was more subtle, other times it was a positive attribute that culminated over the years.

Commercial portfolio property management can be complicated. For one individual commercial property there are many factors present at any one time. It takes a well organized and knowledgeable person to be able to track the daily activity of the investment.

An income property is an investment and a single bad decision, lack of understanding or lack of follow-through could jeopardize the bottom line as can be seen in my example above.

Another example is in regards to triple-net expense reimbursement. Many commercial leases have provisions for the tenant to reimburse the owner for common area maintenance as well as reimbursement for other expenses to operate the property known as triple-net expenses. Did you know that each year the tenant could request a statement of last year’s charges and a reconciliation of actual charges versus what was paid? This could result in a credit being applied to the tenant’s account or a bill for underpayment.

After my analysis of past expenses I found the tenant was being undercharged each month for the reimbursement. Not only was this tenant being undercharged, but all tenants. Needless to say I was quite unpopular with the tenants but the owner discovered an increase in his income, which resulted in an increase in the overall value of his investment property.

My purpose is not to tout my accomplishments, but to use examples of how an asset manager can add value far above what most investors consider when discussing the needs versus value of a property manager. Yes, the day-to-day operations of handling rent, maintenance and tenant issues are a valuable service offered. But, consideration must be giving to other services an experienced and qualified asset manager can offer.

Filling vacancies and insuring a tenant’s lease in an office building or retail strip center is renewed are also important duties of a qualified asset manager. A leasing broker is oftentimes preferred and could be a benefit in certain situations, but the asset manager being very familiar with the property can insure a good fit. As the terms of a lease are constructed it can get complicated as I mentioned. It can be a benefit for the negotiator and drafter of the lease to also be the one who implements its terms.

Additionally, rapport that is built with the tenant in the beginning of the relationship can be a tremendous asset as the lease and relationship matures.

Have any questions on the other services provided by a property manager? Leave them in the comment section below.

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