Some people may think that it’s easy to manage property and that all property managers do is collect rent and pay bills. That, however, is a myth. In reality, commercial and residential property management involves a lot of work and 24-hour availability.
“It’s a busy field,” said Meaghan Levy, director of assets for the Las Vegas office of CB Richard Ellis, a worldwide commercial property management company. “It’s a lot more challenging a job than one would initially think because of the details that have to be tended to on a daily basis.”
The industry is a more sophisticated today than ever, with the required financial reporting, the complex landlord-tenant leases (commercial lease contracts are typically 50 pages long), as well as changing laws, codes and regulations, said Frank Gatski, president and owner of Las Vegas-based Gatski Commercial Real Estate Services.
General Responsibilities
A property manager’s role is to act on behalf of the property owner per the contract with the owner, said Marge Landry, president/broker of the Las Vegas-based commercial property firm, Landry & Associates Inc.
For commercial clients that means managing retail (shopping centers, strip malls), office (medical and professional) and industrial (multi-tenant warehousing) buildings. For residential clients, it translates into managing single-family homes, apartment and condominium complexes, and other multi-family dwellings.
The job encompasses three major components. The first is overseeing and maintaining the physical aspect of the property, including the landscaping, lighting, roofing, air conditioning, the building itself – “everything that’s involved with keeping the property in its best physical condition,” said Lannie Neal, vice president of property management for Gatski Commercial Real Estate Services.
The second focus is to increase the property’s value and get the best return on the owner’s investment. “Owners today are expecting an asset manager or consultant to help them along with their investments,” Gatski said. “When is the right time to increase rent? How can we adjust expenses and when? When is the right time to sell? Have we reached the property’s maximum potential? They are looking to us today to help them with those questions.”
The third element is interpreting and enforcing tenant leases. Property managers must ensure the tenants and property owners are abiding by their leases; for example, both paying their shares of expenses as outlined in the lease. This protects the property and safeguards the owner against potential litigation.
Expected Benefits
Property managers provide expertise and experience that owners often lack. They have the tools at their fingertips – contacts, documents, market data, systems, knowledge and more – to do their jobs well. For example, property managers at CB Richard Ellis have access to an online library of 4,300 documents, including tenant letters, contract forms, work orders and budget formats.
“We’re often better at property management than an owner who does it part-time,” Levy said.
In fact, Nevada property managers are required by the state to attain a real estate license and an accompanying property management certificate. Some property managers also have optional certifications.
“These types of designations are extremely important to identify someone who has experience and background in the industry,” Gatski said.
Through the Institute of Real Estate Management (www.irem.org), which provides educational opportunities, resources, information and membership for real estate management professionals – property managers can become accredited residential managers (ARMs), accredited commercial managers (ACMs) and certified property managers (CPMs). CPM is the highest designation.
Specific certifications also are available through the Building Owners and Managers Association, Nevada (www.bomanevada.org). The 140-member, local chapter of BOMA International is a nonprofit organization serving building owners, property managers and their associate vendors through Nevada. “They’re like an accreditation,” said Pam Villareal, president of BOMA Nevada. “They’re recognized throughout the industry as proof property managers put in some effort to learn their jobs.”
BOMA offers certifications for real property administrator (RPA), facilities management administrator (FMA), systems management administrator (SMA) and systems maintenance technician (SMT).
Another advantage to using a property management company is they receive savings when purchasing products and services from economy of scale, which they then pass on to their clients, the owners.
“If properly done, property management should save the owner money beyond the management fee,” Wilkerson said. “We get breaks in newspaper advertising that an individual typically doesn’t get. When I buy carpet cleaning, I’m buying carpet cleaning for 3,000 units, and I get a pretty good buy.”
Landlords who hire a property management firm don’t have to handle after-hours calls and emergencies. “A lot of people don’t want to deal with day-to-day issues and get those Friday-night calls about the toilet overflowing,” said Robert Hall, owner/broker of Reno-based New Dimensions Inc., which provides commercial and residential property management along with real estate services.
Property managers can be on-site within a short period of time, whereas owners, who often don’t live locally, cannot. “We’re the eyes and ears of our clients,” Landry said. With their property in the hands of the right manager, owners can rest easy. “If they know we’re going to make the right professional decisions and treat their property the way they want to be treated themselves, their worry factor goes down,” said Don Wilkerson, president of Gaston & Wilkerson Management Group, a Reno-based commercial and residential property management firm.
Using a property management firm also alleviates employment concerns. Rather than hiring an accountant, a manager and a building engineer, owners can contract with a property manager who handles it all. Owners then don’t have to deal with recruiting, hiring, training, managing, employment taxes and other employee-related issues.
Owners are freed up to do what they like to do or what they do best. “Property management allows owners to spend more time on their core competencies, which has a greater positive impact on their bottom lines,” Levy said.
Services Provided
Typically, the scope of services that a property manager provides is tailored to each client. In general, however, a property manager’s job entails discussing with the client his or her goals and directions for the property. Goals, for example, may include maintaining the asset at the current physical state and getting it fully leased. With those goals in mind, the manager anticipates revenues and expenses for the property and prepares an annual budget.
“Every day you do what you need to do to work towards those goals,” Levy said. The manager assesses and fulfills what the property needs in terms of functionality, marketability and leasing, said Barbara Holland, president and chief executive officer of H&L Realty & Management Co. Inc., a Las Vegas-based commercial and residential property management firm. That includes: obtaining repair bids; hiring and supervising service vendors; ensuring vendors have workers compensation coverage and liability insurance; and advertising for, screening, leasing and re-leasing to tenants.
Property inspections are done periodically, from weekly to every three months, depending upon the owner’s dictation. For example, during those on-site visits, managers look to see whether the landscaping is being maintained, the trash is being emptied, no tenants have moved out in the middle of the night, and that everything is as it should be. They talk to commercial tenants to gauge their financial strength, get a feel for how their businesses are doing and determine their needs.
Property managers collect rent, assess late fees when appropriate, maintain the books, pay bills and taxes, and ensure insurance is in place and appropriate. They address tenants’ needs and when issues arise, act as a liaison between tenants and landlord. And primarily on residential properties, they can also mediate between tenants. Some property managers can present cases in small-claims court, and help landlords evict tenants. They handle all problems and emergencies that arise, no matter what time of day or night. “These can range from something as minor as a sprinkler head popping off to something as major as a fire sprinkler system blowing out,” Landry said.
The job requires property managers to be on-call around-the-clock. “An amazing amount of things can occur or go wrong after hours,” Neal said. “It seems like during the off-hours is when the pipes are going to break, the battery goes low in the fire alarm system and, of course, that’s when break-ins occur.”
Managers stay abreast of new and changing laws and ordinances, such as what kind of street address numbers apartment buildings need on the front and back, how high they need to be, whether a directory must be installed, what kind of signage is required and where it belongs. “We don’t see as many laws being passed on a state level for commercial property management, but in any given year we usually see ordinance changes on residential,” Holland said.
At each month’s end, property managers prepare customized financial reports on each property for their clients. These typically contain a rent roll, total income, expenses, bank reconciliation and invoices. A letter often is included that explains expenditures above the pre-set limit and information about anything pertinent that cropped up during the month. It may also include recommendations, bids for improvements and anything else the owner wants. “Some owners are very hands-on and want to know what we’re doing with their assets at all times,” Wilkerson said. “Some just want you to send them a check at the end of the month.”
Additionally, property managers will meet with their clients face-to-face as often as the client wants. Property managers may also prepare financial reports and budgets on new projects during pre-construction to help owners determine whether they’ll get the return they want from the project. “We have resources to give someone a good idea of what their expenses are going to run and even what kind of income to expect as far as lease rates,” Gatski said.
When not handling these tasks, the property manager is keeping revenues high and expenses low to make money on the property. “The day-in and day-out, No. 1 job for the property manager is to make sure the property value is maximized,” Levy said.
That may include creating a rental comparison grid to prove rents can be increased, preparing a refinancing package, shopping the competition, checking with vendors and suppliers yearly to ensure the best price breaks, buying in bulk and renegotiating insurance policies, according to Holland.
“If property managers do a good job, they can increase (lease) renewals,” she added. “When they increase renewals, they shut the back door. When they shut the back door, they can push-up the income with a higher rental rate for people coming in.”
One way CB Richard Ellis boosts revenues for its clients is by offering notary, parking and concierge services to its commercial tenants – auto washing, shoe shining and more – for which it charges, Levy said.Some property management firms offer additional services, such as real estate sales. The cost for property management is generally a percentage of the project’s gross rental income. Included in that fee is a profit for the management company. However, the cost can vary depending upon the type, size and condition of the property, the number of tenants involved and the amount of work the property will require.
In the Las Vegas commercial market, for example, the cost is about 3 percent for industrial, 4 percent for retail and 5 percent for office properties, Landry said. For residential management services in Northern Nevada, New Dimensions Inc. usually charges 10 percent of the gross rental income, Hall said. Property management contracts most often range in term from month-to-month to yearly.
Where to Look
To find a reputable property management company, ask for a referral from a property owner, a real estate agent, a commercial brokerage firm, an insurance company or lawyer, anyone who deals regularly with property managers. Contact BOMA Nevada for a referral or obtain a list of property managers from IREM’s website.
Wilkerson recommended first looking for an accredited management organization, a designation given by IREM, and then speaking to a knowledgeable member of that firm who holds a property management certification. If a firm isn’t designated, he suggested finding a certified property manager. “That way, you’ll have some assurance that you’re going to speak with somebody who’s been trained and will uphold strict ethics,” Wilkerson said. Gatski suggested hiring a company that specializes in the type of product you own, whether a commercial building or some sort of residential property.
Once you’ve obtained the names of several property management firms, meet with the owners or heads of their property management departments. Ask whether they manage the type and size of building you own because management varies according to the tenant load and type of property, Gatski said.
Find out how long they have been in business, what their credentials are and how many property managers they have onboard. Determine whether they have liability, errors and omissions, and standard business insurance, and whether the employees are bonded. Ask whether they have their own maintenance workers or if they hire contractors.
Learn what they charge for property management and what services are covered by the fee. Find out how often they plan to inspect your property, pay bills and how long they take to respond to your concerns. Ask if they plan to open a separate trust account for your property, as required by law. Inquire what kind of accounting software they’ll use, whether they’ll provide monthly financial statements, what those reports will include and whether you’ll have an opportunity to audit them.
Ask who would be managing your property, an individual or a team. Meet them face-to-face and interview them. Ask if they are properly licensed and certified, whether they have any additional certifications and how many years of experience each has. Determine whether or not you click with them. “A property owner needs to have a comfort level with the person who is actually going to be their property manager,” Landry said.
Find out whether the firm can help with legal matters, such as evictions and small claims court. “It’s a real savings for the owner if their property management company is experienced in those two areas,” Landry said. “Otherwise, they’re in a position of needing an attorney, which can be quite costly.”
Ask to see the company’s portfolio, a copy of the lease agreement and request names and phone numbers of some client references. “Most of us have a show-and-tell book,” Holland said. Look in-person at some of the properties the firm manages and see what kind of condition they’re in. Verify with Nevada’s Real Estate Division that all the people who may ultimately be managing your property are properly licensed. Find out whether any complaints have been filed against the company and determine its standing with the local chamber of commerce and Better Business Bureau.
Interview several firms rather than settling for the first one you contact. Find a property manager who has the skills you require. “If you have strong financial requirements, make sure the manager you hire is strong in finance or accounting,” Levy said. “If you want a lot of construction management, make sure the person has a strong background in contracting and is comfortable with the process.”
Finally, don’t sign a contract unless you’re satisfied with the property manager’s abilities. “If you’re not comfortable with someone, keep looking,” Wilkerson said.
