Hiring the right property management company for your commercial property can be a daunting task. How can you make sure you hire the right one?
While there are several qualified property management firms in the market, it is important to find the management team whose skill set matches your property’s specific needs.
To help make the selection process easier, we’ve compiled a list of the five questions you should ask a commercial property management company before making the decision to hire them. These questions will ensure that you find a qualified, capable property manager who is also the right fit for your property.
1. What Is the Property Management Company’s Reputation?
It’s important to make sure your property manager is reputable and experienced.
Making sure your commercial property management company has a good reputation is vital. Several factors should be considered to determine if a company is reputable, reliable and will serve your property management needs.
Does the firm have a good reputation among clients and other professionals in the industry? Client and tenant references and testimonials can help you determine if a company is reputable or not.
Other ways you can determine the reputation of a management company include:
- Reviews by previous clients (either online or through referrals)
- Rankings in the Austin Business Journal
- Input from leasing brokers in the market
Additionally, you want to make sure the company has a good reputation among vendors. Vendors and contractors are key for servicing many needs of your building operations. Make sure the property manager has strong relationships with contractors to ensure that when a problem arises (a pipe burst, electricity goes out, etc.), there will be someone on your team who is qualified to fix the problem in a timely manner.
Specific Questions to Ask
Questions you may ask to ensure your commercial property manager works for a reputable and reliable firm include:
- Do you have any testimonials from clients or tenants you have worked with recently?
- Can you provide names and contact information for references that I can talk to?
- Who are some of your other clients, and what properties do you currently manage?
- How long has your company been operating and is there high employee turnover?
- What vendors do you work with for maintenance services?
- Who from your firm will be on my management and maintenance team, and what percent of time will be dedicated from each team member?
2. How Much Experience Does the Management Team Have?
Longevity and experience are important factors when it comes to a property manager’s success. If the business has many years of experience, they should know how to anticipate your needs and adjust accordingly. Although a newer may be successful through thorough attention to detail and technology utilization, a more experienced team will know how to respond to a plethora of unforeseen circumstances that could face your property.
Just as important as years of experience is the type of experience. You want to make sure that the property management team has experience with your property type – be it retail or industrial, Class A office, or mixed-use. Managing different property types requires varying skill sets and knowledge, as each comes with its own specific challenges, tenant types, lease intricacies, and more.
Other factors to consider are the size and location of the property. Your property manager should have a presence in the locale of your property. If you have a larger property, you should know if the manager has experience managing a property of that size and a team large enough to handle it.
A firm with more years of experience is also inherently more stable than a newer firm focused on growth. Organizational stability is imperative, you should make sure that the company will still operate throughout the life of your property. You also want familiar faces to interact with your tenants and to develop property-level expertise.
Specific Questions to Ask
Questions you may ask to ensure your commercial property manager has the necessary experience:
- Can you supply full resumes for the management team that will be assigned to my property?
- Have you managed properties like mine in the past?
- What types of property do you normally manage?
- Where is your company located, and where will my specific team operate from?
- How long have you been in the business?
- What challenges or opportunities do you see for my property, and what suggestions do you have to improve my property?
3. Does The Property Management Firm Provide the Services Your Property Requires?
Property management companies wear many hats and provide a wide variety of services. It’s important to know that your management firm can provide the services you need for your portfolio of properties.
You’ll want to make sure that the property manager you select can provide all the services that you need for your property and that they can adapt to the budgeting and reporting methods that you require.
Specific Questions to Ask
Questions you may ask to ensure your commercial property manager fits your property needs include:
- What services do you provide?
- Do you have a maintenance schedule in place, what does this look like?
- How does your company handle rent collection?
- What monthly financial statements does your company provide?
- How will your company help me develop a budget to reach my goals for my property?
- What kind of contingency plans does your company have in place in case of emergency?
4. Is the Property Management Firm Insured and Credentialed?
Sometimes, things do not go according to plan. It is important that the property manager you choose is familiar with risk management and loss prevention actions. There are several types of insurance that property management firms typically have for those unforeseen circumstances.
- A fidelity bond will protect the firm against loss due to fraud or dishonest acts of employees.
- Depositor’s forgery-and-alterations insurance will protect against loss due to forged or altered payment instruments.
- Professional liability insurance, also known as errors and omissions insurance, protects against loss due to providing a customer or client with negligent or deficient professional advice.
- General liability insurance protects against loss due to a customer or property being found to have been negligently injured or damaged by a company’s services or employees.
You want your property management company to be insured so that when there is damage or harm, the company can continue managing your property.
There are various credentials that are prominent in the property management profession. It’s recommended that all management firms and managers have at least one of the following credentials in order to certify their expertise as a property manager.
Certified Property Manager (CPM®)
To achieve Certified Property Manager status, the applicant must have three years of experience prior to applying and have a real estate salesperson license. They are recognized as experts in real estate management. According to the National Association of Realtors, 70% of those who hold the CPM designation hold the highest management positions in their offices. This certification is administered by the Institute of Real Estate Management.
Real Property Administrator (RPA®)
The Real Property Administrator certification goes into detail on the operational side of the profession and is administered by the Building Owners and Managers Institute. All applicants must demonstrate three years of property management experience and complete various courses. This program teaches property managers how to maximize an asset’s income and minimize risk.
Accredited Management Organization (AMO®)
An Accredited Management Organization is a company certification that requires having an executive team member with a CPM. This is administered by the Institute of Real Estate Management. According to the IREM website, AMO Firms are led by knowledgeable executives who hold the CPM designation and are rigorously trained to maximize value, minimize risk and partner with you to achieve your goals.
Service Organization Control (SOC 1®)
A Service Organization Control proves that an external auditor has confirmed the security of the internal controls, meaning that client financial data is kept secure. This ensures that the property management company, as well as the owner, are protected and can make future audit requests run more smoothly.
Systems Maintenance Administrator (SMA®)
Systems Maintenance Administrator applicants must have three years of experience as a stationary engineer or equivalent at a property portfolio of at least 40,000 square feet. This program ensures the applicant can improve operations, create energy efficiencies, reduce costs and enhance the value of an asset. This is administered by the Building Owners and Managers Institute.
Generally, a more experienced and accredited team will be better able to address your needs. It’s important to consider the experience and expertise of building staff and engineers as well.
Specific Questions to Ask
Questions you may ask to ensure a commercial property manager is credentialed include:
- Does your firm have liability insurance?
- Does your firm have a fidelity bond?
- How does the company protect itself from fraud?
- What credentials does your firm hold?
- What credentials do my specific managers and maintenance team hold?
5. How Are the Property Management Fees Structured?
When hiring a property management firm, one of the things you will want to know is how much their services cost. Management fees are structured in a few different ways and there are several factors influencing pricing. Typically, management fee agreements will fall into one of three structure categories. These categories are percentage of gross receipts, flat fee, and hybrid.
Percentage of gross receipts structure is a percentage of gross revenue as well as other charges tenants incur in their occupation. These charges include operating expense reconciliations, bill backs for tenants with extraordinary utility needs, and any services that tenants require that are above the building standard. These fees typically run between 2% to 4%.
Flat fee structure means that you will be charged a flat monthly fee the property manager determines to be sufficient to maintain the building and make a reasonable margin.
Hybrid fee structures are used when managers are unable to accurately predict gross receipts. Hybrid fee structure charges the greater of a flat fee or percentage of gross receipts.
How much these fees amount to varies on many factors. These factors include square footage, number of tenants, vacancy, the anticipated amount of work, and service offerings. It is important that your property management company charges a fee that is in line with your property’s needs.
Specific Questions to Ask
Questions you may ask to understand the fees associated with hiring a property management company:
- Would you structure your fees as a percentage of gross receipts, a flat fee, or a hybrid of the two?
- What typically influences your fee structure?
- What characteristics of my property influence the fee amount you charge?
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As you can see, there are many things to consider when choosing a commercial property management company. The most important thing you should do is make sure that your property manager is capable of providing the services you need. Now that you know the right questions to ask to ensure this, finding the right company to manage your property should be a little bit easier.
If you would like to learn more about property management and how an experienced management team can be of use to you, schedule a consultation with AQUILA Property Management today.