Last updated on June 10th, 2022 at 12:09 am
When you invest in real estate, property management is one the most important elements that will affect the success of your investment.
In the real estate management business, we are hired by many different types of self-managed properties to help solve similar problems. I thought it would be helpful for readers to learn from the most common mistakes of others:
1. Deferred maintenance – One of the most common mistakes property owners make is following the old saying: “if it ain’t broke, don’t fix it.” But if you wait until it breaks, it’ll cost significantly more than maintaining it in the first place. We can compare it to a car owner who keeps putting off regular, inexpensive oil changes until the car locks up and the entire engine has to be replaced. That can happen with real estate. Frayed carpeting, water spots on ceilings, exposed wires, potholes, faulty HVAC units and safety systems that are shut down may not seem crucial, but they can lead to disasters or at least safety hazards and occupant discomfort. In order to avoid these, make sure to contact roofers, electricians, and plumbing services to perform regular repairs and maintenance.
2. Giveaways – Owners often fall into a habit of repairing things and giving away services that should be handled by tenants according to their leases. When “favors” become the norm, it costs the landlord money and decreases value since the property’s cash flow goes down with giveaways.
3. Poor lease administration – Owners who fail to collect what is due them often have trouble keeping mortgages current or paying certain bills. At the very least, they have smaller owner cash distributions. Professional edmonton property management managers and leasing agents can help owners enforce their rights and make sure they receive the monies due them.
4. Ignoring property taxes – Many owners do not look at their tax bill except to write a check to the city. Because we know how assessors think and what they look for in setting their tax numbers, we often find opportunities to appeal taxes, benchmarking values against market data. We also see owners who forget to bill tenants for their share of taxes, losing cash flow that is rightly theirs.
5. No benchmarks – How much should occupants or tenants pay for their share of CAM, taxes, insurance, etc. Professionals know; owner-managers may or may not. Industry groups such as IREM, BOMA, ICSC provide data, but it takes special knowledge to interpret this information to best determine what a building is paying.
6. No design criteria – While change is essential to the design and function of a property, we often find a mish-mash of signs, windows, HVAC and other physical features that are inconsistent with the original building. A lack of focus on design issues can create poor appearance, early terminations by tenants and, in some cases, rapid physical deterioration.
7. Poor curb appeal – Investment in appearance takes focus, effort and capital. Among the most common mistakes made by owners is “milking” properties to maximize cash flow.
When properties are “milked” for cash flow, tenants suffer and leave, rents stay low, repairs cost more, and it catches up to the owner. It is always wise to strike a balance between taking and leaving cash to operate properly, keep tenants happy, refresh key building components, do preventive maintenance and keep values high. For instance, if your property has a garage, it pays to maintain the garage door and determine early on if a garage door spring repair is needed before it becomes a more costly endeavor.
8. Few good vendors – Many owners do not get multiple bids on essential goods or services, nor do they know how to properly evaluate the bids that do come in. Some owners lose also objectivity by hiring friends and relatives regardless of price or quality. Such a narrow list of vendors often limits quality control and dampens value.
9. Insurance aspects missing – Insurance coverage of a building, its rents, specific uses, liability and more is often absent, inadequate or misappropriated. Tenant insurance certificates need to be up-to-date and should show the owner as an additional insured party. Failure to do so can result in the owner being held liable for any number of problems on the property.
10. Absentee management – Absent, part-time, off-site or inexperienced management puts an owner at high risk for problems caused by negligence. It makes sense to hire a property management company in Koh Samui to watch, inspect, repair and visit properties. Such a proactive approach is far better than waiting for tenants or others to come forward with a list of complaints.
All of the above problem situations are reversible. Reversing negative aspects of any investment is critical to your business success.
David L. Kliber is president and chief operating officer of Polacheck Property Management Corp. in Milwaukee, part of the Polacheck group of companies.
April 27, 2001 Small Business Times