Opinion: Lessons learned navigating property management
Originally in RealTrends
We live in an unusual time with many unique property management issues confronting today’s commercial and residential real estate market. Whether you’re just starting out or are a seasoned veteran in the field, it’s always a good idea to consider whether there are essential practices you may be overlooking.
After years of managing more than 100 properties, with more than 200 tenants, both commercial and residential, I want to share some of the lessons I’ve learned along the way. I will explore how they were learned, how they were navigated and the ultimate outcome.
Don’t shortcut your client relationships
Try to get to know the client as well as possible in the beginning. You have to ask yourself if it’s worth it to your business and bottom line to work with a potential new client. The property might look like a great fit on the surface, but you need to observe and get to know who you will be working with. Early in my career, it could take me two to three months to see that the client and opportunity were not going to work. Some patterns or red flags:
- Working with a client who doesn’t have a background in property management or it’s intricacies
- Working with a client who likes to micro-manage
- Working with a client who is too needy
Since management fees are based on what you collect, focusing on just one property at the expense of your other clients will not be effective and will hurt your bottom line. Your responsibility to all your clients, whether big or small, is to provide the best service you can If you can’t see the relationship becoming long-term, it won’t be in your best interest to stay and it won’t be in the client’s either.
Not all properties are equal or fit the asset type
From time to time, we’ve thought it was a good idea to mix up our asset types and consider non-traditional properties that are neither residential nor commercial. However, we learned that not all properties that need to be managed are equal. We found that in thinking we could manage non-generic properties the same as we would more traditional properties, such as an apartment or office building, we underestimated the skills and knowledge needed to meet the owner’s expectations.
For example, churches and places of worship have their own idiosyncrasies. Past experience taught me this in a case involving a church where no rent was involved. However, the owner had different expectations for us managing the property than what our agreed-upon written contract specified. Another such example was managing a fraternity house which turned out to be not a good fit for us or the client.
Sometimes you may be asked to work with a major corporation that operates 200 to 300 types of businesses. Be certain that you meet their prerequisites because they may have different needs depending on the property.
Beware of vacant properties
Vacant properties often require more management time than occupied properties. You can’t ignore the needs of your other clients if you’re spending the bulk of your days monitoring vacant properties.
Another lesson we learned is if the vacant property resides in a different location from the majority of your clients — such as a property in Washington, D.C., instead of Maryland — it could fall under a different tax structure and require different services and paperwork to be completed more frequently than that for your properties in another location.
This will add more time and effort to be focused on the vacant property than you originally anticipated. Over time, we decided to focus on building solid client relationships with the owners and occupants of occupied properties.
Understand the region and neighborhood
Understanding the region and neighborhood in the beginning of your discussions with a potential client is critical. If the property is in a lower-end location that means the rent will tend to be on a lower scale and, as a result, your commission on that property will be lower.
Identify in the beginning whether or not this appears to be a mutually beneficial situation for you and the client. If not, it’s often best to offer the client alternative options.
We’ve learned that if we’re not fully confident going in, that we can build a long-term relationship with a potential client then it’s not a good fit for us and we don’t continue with planning for the partnership.
The real estate market will always go up and down
No one can control the economy – you must have patience and perseverance to retain your clients through the economy’s ups and downs. In looking back over the last two years, as an example, our owners and property managers who made concessions to help struggling tenants have been the most likely to keep them.
By making concessions, you’ll discover that when the economy comes back around and tenants are back on their feet, those properties will still be at capacity. When you don’t make concessions and lose tenants, you’re left with vacancies and lower profits when the economy ultimately rebounds. Remember, your No. 1 goal in property management and property ownership is to hit capacity.
Another important tip to follow is to manage expectations during the tough times. Through the latest economic challenges we’ve seen significant supply chain issues. Owners or tenants want to know why the garage door doesn’t work or why it’s taking so long to get the air conditioning working. Property managers must manage client expectations around property management projects and improvements by clearly communicating the issues you are dealing with. Communication is key to retaining your clients.
Finally, put together a one-year or five-year plan to determine what your long-term goals will be. This can include what assets and commissions will get you to your goal. Then, look at the properties you manage and hope to manage to determine whether or not they are a good fit to help you achieve your goal.
The above lessons have served me and my team well in maximizing our business with our existing clients as well as creating guideposts to remember in considering new ones.
Once a year, I revisit these lessons to ensure I don’t end up re-experiencing or re-learning them from a less-than-perfect outcome.
James C. Dailey, MBA, CPA, is a co-owner of Rory S. Coakley Realty Management, LLC. in Washington, D.C., Virginia and Maryland.
This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.
To contact the author of this story:
James C. Dailey at email@example.com
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Tracey Velt at firstname.lastname@example.org
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