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What Does a Property Manager Do in Commercial Real Estate?

4/6/2022

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Investing in commercial real estate is sometimes regarded as a strategy to generate passive income. However, this is a little misleading. Managing a commercial asset involves a large amount of effort that must be carried out to keep the property in excellent operating condition. Outsourcing property management tasks to a professional manager who knows commercial real estate management is one of the only methods to earn passive income. ​

What is commercial real estate?

Commercial real estate is simply a property that has the potential to create profit through capital gain or rental revenue. For example, commercial property can be an office building, a duplex, or a restaurant or warehouse. If you can profit by leasing or keeping it and reselling it, it's business property.

To understand what a property manager performs, first know what they are.
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What is a Property Manager?

A professional property manager or property management business is someone responsible for overseeing the day-to-day operations of a real estate property. Depending on the size and kind of property, the commercial real estate management company might be one or two persons or a huge team that works onsite.

A multifamily property, for example, is likely to have an onsite crew since this property type needs more active management involvement. On the other hand, an industrial property may not require any onsite presence.
In short, the commercial real estate management company takes care of the property on behalf of the owner. The presence of a commercial real estate management company enables property owners to continue building and extending their portfolios without dealing with day-to-day property operations.

What Does a Property Manager Do?

For better understanding, a property manager's tasks can be separated into two categories: operations and finance.

Operational responsibilities of a property manager:

In commercial real estate management, the operational tasks of a property manager are all about keeping the property functioning efficiently daily. Depending on the type of property, this might include:
  • Creating and carrying out a preventative maintenance plan for a property. This includes annual inspections and repairs of lights and air filters and ensuring that the property's cleanliness is constantly taken care of.
  • Property renovations and upkeep should be scheduled and carried out. Plumbing and electrical systems must be upgraded regularly as a house gets old. This will extend the property's usability and guarantee that it stays in good functioning.
  • Upkeep and maintenance. The landscaping of a home is often the first thing that guests notice. It may make a good first impression if properly kept and inviting. This is especially crucial for multifamily and office establishments that must offer a positive first impression.
  • Tenant management. If a tenant has a problem, requires a repair, or has a special request, the property manager must care for it.
  • Handling emergencies. Unfortunately, crises occur—a pipe bursts, a storm damages the property, or the electricity goes out. The property manager is responsible for addressing these sorts of situations and keeping the owner informed of the status of necessary repairs.   
  • Managing the occupancy of tenants. A smart property manager from a commercial real estate management company is always aware of which leases are coming to an end, which need to be renewed, the market rental rates, and prospective new tenants seeking space in the region. In summary, they oversee all leasing agreement activities to keep the property occupied and make sure that you get consistent rental income.
  • The property is being staffed. If the property requires full-time staff, the property manager is in charge of recruiting and managing the commercial real estate property team, including maintenance personnel, plumbers, security guards, etc.
  • Evictions. If a tenant fails to pay rent, the property manager is responsible for alerting the tenant and, if necessary, coordinating the tenant's eviction.
The property managers from a reputed commercial real estate management company perform all of the above tasks—and more—with efficiency, a tenant relations approach, and ensure asset profitability.

Financial responsibilities of a property manager

As a part of commercial real estate management, managing the property's finances is another key area of responsibility for a property manager. This covers acts such as:
  • Collection and processing of rent. The property manager is in charge of ensuring that all tenants pay their rent every month.   
  • Late payments and additional penalties If a tenant is late on rent or owes an ancillary charge, the property manager must issue and collect on these.
  • Reporting. Because the property owner is not there daily, financial reporting is handled by the property manager. Expenses, financial expenditures, budget vs. actual analysis, delinquencies, bank reconciliations, and cash reserve balances are all included in these reports. Typically, these reports are generated using property management software.
  • Budgeting. The property manager from a commercial real estate management company is in charge of establishing the property's operational budget each year. To accomplish this, they must collaborate with the property owner to ensure that the property's financial performance meets the financial expectations as needed.
If the property manager performs a good job, he or she will provide the cash flow required to sustain the asset's investment performance.

What to Look for In a Property Manager?

A good property manager might be difficult to hire. But on the other hand, making the incorrect decision may be costly financially and in terms of reputation. To avoid this, property owners and investors should seek the following characteristics in a trained and qualified property manager:
  • Experience: The best property managers have a significant amount of experience. They should be able to identify other properties that they have managed and how their management impacted the property's revenue profits.
  • Educational Qualifications: Potential property managers should have a minimum of a bachelor's degree from a recognized institution. In addition, they should have the relevant subject matter expertise.
  • References: If a property manager is being considered for hiring, they should be requested for references that specify previous properties that they have managed and contact information so that these references may be contacted.
Good property managers with the right expertise are difficult to hire, and it takes a particular person or a commercial real estate management organisation to execute the job successfully. However, a commercial real estate management organisation can be a valuable partner and significant contribution to increasing a property's financial gains when done correctly.
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