7 Compelling Reasons Why You Need a Commercial Property Management Company
Commercial property management can seem like a herculean task to a property owner. The responsibility of maintaining the property, ensuring profitable operations, and attending to tenant needs could be overwhelming. It is here, that the necessity of a commercial property management company becomes indisputable. Let's delve into seven compelling reasons why engaging the services of a commercial property management company is an advantageous move.
- Expanding your Time Horizon: Property management is a time-consuming affair. By leveraging the services of a commercial property management company, property owners can free up their time to focus on strategic activities such as property portfolio expansion, investment diversification, and other high-level business pursuits.
- Risk Mitigation through Legal Expertise: A deep understanding of local and federal real estate laws is paramount to avoid legal pitfalls. Commercial property management companies bring a wealth of legal knowledge to the table, thereby minimizing the potential risks associated with property ownership including those related to tenant eviction, property maintenance, and lease negotiations.
- Access to Market Intelligence: Achieving the optimal rent for your property is a delicate balancing act. Too high, there is a risk of increased vacancy. Too low, you leave money on the table. Property management companies understand the dynamics of real estate markets, conducting rigorous comparative market analyses to determine the optimal rental pricing strategy.
- Enhanced Tenant Retention: The tenant turnover process can be a significant expense for property owners, which encompasses advertising costs, property showings, negotiating contracts, and preparing the property for new occupants. A professional property management company can enhance tenant satisfaction through prompt response to complaints and issues, thereby improving tenant retention and reducing turnover-related expenses.
- Efficient Maintenance and Repairs: Regular maintenance preserves the property’s value and keeps tenants happy. Property management companies typically have relationships with vendors and contractors, which can save property owners money and ensure quality work.
- Comprehensive Financial Management: Property management companies provide detailed income and expenses reports as well as annual reporting for tax purposes. This level of financial management allows property owners to have a clear picture of the profitability of their property, and aids in strategic decision making.
- Streamlined Rent Collection: A consistent and systematic rent collection process is essential to maintain healthy cash flows. Property management companies act as a buffer between the property owner and the tenant, ensuring timely rent collection and taking necessary action in case of delinquencies.
In the realm of property ownership, the decision of managing your commercial property in-house versus outsourcing to a professional management company is akin to the classical make or buy decision in Operations Management. The aforementioned benefits of hiring a commercial property management company can be viewed as the "transaction cost" advantages as per Coase Theorem. The Coase Theorem, developed by Ronald Coase, posits that where transaction costs are high, companies are more likely to undertake the tasks internally. However, where such costs are low, outsourcing becomes a viable option.
In the context of commercial property management, these transaction costs encompass the time, effort, resources, and expertise required to manage a property effectively. And as outlined above, these costs can be significantly reduced by delegating these tasks to a professional property management company, thereby freeing up the property owner's resources for strategic business pursuits and investment opportunities.
In conclusion, engaging a commercial property management company is not just a strategic decision aimed at efficiency and cost-reduction. It also facilitates risk mitigation, improved tenant retention, and enhanced financial management, thereby contributing to the overall profitability and value preservation of your commercial property.
Let's delve into seven compelling reasons why engaging the services of a commercial property management company is an advantageous move.
