How to Get Tough with Commercial Property Management Firms
It’s time to get tough.
Not breaking knee caps, Goodfellas kinda tough. No, not that. Rather, think Tom Cruise in A Few Good Men or Atticus Finch kinda tough.
What started off as one small office building, where you did everything from fixing toilets to cutting the grass, has become much more than you could ever handle on your own. Success came faster than you thought, and now you need to adjust your approach to keep an overloaded ship from sinking.
It has become painfully clear that you need help managing your properties. You needed to hire a commercial property management company yesterday.
To find the right property management firm, you have to be ready to ask some direct, no-nonsense type questions. I think you’re up for that, right? After all, you wouldn’t be where you are without some intestinal fortitude and capacity for boldness.
Ask yourself, however, “Do I know the right tough questions to ask?
This is where MacRo can help.
Behold! Our list of seven “Did you order the code red?” interview questions to ask commercial property management firms.
- Do they do anything else?
Some companies have their hands in everything, and only a portion of their business focuses on property management. You don’t want to hire a company that dabbles in what you need, you want to hire one that only does what you need.
- How many other commercial properties do they manage and what type?
This is a crucial question to ask in an interview. Do they have similar properties to yours in their portfolio? Does the number of properties seem reasonable given their staff size and resources? Once you get some intel on their company size relative to their number and types of clients, you can make an intelligent assessment about their ability to properly serve your needs.
- How do they calculate their management fees?
Note the question is not “What are your fees?” Most commercial property management firms will base their fees on a percentage of collected rent (these fees vary from market to market but could range from 7 to 10%). Some will offer flat rates. There are many different types of fee scenarios, but in all cases, you need to understand how fees are determined, which services are included, which are add-ons and how those add-ons get approved. You need to know if the fee percentage is based on collected rents or projected rents. You need to know the management firm’s approval process for spending on maintenance. Some commercial property management firms will ask that maintenance repairs of a certain dollar amount do not require your approval. These are just a few nuances to be aware of when signing on with a commercial property management company.
- Who is my point person?
Be blunt and ask about your main point of contact. This person’s accessibility and experience will have a direct impact on your service contract and the profitability of your properties. The property management firm might sound and look great, but who will you really be dealing with on a daily basis? A newbie that will be afraid to confront derelict tenants or won’t be available in an emergency? Or a certified, experienced professional that has been around the block and knows how to get things done. Ask about the tenure of the staff. How long do people stay? Are they CPM (Certified Property Manager) certified? A CPM is comparable to a CPA in accounting and requires significant training. If they seem to have high turnover, are dodgy about who will handle your account or are not certified, move on.
- How do they handle reporting?
Ask a prospective commercial property management company about their reporting processes. What software do they use? How often will you receive reports? Can reports be customized to suit your needs? How do they track rents collected, rents outstanding, vendor expenses and other key metrics? Is their reporting process scalable if you expand your commercial property portfolio? You need a property manager and property management company that can stay on top of the data to drive down your costs and maximize revenue. Excel spreadsheets don’t cut it anymore. The commercial property firm you choose should have made serious investments in reporting software, and have reporting protocols in place before you come on board.
- How do they handle formal commercial property inspections?
You need to find out how the management company conducts formal property inspections and how often. Gauge this reaction carefully. Does it seem property inspections are part of their normal process? Are these formal property inspections included in the fee, and if so, how many are included? Regular, formal inspections of your commercial properties will be standard operating procedure for a reputable company and should not be positioned as “extras.”
- Do they have existing customers that you can meet?
This question goes beyond character references or anonymous testimonial quotes in their brochures or on their website. This is about you meeting with and talking to other clients about their success using the property management company you’re considering. See how they react. What do they provide to you, a list of properties or a list of properties with owner contact information? Do they offer to make the introduction or are you left to your own devices? Everyone is aware that all organizations will cherry pick those clients that they know will be strong referrals. If they do have a formal reference process, what are people saying, and perhaps more importantly, what are they not saying about the firm you are interviewing.
You’re not likely to get a commercial property manager to confess and tell you, “You can’t handle the truth” and that they ordered the code red.
But by asking some tough, pointed questions you’ll be able to separate the wheat from the chaff quickly and hire a commercial property management company that will keep your properties in good condition and in the black.
These are just a few options of questions every commercial property owner should ask. Feel free to add more to your list!