|
So you think you want to manage your own property. Here's what it takes.
Do-it-yourself Property Management
Jumping into buying and renting out commercial space can be challenging, especially if you don’t have prior experience in property management or real estate. But the rewards can be plenty. You will earn monthly income for the spaces you lease, you will be able to choose which vendors you want in your space, and you will be able to sell the property if you need extra money. But before you take on too much yourself, you should have an idea of what you are getting into in terms of your rights as a property owner, the rights of vendors, and how much extra money you will have to invest in the property.
Common Area Maintenance (CAM)
Common area maintenance, or CAM, is defined as space within a property that is used by many people. This includes hallways, entryways, bathrooms, parking lots, sidewalks, real estate taxes, insurance, trash removal, landscaping, and more. As a property owner, you are responsible for the maintenance and upkeep of these areas. Since they are considered public areas, they should be inspected once a year to make sure that all fire and emergency escape codes are being followed, and that these areas are not hazardous to the well fare of those using them. This includes loose tile, rugs, broken stairways, doors, ceilings, mold issues, ice patches, snow removal, cracks in the walls, water damage, or other issues.
It will be up to you to maintain these areas and fix any issues along the way. When you are considering purchasing a property, you should have to entire building inspected, this includes the roof, basement, and all CAM areas. Assessing the property value and repairs that will have to be made to certain areas will play a big role in what you charge vendors for monthly rent. Usually, property owners transfer CAM costs to those who are leasing space in the building.
Depending on the size of your commercial space and the amount of space each vendor has, you should equally distribute these costs between all vendors.
Selecting Vendors
You can lease retail space to any business you choose, but you should carefully screen potential vendors by insisting on a Request for proposal/Letter of intent from the vendor, which states their purposes for the space, what they require from the space, and how much their business is currently worth so that you can feel confident they will pay their rent on time. In the end, it is up to you to decide if you want to work with a particular vendor or not. It may be useful to also inquire if they have leased other locations or have had offices elsewhere. Ask for letters of recommendations from other landlords.
Once you have verified all of the vendor’s information, you can proceed with legal contracts. Standard Leasing Agreements can be downloaded from government business sites or from commercial real estate help sites. You can also create your own or hire an attorney to draft one for you. Make sure your leasing agreement covers all costs, issues, and leasing laws in your state. Have a real estate attorney look over the agreement before you present it to a vendor.
Managing Your Property
Managing your property may become a full-time job depending on the needs of vendors, the age of your building, and the number of buildings you own. You should invest in computer software that will allow you to keep all of your paperwork and other files easily accessible. Creating paper files is also important as you will need to store lease agreements, building permits, tax information, and other documents.
Software that tracks monthly rent payments, repair bills, electric and heating bills, outside maintenance, trash removal, and other costs should also be tracked. There are many software programs such as QuickBooks and Quicken that allow you to print off invoices, receipts, and track your expenses. Proper bookkeeping is an essential part of running any successful business.
Managing commercial or residential property has changed dramatically over the years. Now, many people manage properties from the comfort of home. Thanks to computer software, free forms on the internet, legal resources, and accounting software, the cost of managing a property has also gone down. If you want to work for yourself by managing properties, you will find that is it not as difficult as you may think.
Computer Software
These days, your biggest expense, besides maintenance and repair of your property, will be computer software. But the good news is that you will not need to buy ten or twenty computer programs. Residential and commercial property software is available that will let you track everything from rent collections to maintenance calls. The software has invoicing capabilities, bill paying capabilities, expense reports, calendars, and much more. You will be able to create individual files that let you track tenants and vendor activity from the beginning of the lease until the end.
Investing in this software is the first step to working mostly from home when managing a property. Even though you will still have to visit your property from time to time, if you want to work from home, you can do so when you want to. This means you will save money in office costs, hiring employees, and other costs associated with managing a business.
Finding Legal Forms Online
This will require you to research a little bit on the internet, but the pay off is big. Online, you will be able to download leasing agreements, maintenance forms, insurance paperwork, and other documents, for a low cost or for free! By downloading one or two documents, you will be able to modify them any way you choose in order to create your own document. This means you will not only save time, but money in the long run.
The legal forms you will find online are basic forms used by many different types of businesses. You may have to make changes depending on what you need, but you will be able to present documents that contain all the legal terminology that is expected.
Legal Resources
When looking for advice and information online, you should try to stick with online resources that end in ‘gov’ or ‘org’. These resources tend to have the most current information and the most accurate information. While you can use these resources when first starting out, if you have complicated legal questions, you should contact a real estate attorney that specializes in your region.
You can however, learn more about your legal rights as a landlord in addition to the rights of your tenant by searching online. Many times, these sites will allow you to search for attorneys in your area. This will make finding a qualified attorney much easier.
Accounting Software
In order to keep track of your properties earnings, taxes owed, and other bookkeeping, you should find a software program that will allow you to track how much you pay each month for items like electric, water, heating, trash removal, inspections, maintenance, and security. You will also have to track how much you will have to pay in taxes and how much you have paid in the past. Update this software every few years because tax laws are continually changing and older software will not include new laws.
Tracking your income and expenses is a great way to see the strengths and weaknesses of your property and how to improve them in order to maintain a quality building that people will want to rent space from for a long time.
Managing a property can be done from home very easily. Proper bookkeeping and property management skills are still needed in order to keep tenants and vendors happy, but a lot of the guesswork has been taken away. You will be able to automatically update files, bookkeeping, and other items so they will always be accurate.
|
