Do you use a property manager for commercial?

I am looking into some commercial property however unsure about property management side of things. Is it like residential where most investors use a PM? why/why not would you use a PM for commercial? Are there fees similar e.g. 7-9% of rent collected?

Thank you

 

Absolutely yes. Property management of a commercial property is highly complex with leases that can run into the 100s of pages. And be wary of just any PM, they need to be a commercial one as a residential PM generally does not have the knowledge to handle it

A good one will also have a lot of contacts with potential lessees

 

Fees vary widely but generally lower than resi rates (in NSW) as rents are healthier.

Retail leases are highly regulated and a minefield for non-experienced players with no/poor understanding of the Act.

GST adds another level of complexity which many residential agents don't understand thus costing the owner recoverable $$

 

I manage my commercial property. It is a safe reliable government funded tenant.

before that tenant I used a commercial agent and I would do again to find a new tenant.

Avoid the resi/commercial agents. A single purpose commercial agent - it is a different market and the tenant is more of a business partner.

 

No, I suppose it depends on the circumstance. I have just leased a property with a 4 year lease . Paid $450 for lawyer to draw up lease, It is the only cost I incur besides council rates and water supply charge. The conditions, payments 12 months in advance, tenant responsible for all maintenance, insurance, water use and to be left in same or better condition .

 

Property Management fees on commercial are normally passed onto the tenant as part of the outgoings, so there is generally no reason not to use a PM.

 

Thanks Westminster it is sounding like it is better to get a PM that specializes in commercial!

 

That is similar to what i have heard from others where they manage like a single warehouse themselves or have used the agent to find a tenant then look after it themselves. Good to hear you would use an agent again but!

 

Is it then pretty hands off for this circumstance when the tenant is looking after or do you do regular inspections ect?

 

This is one of the biggest fallacies about commercial property, most people think the tenant pays all outgoings. The other fallacy is that its the next step up form residential investment.

Using a PM for commercial? Its the same idea as a residential PM, you don't need them until you do, and then you want to make sure you have a good one

 

No regular routine inspections, just when there's an issue which can be often or can be once ever three years.

 

I'd be paying more for a better lease (not a standard law Society lease) or actually read the lease that you've got. Water services includes the sewer charges and tenants have no issue paying them. Are you also registered for gst and not charging it on your water services?

As @Shady notes only if the lease provides for the recovery of the lessor's management fee which is uncommon and on very few net leases.

 

Ah thats good to know, thanks!

 

I would condition that with a meeting with the tenant is a way of gauging how their business is travelling (so they appear slow/busy, overstocked, undercapacity etc) or inspection of the premises is required for signing off the Annual Fire Safety Statement as the owner is required to sign in NSW (agent cannot so that on their behalf).

 

100% recommend having a good PM unless you have experience in property management yourself.

Also, a PM has neutral ground so it makes it easier to sort out any issues.

The fees are around 4%

 

Fees really vary property to property.
It really depends on the amount of work the manager has to do.
Can you give us details?

 

ah true, have been looking at an industrial warehouses style property with a single tenant so would not imagine it would be a lot of work.

 

I have proposed fees from .02% to 12% of the income on my portfolio!

 

Mustn't so much for that amount unless the rent is in the $ gazillions.

 

Lessors interest set for 12yrs ...no work for 12years till the review. Almost four years so far on this lease . Time spent zero . They just calculated a fee based on the 12 yr review (Fee $2,500÷ $12.3m)