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How To Keep Your Commercial Tenants Happy

Maximizing the value of your property

When entering the commercial real estate market, owning a property is as much about the people as it is about the building. Tenants, just like the property itself, have needs. The two have a direct relationship: Ignore the property, and tenants leave. Ignore the tenants, and the property suffers.

The combination of a well-managed property and strong people skills not only strengthens the tenant/owner relationship, it also raises the value of the asset. In other words, a happy building is a happy tenant, and a happy tenant is a profitable investment.

Keeping the property happy

First and foremost, it’s important to take stock of the property itself with regular inspections. Be aware of any property needs that may need attention, such as air conditioning, plumbing, pest control, and safety issues. If there is any work that needs to be done, know the contractors who will be doing the work. While they’re working in and around the property, they are a direct reflection on you.

At the same time, it’s important to not take the building’s appearance for granted. Consider the curb appeal of the property, as well as what’s on the inside. Adding or improving landscaping in addition to offering amenities like high-speed Internet service or Wi-Fi can go a long way in not only attracting the right tenants, but also convincing good tenants to stay rather than relocate.

Keeping the tenants happy

When it comes to keeping tenants happy, communication is key. The biggest complaints from unhappy tenants are usually poor communication and any misunderstanding of terms. To address this, it’s important to:

  • Create an email or text alert for maintenance work that’s to be done.
  • Keep tenants aware of changes being made to the property through regular communication, such as a newsletter.
  • Respond to complaints, questions, or concerns promptly. Twenty-four hours is a reasonable amount of time.
  • Take the time to meet the tenants and to listen to their concerns and suggestions. Thank them for their suggestions in writing. Treat them like investments.
  • Make it easy to be your tenant. Establish a system of online rent payment, or an option for monthly, semi-annual, or yearly automatic withdrawals.
  • Create documentation of all contact between yourself and a tenant. It’s always a good idea to follow-up a casual or planned meeting with notes so that all parties are on the same page.

Keeping yourself happy

While it’s impossible to prepare for every issue, it’s always a good idea to address problems before they become a crisis. Being proactive will alleviate many of the headaches associated with owning a commercial property.

If the management of your property is too large of a task, surround yourself with good people who can represent you and your vision professionally. Anything you can do to add value to your asset is a win for you and your investment. The property management team at Morris Southeast Group has a history of adding value to office, industrial, flex/warehouse, and retail properties.

For a free consultation or to learn more about our property management services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

So You Want To Get Into CRE …

Advice for the residential owner/investor

When the housing market collapsed, investors of all sizes swooped in to buy up residential properties to grow wealth and expand portfolios. What is often overlooked, though, is another real estate investment opportunity that often stays comparatively stable during swings in the economy: commercial real estate (CRE).

Diversifying into the CRE market is vastly different than investing in residential, and investors new to CRE should dip their toes in slowly and cautiously.

Questions the new CRE investor should ask

Most residential investors are familiar with the ins and outs of single-family homes, duplexes and triplexes, and even small apartment buildings. CRE investments operate on a whole new set of metrics and complexities – and a new investor needs to answer a few key questions before jumping in:

  • What are their return requirements going to be?
  • What level of complexity are they willing to live with for that investment?
  • Are they professional investors, or will the CRE opportunity be a side investment vehicle?
  • What is the bandwidth in terms of time and resources they have to handle the complexities of CRE?

The positives of CRE investment

There are a host of unique benefits from commercial opportunities. Topping nearly every list is the reason why so many turn to the CRE market: higher yields. Generally speaking, commercial tenants assume many more costs (such as insurance and maintenance) than landlords do for residential properties.

Additional positives include:

  • The relationship with commercial tenants, most of whom sign long-term leases, tends to be on more professional footing. Calls and issues usually arise during the business hours, rather than at all hours of the night, as with residential tenants.
  • In most cases, commercial properties tend to increase in value over time, especially as surrounding development improves and/or the commercial tenant attracts more customers. Profits not only increase in the short-term, but also increase for a future resale.
  • The building and the quality and location of the commercial land all play a role in providing greater security, shielding the investment from many economic swings.

The complexities of CRE investment

Despite the positives, there are complexities woven throughout CRE investment – and failing to deal with each one usually comes down to a single mistake: the investor not doing his or her homework.

Many new-to-CRE investors falsely believe that commercial properties won’t go into foreclosure, and failure to do proper research can lead many investors down that path. Consider the following before taking the leap:

  • What are local market conditions? Many new investors can easily be swept up by a great property in a bad area and, at the same time, overlook a lesser property in a good area. Do a thorough investigation of demographics in the region: population, income, employment, and other economic factors.
  • What’s happening under the skin of the building? Many commercial properties have more complex structural components and systems than residential properties. The investor will have to rely on knowledgeable professionals to peel back the layers and truly understand what’s happening or not happening – and the associated costs – within the building.
  • Don’t casually assume income and expenses. Risks increase with projections. Numbers should be verified and confirmed.
  • What is the break-even ratio of the investment? Operating Expenses + Debt Service divided by Gross Potential Income = Break-Even. If the ratio tops 80%, the investor is on thin ice, and runs the risk of borrowing too much money to get into the game.

The number one solution in CRE investment

Of course, the best way to face many of these issues is to talk to someone who is well-versed in CRE and the area you’ve chosen. The professionals at Morris Southeast Group have decades of experience in helping commercial investors in South Florida and beyond, and we help match a new investor with the best opportunities.

For a free consultation on CRE or to learn more about our property management services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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