Commercial Property Management: Pros & Cons

While commercial property management can offer wonderful returns, the horror stories that surround it are enough to make your hair stand straight up off your scalp, turn white as the driven snow, and then fall out completely. Just consider the 2012 report from The Sydney Morning Herald about the arrest of a ring of criminals manufacturing $15 million AUD worth of drugs out of rental properties. Or the evicted tenant who left the stove on and almost burned down the property. Or a property with an unplugged refrigerator that had been left stuffed with meat — for two whole years.

Even though these tales are primarily about residential rentals, they have their counterparts in the world of commercial real estate. It’s enough to make anyone want to simply hand over a property to a professional manager and be done with it. And while we at GNP Realty Partners generally approve of professional management (it is our business after all!), you should know a little bit about the pros and cons of such an arrangement. Read on to learn about all the benefits and drawbacks of professional commercial property management.

Who Benefits from Having a Property Manager?

To many, commercial property management sounds wonderful right from the get-go. No more managing tenants. No more collecting rent. No more worrying about the legal process of renting, which can have far steeper consequences when dealing with commercial properties rather than residential.

However, as surprising as it may sound, not everyone will benefit equally from hiring a property manager. Some people prefer to maintain more direct control over their own properties. Others find themselves with stable tenants in properties with generously priced rents that won’t need any renovations for the foreseeable future. And a number of landlords truly enjoy the hands-on labor associated with keeping their real estate in top condition, everything from sussing out new renters to dealing with toilet emergencies at 2 a.m. There are a number of people, though, who don’t fit this mold, and some landlords who would benefit from having a property manager include those who:

  • Don’t have maintenance skills or a contact who can handle maintenance issues quickly
  • Don’t have an extensive knowledge about landlord/tenant law
  • Spend an inordinate amount of time trying to fill vacancies
  • Don’t want to deal with tenant complaints
  • Own out-of-state property or don’t live near their property
  • Struggle to thoroughly evaluate, collect rent from, or evict nonpaying tenants
  • Have no free time due to the burden of managing their properties

Benefits of Hiring a Property Manager (Pros)

We have already detailed some of the advantages of property management above, and most landlords recognize that having a third-party handle everyday matters provides them with added flexibility. But there are so many more advantages, many of which aren’t immediately evident. Professional commercial property management can offer wonderful gains, including (but not limited to!) the following.

Better Tenant Relations

A good property manager will increase the value of your commercial real estate. How? By finding high-quality tenants and keeping them happy. Pleased tenants translate into better upkeep for your property, longer rental periods, lower maintenance costs, and more maintenance invested. Everyone benefits — you most of all.

Screening Out Tenants that could be Problematic

Property management also handles the flip side of that particular coin: the screening out of low-quality tenants. Such tenants could not only use what little time you have, they can damage your real estate, cause thorny legal issues, and keep you from finding those aforementioned ideal tenants. Property managers have experience in dealing with just these sorts of troubling cases. Thanks to them, you won’t have to manage them.

More Time to Focus Your Attention Elsewhere

Another benefit involves management of another sort altogether, namely your time. A commercial property sheds troubles like flowers fling pollen in the spring. It’s part of the nature of the business — but it doesn’t have to be part of your business. With a property manager, you can enjoy more time to invest further, start a new venture, or simply enjoy some free time.

Specialized Skills make Many Tasks More Efficient

Professional property managers have some innate advantages that makes them inherently better at certain tasks than owner operators. One of those tasks involves avoiding legal problems. Because management companies must deal with multiple properties day in and day out, they’re intimately familiar with the legal code and far less likely to accidentally end up in legal trouble.

Property managers also have an edge when it comes to collecting rent efficiently. Not only do they lack an emotional outlook on the situation, they have finely honed systems and strategies that help them get rental funds into your bank account in a timely manner. And when those funds aren’t forthcoming, they have the personnel to begin the eviction process and see it through to its end with a minimum of muss and fuss.

Less Time Spent on Emergencies

Speaking of personnel, property managers excel at something every owner operator dreads: emergency maintenance. Whereas owners can only field a few people at most to address maintenance matters, property managers have an entire staff ready, willing, and able to the deal with the most dire incidents. Additionally, property managers usually have access to independent workers with more experience and a wider skill set.

Disadvantages of Hiring a Property Manager (Cons)

The ancient Roman pantheon included a deity named Janus, a being who had two faces, one looking to the future and the other to the past. Well, the image does a good job communicating the downsides to commercial property management. Why? For every benefit, there is a related downside, and some of these are directly related to the above benefits.

Your Budget may not cover Management Fees

While managers can find good tenants for you, that service doesn’t come for free. Owners must hand over a portion of the gross income each and every month. Many see this as the biggest downside to commercial property management, and when it comes to high-quality managers, that’s probably true. Losing some of the money going into your pocket can prove painful, particularly when trying to meet financing and insurance expenses.

Poor Management can create Problems rather than Solutions

Good property managers really can eliminate unsavory tenants — but not every management company is ethical, honest, and competent. These managers can lead to just as many headaches and heartaches as the worst sorts of tenants. That’s why it’s incredibly important for owners to thoroughly research property managers prior to engaging their services.

That leads directly into the next point: your free time. A poor property manager can lull you into a sense of false security, acting as a buffer between you and your real estate. By the time you realize there’s a problem, you might find yourself dealing with substantial losses.

You may Lose Part of that Personal Touch

A third party can’t share all of your concerns, your attention to specific, personally important details, and your focus on the properties that only you own. That often means that property managers don’t focus on some of the things that you would like them to focus on. However, this isn’t an insurmountable obstacle. With a little clear communication directed at the right company, you can achieve your goals and enjoy what a professional property manager can do for you.

DoYou Need a Property Manager?

As we’ve already mentioned, some landlords may find that hiring a property manager doesn’t mesh with their professional philosophy, personal temperament, or individual portfolio. However, the opinion of some landlords isn’t really what concerns us here. We’d rather focus on you. Do you find that taking care of the daily complaints and never-ending tasks of your current real estate holdings only multiplies your anxieties? Do you believe that your properties could generate more income and house happier tenants if you just possessed a certain sort of competency? Do you really want to expand, but you just can’t see how it would work out practically? If you answered in the affirmative to any of these, then you really should consider getting a property manager.

GNP Realty Partners would like to be that manager. Our senior staff have more than 250 years of collective experience in Chicago, the Chicagoland area, and surrounding states. We have multiple awards in our field, and we’re an Accredited Management Organization® (AMO®). To learn more about how we can help with your commercial property, contact us at (312) 329-8466 or request a proposal.