Commercial vs Residential Property Management

Real estate, in general, is attractive to many investors for a variety of reasons. Portfolio diversification, the potential for cash flow, the promise of asolid return on investment, and other benefits can be realized passively with the right choice of properties and the right property manager. Just as the difference between whether commercial or residential property is the better investment option for the particular investor is important and requires a different type of expertise, so, too, are there differences between commercial and residential property management.

Duties and responsibilities

The nature of the tenant fundamentally affects the primary responsibilities of the property manager. Although commercial tenants have much invested and at stake in the business enterprise that occupies the space they are renting, residential tenants are living in their units as their domiciles. The residential property manager has an ongoing duty to maintain habitability, which can, and often does, translate into round the clock availability. Commercial property most typically has standard, daytime hours of operation.

Maintenance

Proactive and responsive maintenance is essential for all property managers. It is common for many commercial properties and for multi-unit residential properties to have on-site managers. But it is most important to have an established and tested protocol in place to allow tenants ease and confidence in making known their concerns integrated with a system that enables the property manager the ability to track each work order to know the current status and estimated time of completion. Tenant satisfaction and renewal rate closely tracks with how well the property is maintained.

Leases

The biggest difference between commercial and residential property management is in the wide variation in the complexities of the commercial lease. Residential leases are generally shorter and cover fewer issues and therefore, become much easier to renew.

Commercial leases will likely have provisions for tenant expenses to cover all or some portion of the expenses of real estate ownership, such as property taxes, insurance and maintenance fees. Leasing options include triple net, modified net, gross lease, modified lease, among others. Fees are reviewed annually and adjusted accordingly, and the base rent often increases each year based on an established standard, such as the Consumer Price Index. Commercial leases are more difficult to break because of all the penalty clauses contained within.

Understanding the commercial real estate market, how to attract quality tenants, how to retain tenants and how to replace tenants when necessary requires knowledge, experience and a dedicated team of professionals. Primior meets and exceeds those standards. Contact us today to see if commercial real estate investing makes sense for you.

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