Professional Management - A Building's Best Investment

Article by Stan Cappe

Management fees always appear on the expense side of the operating statement, but, while they are certainly a cash outlay, it is a misnomer to consider them as a “cost”. In today's market of inexorably rising utility, realty tax, marketing and maintenance factors, professional management is, in reality, an investment in increasing the value of your property.

A “caretaker” manager can collect rents. A professional manager identifies those strategies that gain additional revenues and add to profitability. Each additional dollar gained multiplies seven to ten times in increased value for the property.

The professional manager can take on a site that has been neglected for some time. The tenants are unhappy. Its appearance is an eyesore and its mode of operations is not even out of the 20th (let alone the 21st) century. Rents are undervalued. Vacancies are rising.

Even before delving into operations and staffing and capital improvements the professional knows the basic appearance has to be addressed. “Curb appeal” is still the single most important factor in marketing rental units and, as a rental property is always in a marketing mode, it has to be “market-ready”.

Next, a survey of the property and the units identifies key areas in need of improvement. The physical assets (structure, envelope, mechanical, electrical, life safety, grounds, common area aesthetics, etc.) are analyzed as well as the utility consumption patterns to determine areas for savings.

An examination of the existing tenancies and occupancy patterns indicates the strength (or lack thereof) of the present revenue base. A survey of the market area surrounding the property establishes the potential that can be reached and the results that should be obtained. With the strategic goals and base lines established the professional plans out a program.

Financial parameters for budgets and funding are set out. The feasibility of revenue gains on turnover and through the regulatory process is ascertained. The steps of the program are initiated and carried through to completion.

The “caretaker” manager's approach would take modest rent increases; maintain occupancy by undervaluing the revenue stream and profitability by deferring items. The professional approach will aggressively increase revenue and value while boosting profitability and efficiency.

In further issues we show the results and ongoing progress of some actual cases.

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Stan Cappe

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