Expert: Jim Avancena, CPM - 11/10/2008

Question
Jim-We inherited five commercial rental properties recently, all with single tenants, and long term(10 years plus) triple net leases scattered around the country from south Carolina to California. What would be a realistic management fee typical for this type of property and what type of company-local or national would you suggest to manage these properties?

Answer
Bob-

Your question is difficult to answer because it involves so many considerations about each property and about the property owners - you.

Generally, much of your decision depends upon the precise services you want provided for each property.  That depends on the size of each property, the amount of income generated by each property, the age and condition of each property, the level and types of insurance coverage on each property etc.   How often do you want your representative to be on-site and visually monitoring each property?  To some extent that is determined by the type of tenant you have at each property, they manner in which the tenant utilizes your property, and what is each tenant's track record for responsibility and integrity in performing it's lease stipulated maintenance requirements.

It also depends on how much you require regarding record keeping, bookkeeping, accounting, tax preparation, tax planning, capital improvements planning and management, etc.  Like so many products, you should only pay for the services you need for property management.

My experience suggests that national companies offer you the dream of being able to call one highly responsible national asset manager that is always on top of everything that needs to be dealt with at all of your dispersed property.  This is never reality.  National firms charge too much for that kind of service and they don't deliver the sophisticated level of capabilities they sell - but do not provide.  Never.  Sooner than you expect, the asset manager will turn over a limited number of basic tasks to a new hire or a clerk and have them relay information about basic concerns at the property.  You then have that information told to you as if the asset manager can't sleep at night because he is so concerned.

On the other hand, local property management creates more work for you to set up and monitor.   

Perhaps the best thing to do is to go to each property in person and review each property with 2 or 3 local property management representatives that are interested in handling your account.   Measure the mountain of combined information they give you.  After that experience, meet with a few national firms and review with them all the specifics of the five triple net properties, and consider each firm's response.

It may make sense to hire a local manager and have them travel to the other properties - at your expense - as required.  It simply depends on what scale of property and economic parameters you are dealing with on these properties.

Compare fees and the integrity of each operation, check references, and make a decision.  If you want to maximize the value and returns from your properties, it will require your focused effort to set up and maintain.   

Property management requires a certain level of technical knowledge, skills, experience, and hard work.  However, you will know what to do after becoming immersed in discussions with all of these players.  

Good luck,

-Jim