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The Ultimate Guide to Property Management

The Ultimate Guide Property Management

Download the guide here or read below.

 

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Introduction

As a property manager, it’s easy to get so caught up in the daily operations of managing a commercial property that we forget to take a step back and see the bigger picture. The Ultimate Guide to Property Management is a framework to help you organize the different areas of your work and stay on task throughout the year. We broke down this framework into 4 categories: Facilities, Vendors, Financials, and Tenants.

 

Facilities

Facility Management is a critical but often overlooked component of managing a commercial property. Most work is preventative, however, corrective maintenance is inevitable. Tenants will submit work orders to which you must respond, and you’ll notice little tasks around the property that require your attention.

 

All of this can be overwhelming, but it doesn’t need to be. If you implement the correct system, facility management can be simple and easy. In this guide, we’ll help you outline the four primary objectives and provide you with the tools and resources to execute them efficiently. To simplify this section, we’ve broken down the material into 3 components: Work Orders, Scheduling, and Software.

 

Work Orders

Work Orders are an inevitable part of managing a commercial property. However, if you implement the correct system, managing them can feel routine. In this section, we’ve outlined the 5 steps to processing work orders. We’ve also provided you with our Work Order Form and Checklist for you and your team to get started.

 

Step 1: Open Work Order

The first step is to record a detailed ticket of the problem, who notified you, date, time, and actionable next step.

 

Step 2: Identify Problem

After the ticket has been recorded in your system, the next step is to identify exactly what the problem is. Sometimes problems are simple enough to resolve yourself.

 

Step 3: Contact Vendor

If the problem can’t be quickly resolved on your own, it’s best to contact a vendor. If you already have selected a vendor for this type of issue, great!

 

Step 4: Inspect Work

After the vendor has completed their work, it’s important to check if it resolved this problem. If so, you’re ready for step 5.

 

Step 5: Close Work Order

The last step to managing a work order is closing it out. If the problem has been resolved and the tenant is satisfied, record the date and time so you can track how long this type of problem will take to resolve in the future.

 

It’s important to have a standard process to manage work orders efficiently. That’s why we’ve included the Work Order Form we’ve used to manage all of our properties. Click here to download the Work Order Form.

Work Order Form

 

It’s easy to get so caught up in your work that something can fall through the cracks. This checklist will help you stop that from happening ever again. Click here to download the Work Order Checklist.

 

Work Order Checklist

 

Scheduling

The next component of a successful facility management plan is scheduling. A proper maintenance schedule will help you stay on top of the recurring tasks that take place weekly, monthly, quarterly, and annually. A good maintenance schedule will also help you forecast future expenses, which is helpful for budgeting.

 

In this section, we’ve provided a scheduling template for you to manage all of your recurring maintenance tasks. Click here to download the Property Maintenance Routine.

 

Property Maintenance Routine

 

Software

The right facility management software can help you transform your property’s performance. Most tasks that once took hours can take place in just minutes or no time at all with the right solution. One of the simplest and easiest ways to improve your property’s facility maintenance, is the right templates with Microsoft Office.

 

Microsoft Office

Software like Microsoft Office is great but it doesn’t centralize or automate the tasks that you do every day. Furthermore, facilities maintenance is just one part of a property manager’s job. There are many other components such as vendor management, tenant management, and bookkeeping to name a few. That’s why it’s important to use a software solution that solves for all of these parts of your job, not just one.

 

Vendors

The right vendors can make or break your property’s performance. Pick the wrong vendors, and you can be caught following up and overseeing all of their work. Pick the right ones, and it can make managing work orders and improving the property a breeze. To simplify this section, we’ve broken down the material into 3 components: Find, Qualify, and Manage.

 

Find

The first step to curating a vendor list for your property is finding them! We’ve provided a few resources that will help you find the right vendors for every type of project on your plate.

 

CRE Vendors

Vendors Depot

Property Cashin

Angie’s List

 

Qualify

After you’ve compiled a list of potential vendors for your property, it’s time to qualify them. We’ve outlined the 5 steps you need to take to filter though the right and wrong vendors in your list and ensure they are aligned with your objectives.

 

Step 1: Identify Requirements

Before you can select the right vendors for your property, you must first identify what work you need to be done. You need to identify your requirements.

 

Step 2: Inspect Scope of Services

After you’ve identified your requirements, the next step is to inspect the scope of services that different vendors offer and find those that are aligned with your needs.

 

Step 3: Compare Pricing

Next, take the handful of vendors that you’ve selected and compare their pricing. This will enable you to choose one that is best for your overall needs.

 

Step 4: Check Client History

Before you select your vendor, it’s important to understand their reputation in the community and the quality of their work. Many vendors are great, but some don’t always leave a strong lasting impression.

 

Step 5: Verify Credentials

If you are still undecided on which vendor you will utilize moving forward, ask for their credentials. This will ensure your company and your owner is best protected.

 

Manage

After you’ve qualified your list, it’s time to record their information in a central location. To help you get you started, we’ve provided a template for you to download. Click here to download the template. This Excel Workbook will help you identify the key data points for each vendor and enable you to access their information quickly when you need it.

 

Vendor List (Image)

 

If you’d like our help compiling this list, Hive has an all inclusive vendor management tools that enables you to quickly save, categorize, and share your vendor information with other property managers in your company.

 

Financials

Today, accounting software helps us manage our books, track revenue, and forecast financial performance. It’s easy to get overwhelmed by the accounting responsibilities that are necessary to operate a commercial property. To simplify this section, we’ve broken down the material into 3 components: Concepts, Financial Statements, and Accounting Workflow.

 

Concepts

The Books

Before accounting software, people recorded financial transactions in physical books. As a result, we derived the term “books” and “bookkeepers”. Although software helps us manage our digital books, the underlying concepts remain the same.

 

Double Entry Bookkeeping

Double Entry Bookkeeping is the center of modern accounting. There are two rules for this system:

 

Every transaction must have a debit and credit.

The sum of all debits must match the sum of all credits.

 

Chart of Accounts

A Chart of Accounts is a list of all accounts a landlord or property manager uses to categorize transactions. The five major types of accounts are:

 

1. Assets

2. Liabilities

3. Equity

4. Income

5. Expenses

 

While there are only five types of accounts, a Chart of Accounts can have as many as you want. For example, you can have a single expense account to track utilities or you can have multiple to categorize by electricity, water, and natural gas.

 

Also, if you’re working with a bookkeeper or an accounting firm, don’t hesitate to ask for advice. While there’s no correct method to set up your Chart of Accounts. While there is a standard set of accounts, most property managers should include, it is entirely up to you how to organize and name them.

 

General Journal

The General Journal is a chronological list of all financial transactions called journal entries. When a journal entry is recorded, the sum of all credits and debits must balance. For example, when a lease payment is recorded, three entries are made:

 

1. Debit to  Checking Account

2. Credit to Rental Income

3. Credit to CAM Income

 

General Ledger

The General Ledger is the compilation of every account. Below is an example of a General Ledger from the entries we just made.

 

Image 01

 

General Journal v General Ledger

Both the General Journal and General Ledger provide insight into your property’s financial health. The General Journal shows transactions in chronological order while the General Ledger shows your transactions by account.

 

So why do you need both? While the General Journal provides valuable insight to your transaction history, the General Ledger allows you to gain insight to transaction details for per account.

 

Debit & Credit Accounts

As discussed, each transaction has at least one debit and one credit. You’ll also recall that each transaction must balance. That means the sum of all debits must equal the sum of all credits.

 

How do you know when to debit and when to credit? You begin with identifying each account as a debit or credit account. Once you know that, the rest is easy. We’ve included a chart below to help you know which are credit accounts and which are debit accounts.

 

Image 04

 

Cash v Accrual Accounting

The last concept we’ll cover is when to record transactions in your property’s books. The answer depends on which accounting method you choose: Cash or Accrual

 

In cash accounting, you record income and expenses only when the money is exchanged. Income is recorded when you receive lease payments from tenants and expenses when vendors are paid. Accrual accounting is not as simple. In accrual accounting, income and expenses are recorded when earned regardless of when money is exchanged.

 

Which method should you choose? The answer depends on how you wish to manage your books. While some property managers maintain an accrual accounting method, some choose to use an accrual method for simplicity. If you’re not sure which method is right for you, consult your accountant.

 

Financial Statements

Now that we’ve covered basic accounting terminology and concepts, it’s time to take a look at the three primary financial statements: Income Statement, Cash Flow Statement, and Balance Sheet.

 

Income Statement

The Income Statement is also known as the Profit & Loss Statement and is a summary of a property’s profit or loss in a given period.  The Income Statement shows total income, expenses, and net income. The purpose of the Income Statement is to show whether a property made or lost money in a given period.

 

Cash Flow Statement

A Cash Flow Statement shows a property’s cash inflow and outflow over a given period. The Cash Flow Statement is important because it shows if a property has enough cash to manage expenses. While an Income Statement allows you to understand whether a property was profitable, a Cash Flow Statement tells you if you hold enough cash to pay your bills.

 

Balance Sheet

There are three components of a Balance Sheet: Assets, Liabilities, and Equity. Unliked an Income Statement or Cash Flow Statement that provides income and cash over a given period, a Balance Sheet provides you with a snapshot of what your property owns and owes today.

 

Putting it all together

Although each financial statement provides a unique purpose, they are all related. For example, a property’s assets and equity increase or decrease when a company makes a profit or loss.

 

While no one financial statement provides a complete picture, together, they provide the information necessary to determine how your property is performing.

 

Accounting Workflow

Now that we’ve discussed basic accounting concepts, reviewed the three primary financial reports, and covered their relationship, let’s take a look at how they are implemented into your accounting workflow.

 

The Accounting Workflow is nothing more than a series of steps for recording business transactions from the time they take place to the time they appear in financial statements. The Chart of Accounts, General Journal, and General Ledger are the tools you’ll use along the way to complete these steps.

 

Step 1. Record Transaction

Record the transaction in the general journal in chronological order.

 

Step 2. Post Entries

Post the entries to the appropriate accounts on the General Ledger.

 

Step 3. Total Accounts

Total your accounts and use those totals to prepare your financial statements.

 

We’ve also provided an Accounting Workflow Template with this guide so have a complete and detailed view of your property’s accounting functions. Download it here.

 

Tenants

Tenant Management is one of the most important and often overlooked aspects of managing a successful commercial property. Maintaining tenant satisfaction will not only make your job as a property manager easier but will reduce turnover and maximize revenue.

 

According to a research study published by Kingsley Associates in 2011, tenants are 300% more likely to renew their lease if they are satisfied that their needs have been met by you and by the property itself. Alternatively, dissatisfied tenants can mean vacant properties and the associated income loss. A written strategic plan for tenant management is the first step toward avoiding this and other undesirable circumstances.

 

This plan should include an assessment of the tenant’s needs, along with a detailed action plan to ensure those needs are met. Keep it simple and streamlined for your tenants by establishing a communications hub, with a single point of contact and an assessment program that can measure their level of satisfaction using relevant metrics.

 

In this section, we will outline 12 tips to help you develop better relationships with your tenants, so you can improve satisfaction and reduce turn over.

 

Tip 1. The Landlord

Your landlord has targets, instructions, and methods of communication that they would like to see implemented. Understand those facts and stay within them.

 

Tip 2. Local Property Laws and Regulations

Local property laws will prevail first and foremost when it comes to the operations and occupancy of any commercial building. Ensure that your property and the tenants within and complying with those laws and regulations.

 

Tip 3. Lease Dates and Documentation

Get to know all of the occupancy facts that relate to the tenant in occupation and the particular lease documentation. Extract important information from the lease document including the critical dates and the obligations that apply to the tenant and the landlord. This information should be recorded so you can respond more quickly in the future.

 

Tip 4. Late Lease Payments

If a tenant is late on their lease payment, you must act quickly to recover lost funds. Every action you take regarding this recovery should be in accordance with local property laws and the existing lease documentation. It’s important to respond to these issues early.

 

Tip 5. Lease Terms and Conditions

Every lease and tenant is unique. That’s why it’s important to understand how their obligations apply to both the landlord and the tenant. Any event or issue occurring within the property should be responded to in accordance with the lease.

 

Tip 6. Risk and Liability

An occupied tenant can bring factors of risk to the property and the tenancy mix. The type of business, the type of customer, staffing factors, and business activities can all bring factors of risk to the asset. The other tenants in the asset can be impacted when something goes wrong. When factors of risk and liability are active, take plenty of notes, and understand the required strategies of response. Also, recognize how any damage or injury matters should be reported to the insurance representatives for the property.

 

Tip 7. Tenant Improvements and Code Compliance

Every space has a unique design. This internal layout should be building code compliant and suitably documented for the appropriate building approvals and occupancy standards. The lease normally stipulates how any alterations should occur to the build-out. Create separate files relating to fit out design and the approval process for each separate tenancy.

 

Tip 8. Regular Inspections

On a regular basis, inspect each tenancy in the office building and talk to all the occupants. Understand or identify any issues of occupancy or risk that could need maintenance and or action. Property inspections can help you see issues before they evolve into major events.

 

Tip 9. Permitted Use

The tenant should be operating their business within the permitted use terms of the lease. Regular checks are required to ensure that such is the case.

 

Tip 10. Maintenance

The building will require regular upkeep and maintenance. Some matters of repair will be immediate, and others can be staged to suit timing and budget constraints. Have a maintenance recording and processing system in place where tenants can easily record their repair concerns or requirements.

 

Tip 11. Tenant Correspondence

All meetings, conversations, and observations should be recorded for later reference. You never really know when you will need that special file note or photograph to support a problem or event in the property.

 

Tip 12. Critical Dates

There will be plenty of dates to watch in the property, with the tenants, and across all leases. Create a computer-based critical dates calendar to flag important upcoming issues to you. Respond in a timely way.

 

Next Steps

 

The Ultimate Guide to Property Management will help you organize your tasks into a simple system to maximize the efficiency of your time. If you’ve already mastered this material and you’d like to take your property to the next level, schedule a call, and we’ll help you gain better insight and clarity to your property’s performance.

 

 

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