Navigating the commercial real estate market can be a challenge, especially in a market like San Mateo, where commercial space is pricey and the property management that’s required is often intense. The leasing, management, and maintenance of commercial properties can be complex. You’ll need to focus on making smart decisions that will contribute to profitability and portfolio growth.
A lot of self-managing landlords in this space find themselves making expensive errors.
We understand that self-managing commercial property owners are looking for cost-efficiency and tighter control over their investment. Yet, pitfalls manifest in the form of overlooked details, and those can prove costly in the long run. Just one major mistake can leave you wishing you’d hired a professional property manager from the start.
Let’s take a look at the self-management mistakes you should sidestep as an owner or investor in San Mateo’s busy commercial real estate market.
The Perils of Short-Term Leases
Commercial lease agreements are completely negotiable, and the best thing you can do is to focus on the duration of that lease and to try to keep your tenants in place for as long as possible. We understand that the market has been shifting over time and a lot of tenants are looking for flexibility. You can provide plenty of options within a solid, long-term lease agreement.
The lure of short-term leases is that they allow for quick adjustments to market rates and the quick adoption of potential new trends. On the surface, they may seem more flexible, but when it comes to putting them into practice, they often lack the security and the stable income stream that longer-term leases provide.
The cyclic nature of attracting new tenants for short rental periods in commercial spaces results in increased turnover costs, not just in terms of money but in time. Every vacancy period represents a potential loss of income and the need to divert resources into marketing and preparation for the next commercial tenant. Moreover, shorter leases may lead to higher wear and tear on the property with more frequent tenant moves.
Neglecting to Invest in Tenant Relationships
Many self-managing commercial rental property owners feel they don’t have the time or the resources to invest in tenant relationships. This is a mistake.
Property management is a relationship business, whether we’re talking about residential investment properties or commercial. You want to treat your commercial property as a business, so there’s no need to become friends with your tenants. But, you do want to develop a professional and positive relationship with the people and the businesses who are renting your space.
Regular, business-like interactions build trust. Tenants who feel valued and listened to are more inclined to take better care of their space, leading to a decreased likelihood of disputes or lease enforcement challenges.
In contrast, an absentee approach can quickly escalate small issues into major problems. Delayed responses, or worse, ignoring genuine tenant concerns, can lead to a climate of dissatisfaction or even resentment among your renters. This, in turn, may lead to higher tenant turnover as those on shorter leases move to competitors, seeking a more attentive landlord.
Invest in good relationships. Be a resource for your tenants, and a source of support if they need help. This will help you have a better – and more profitable – experience.
Deferred Maintenance in San Mateo Commercial Rental Properties
Maintenance is a very important part of renting out commercial space, and you have to be attentive to the repair needs and preventative work that come from your building or property. For a self-managing property owner, it’s easy to defer maintenance or cut corners. Maybe you’re hoping your tenants will take care of the problems themselves.
Understand your lease agreement so you can be sure who is responsible for which maintenance issues. When there’s a problem that falls under what you’re required to do, make sure you’re responsive and quick. This will protect the condition and the value of your commercial investment. Deferred or unreported maintenance issues will only cost more in the long term, so make sure your tenants share the same sense of urgency when it comes to maintaining your property.
Legal Compliance Oversights
Navigating the legal landscape can be a challenge. You’ll find strict local and statewide ordinances as well as legislation that seems to always be changing. As a self-managing owner, staying ahead of these legal requirements is non-negotiable. Lapses in compliance can result in fines, litigation, and a tarnished reputation. Don’t let this be the mistake that you make.
There are always new zoning laws and environmental standards to pay attention to. Lease language may become outdated and not align with current laws. A proactive stance on legal updates, alongside regular reviews of lease agreements, helps to mitigate risk and maintain a legally sound practice of renting out commercial properties.
Financial Reporting and Budgeting Blunders
Effective commercial property management requires a sharp focus on the financial reporting and accounting that you do. Developing a detailed budget that encompasses:
- Operating expenses
- Reserves for unexpected repairs
- Ongoing fixed costs such as insurance and taxes
- Allowances for vacancies and tenant improvements
All of these costs require planning and documentation. You’ll need a system to track what you’re earning and spending, and you’ll need to be detailed and accurate.
Leveraging property management technology is a good way to keep your accounting both informative and error-free. You can gather data and insights that are particularly relevant to your property and the local San Mateo commercial real estate market.
Self-management can be an appealing option for property owners who think they are saving money. However, easy mistakes like these can often be more costly than any property management fee. By recognizing and working hard to avoid these common missteps, you are well on your way to a positive and profitable investment experience.
We can help you as a self-manager, or talk to you more about the value found in professional property management. Please contact us at Bayside Management. We lease, manage, and maintain investment properties in San Mateo and around the Peninsula, including San Carlos, Redwood City, Pacifica, San Bruno, Half Moon Bay, Daly City, Mountain View, Foster City, and Palo Alto.