A Word On Investing
What?!  A word on investing!? Isn’t this the commercial property management guide?!
Yes, it is.  And, investing is a part of landlording; landlording includes investing.  Any and all landlords, if he or she owns the property, can also be considered a real estate investor, for he or she owns property that he or she does not reside in.   So then, why should we focus on investment?  Part of being a  good landlord is being a good investor.  You will be miserable if you have a bad investment property, just as you will be miserable if you have bad tenants.  So, we’re focusing on investing this post.
If you’re good, you own a property whose operations of physical state needs improvement.  You can learn more about investment properties at Investment Properties Guide

So, you are looking for a home or other commercial building, and you have found one that needs physical improvement.  The financing works out and the deal looks good from an investment standpoint, so you take control and you keep the current tenants; if there are no current tenants, you put them in there.  In either case, you want to make sure that the tenant’s rent covers the property mortgage as well as all your expenses, except perhaps the improvement expenses.  These can come out of your pocket.  A lot of times, in commercial property management, you will have to spend your own money; the investment can’t make all the money you’ll need.

So, what do you do with the tenants in your property?  You leave them!  Tenants don’t mind you coming in (of course, you have to ask them and schedule it with them first; don’t forget to be polite!) if you are coming to fix and improve where they are living or working.  Just be sure not to get too much in their way.  If you need to do repair something like the flooring, you obviously must wait until in between tenants, or schedule it for a day where they will be out of town.

When you invest in real estate, the goal is to increase the value of the property.  Well, real estate property is valued by the amount of income it can bring in (for investment property, anyway).  Your goal is to increase this.  After you make the repairs and the property improves, you can justify increasing the rent.  This will be to your advantage, as the property value will go up along with it.  Just be sure that when you’re buying the property you calculate this out, as you don’t want this raised rent to be any higher than average rent in the area.  Having it still below average is the best bet.

You will have to break the news to your tenants that their rent is being increased.  They may fuss a bit, but that’s okay, you can’t blame them.  Still though, you must stand firm.  You are not running a charity – your primary mission is to make money for yourself; this is an investment.  Often though, when handled properly, you can keep the same tenants in place.  Be fair with them, and be polite; things should go your way.

You’ve finally taken over the property, are calling yourself the landlord, are officially working in the field of commercial property management (or residential), and have begun advertising.  Your primary mission is to get rid of those vacancies.  Do whatever you can to get rid of those vacancies as soon as possible, right?  Yes, but only under certain stipulations.  You should follow a good commercial property management checklist.  You need to exercise control and slow down; you don’t want to be one of those landlords who rushes into things and ends up with horrible tenants.  Renting to tenants is like buying an appliance for your home, say, a stove.  If you just rush in and buy a stove, you have no idea what you’re getting.  You might be getting a really great stove!  But, you might be getting a lousy one, which you only find out when you can’t heat up your food, as it doesn’t get hot enough.  But, if you had taken some time, if you had read Consumer Reports, then you would find yourself buying a much better stove that will prove to give you little problems.  So, if you exercise caution, slow down, and screen your tenants properly, you should end up with good tenants; therfore, you should end up with little problems.

So, how do you screen your tenants?

This is a good commercial property management checklist, which is borrowed from Leigh Robinson.  This deals with residential property management, but it applies to commercial property management as well.

Gross income – four times rent
Income stability – at least six months with the same source of income
Assets- five times rent (bank account and automobile equity)
Credit – established, nothing negative
Credit Cards - one major credit card
Rent Punctuality - prompt, never late
Pets - none
Waterbed - one queen size OK
Vehicles – one auto, no motorcycles louder than an auto
Former landlord’s recommendations - good
Number of tenants – maximum of three
Attitude- cooperative
Smoking - no
Drinking – moderation (maximum of two drinks daily)
Illegal drug use - no
Permanence – at least six months in each of last two residences
Cleanliness - average
Interest in the dwelling – average to high (willing to pay more in rent than asked)

Here are steps during the tenant seeking process:

1 – prepare the dwelling for occupancy
2 – prequalify the prospects
3 – show the dwelling
4 – accept and scrutinize applications
5 – check references and qualify the applicants
6 – visit applicants’ current home
7 – review your rules, requirements, and policies
8 – fill out and sign the rental agreement
9 – request all monies or a hefty deposit
10 – create a record of the dwelling’s condition and contents

If you follow these steps and use the checklist above when screening tenants, you will almost always have excellent tenants.  This process is not difficult, but very few landlords are willing to put in the time and energy to do it.  It isn’t difficult, but it does take time and effort.  However, think of it as an investment.  You do like investing, don’t you?  After all, you do own an investment property!  The more time you put in now, the less time you’ll spend later.  Problem tenants will always eat up more of your time than you will spend screening.  It is always worth your while.  Remember, too, that having vacancies is no excuse for accepting substandard quality tenants; commercial property management is not the place to take the easy road.

Advertising is one of the most important things you can do as a landlord in the field of commercial property management.  You simply must advertise.  There are plenty of good people and businesses out there who all need a place to live or work; usually, there is no shortage of places.  If you don’t take them in to your home or office, then somebody else will.  YOU want to be sure that you are the one who is taking them.  Otherwise, you might get stuck with bad tenants.

First thing you must do in commercial property management when looking to advertise your property is to walk outside and take a good look at your property.  Does it look like junk?  If it does, then you have your first advertising project in front of you.  Make sure your property looks good.  So often, prospective tenants will come to examine your property, but if the property looks bad, they will be turned away, even before entering the property.  Nobody wants to live or work in a shoddy home or building.  So, if your property looks bad, fix it up.  Make it pretty.  You don’t have to overdo this, but you should make it comparable to other properties in the area.  In fact, it is disadvantageous to you to make it much more attractive than the average.  It will cost you money and give you little gain.  Fixing up property is truly one area in life where you should strive to be average.

So, you’re going to advertise.  You have the internet, real estate agents (not all of them will help you find renters), bulletin boards, housing offices (at colleges and other various places), the newspaper, etc.

How do you construct your advertisement?

Use the KISS rule: Keep It Simple, Stupid.

You want your advertisements to be short and to the point.  Few people enjoy reading long advertisements when they are pouring through more than a hundred of them.  Also, your advertisement is going to cost you money (except for possibly on the internet), so the less lines you use, the better.  Don’t use words like “call” or “phone” before you list your number.  It’s obvious what the phone number is there for.  You don’t need to say “for rent;” you can say “rent.”  Dont say “off of main street;” say “main street,” or better yet, “main st.”  You don’t even need to say bed/bath, just list the numbers.  3/2.  People know this means three bedroom, two bath.    Here is an example:

rent 3/2 Main st.
No pets.  555-555-5555

Remember, when you are advertising, make sure your property looks good, and keep your advertisements short and to the point.

Collecting information
First rule of thumb, smile.  Be on high alert for any and all opportunities to smile.  We will repeat this several times throughout this post.

Usually this process goes smoothly, so you usually have nothing to worry about.  First, keep your cool.  You are the boss, but don’t be a jerk about it.  You need to be firm, but fair and friendly.  When you meet them, be sure you are standing erect and carry confidence in your voice.  If you lack confidence or are easily intimidated, landlording is not a career for you.  You need to show confidence because the tenants won’t think that they can walk all over you.  Also, people like it whentheir boss appears to know what he or she is doing, and that the boss has everything under control.  You want them to trust you and to be able to rely on you, so you must appear this way.  Smile.
Simply ask them for the information and let them give it to you.  Sometimes, tenants may seem a bit suspicious at your asking all kinds of personal information.  Explain to them the reasons why, gently.  For instance, if you ask for their work or cell phone number, explain to them that you may need to contact them in a hurry, such as in the event of a stranger trying to get inside or a fire.  Explain to them that you need their social security numbers so that you can report to the credit industries their good payment history.  Also, this is for your protection, too, you must get their information, because you want to check their credit.  You need to see if they are reliable and can be trusted with rent payments.  This goes for both residential and business property management.  Remember, be sure to smile.
If a client resists, try to let them know that it is for their own benefit.  If they do not want to give out their phone numbers because they are afraid of telemarketers or getting unneccessary calls at odd hours, explain to them that you will take every precaution necessary to keep their number confidential.  Smile.
Like we said before, usually this process goes smoothly.  However, there are times when the tenants just simply won’t give you the information.  This is more common among residential tenants than it is for businesses.  Sometimes, though, small businesses, usually single person operations or private firms, will give you a hard time; larger firms usually operate fairly and won’t pose you any problem.  When the tenants absolutely refuse to give you the information, don’t be too quick to get into an argument.  Forget about fighting with them.  It is better worth your energy and time to collect this information from elsewhere.  Ask the previous landlord, check with the city, do whatever you need to do to find this information.  It won’t be that difficult to collect their information from other sources.

When you get their information, store it away in a safe place.  You’re ready to move on to the next step.

You introduce yourself to the family or business residing in your property, just like you read in the short guide to commercial property management. Everything goes just like you planned it; they smiled at you, greeted you politely, and offered you to come inside. You did go inside, but not too far; you didn’t want to infringe on their private space. You understand that even though you own the property, it is still their space; if your tenants do not have privacy, they will probably leave. And that goes for a family or a business; the family has private, personal things that happen behind the walls of your house, and the business is going to run a company without you in the way.

So, it’s all peachy. You’re a landlord, and everything is going smoothly.

That is, until your phone rings at three in the morning. The little boy in the family has clogged the toilet, and they want you to go fix it. “Use a plunger,” you tell them, but they insist that you come unclog it for them. Or, things are going fine, and the business says to you, “We are very successful and need a larger property, we’ll be moving.” You realize then that it will be very difficult to get a new company in your walls, but you need on in their now. These scenarios start happening more rapidly. The more comfortable the tenants are calling you, the more they call you. Sometimes you get so frustrated with them you want to curse at them and kick them out of the house. You don’t know what to do.

These kinds of scenarios are common for new landlords; this is a fairly normal set of circumstances. What do you do? We will be posting more information to help you deal with exactly these kinds of problems.