What’s a Better Investment: Self Managing or 3rd-Party Property Management?

Jan 15th 2018

The current commercial real estate market is brimming with uncertainties that could lead us down many different paths. This unpredictable environment has office property owners and landlords searching for ways to save on operating costs while maintaining stability for whatever the future might bring.

Is Property Management Worth It?

Not surprisingly, third-party management services are often one of the first items placed on the chopping block. When markets are strong, many owners, including real estate investment trusts, or REITs, assume properties can manage themselves. In down markets, though, they view self-management as a method of recapturing lost revenue. Many private investors feel the same, pondering the possibility of taking things over themselves.

This mindset can be dangerous, as many owners fail to realize that managing a property is much more than simply responding to tenant issues. The primary role of a property manager is to increase net operating income for the owner. This duty requires a specialized skill set, from lease administration and transaction management to project management, tenant services, and building operations.

Value Added

A nuanced knowledge of current laws and statutes relating to commercial real estate, as well as the ability to translate that expertise into proper bookkeeping and reporting systems, can alone save thousands of dollars annually.

Successful property managers also have well-established networks of trusted vendors for jobs like HVAC maintenance, cleaning, and landscaping. Property managers often receive discounts on these services due to the high volume of business they bring to the vendors.

When combined, these elements will prevent vacancies and protect the value of the property. Property owners or asset managers see tangible benefits from a well run operation, and they can focus on their bottom line.

One of those benefits is a superior brand reputation. In situations where tenants have plenty of choices, like office redevelopments and new construction, this advantage is significant. A strong property management reputation will draw tenants to your building, and a strong team can give a savvy pitch that showcases the value placed in each tenant.

While self-managing a property may seem like a smart route to savings, it could end up costing you a considerable amount of time and money while damaging the reputation of your property. Professional and effective property management, however, can enhance value while building upon the bottom line.