In this article I continue with the next stage required to manage a property efficiently and profitably, and discuss best practices for setting priorities and putting a plan in place. Upon completion of the property audit [as discussed in a previous article], you will have a clear understanding of the areas of the property that are deficient and potentially causing the property to lose value. Any plan of action that is required starts with a clear understanding of the owner’s short term and long term objectives. Using the property audit, review all outstanding deficient items and place them in priority sequence, considering the owners’ objectives as your guideline.

These are some of the questions that need to be asked:

1.      Owner’s Objective

Given that the bottom line for any owner is to increase and/or maintain the property’s value, determine if the owner wants to sell it in the near future or keep it for future generations. Is the landlord a sole proprietor or is the property owned by a group or syndication? This is the guiding force that determines what the plan is going to look like. But it can change very quickly, so it needs to be flexible and revised frequently.

2.      Leasing (Rent)

Determine what the rental rates are and whether you are achieving market rent. Are your operating costs competitive? Are there any leases due to expire and do you anticipate any vacancies, renewals etc.? It also pays to examine whether your rent collection is effective and if any rent is in arrears? You should also know what lease rights and lease options that encumber the building.

3.      Operations (Expenditures)

Is there a Life Cycle/Engineering report and what are future major expenditures? Check the maintenance contracts to see if they are up to date and relevant, and if there are daily, monthly or annual inspection reports. Does a tenant survey exist and what can be learned from it? Your building audit will determine what exists and where, but your plan will determine how to act, always according to the landlord’s objectives.

4.      Value Management

Is the financial reporting in place and is it sufficient, relevant and accurate? Are there any historical reports or 5-year plans? Of course, it is critical to know when the mortgage payment is due. Are you satisfied the site is being utilized effectively, and that the zoning is the most relevant, considering “highest and best use” criteria? Also, check to see if the tax assessment has been appealed regularly and if a reduction has been applied for, on any vacant space.

5.      Budgeting

With priorities established, it’s time to work with the logistics necessary to accomplish them, and in keeping with available resources. Start your budget planning and consider a five-year plan for some priorities. Others can be done without a lot of expense, like renegotiating a lease, renewing contracts earlier and lowering the price by blending and extending, checking warranties etc.

Your plan should be realistic, manageable and revisited at least annually. There may be deviations, and the owner and entire team kept abreast if there are any. Set priorities according to cost, return on that cost, and the value added. Set regularly scheduled and consistent inspections of the property, with proper reporting systems that enable you to keep the audit current. Hold regular meetings to review and discuss leasing rents and large expenditures. Finally, update the property audit on an annual basis.

Our next article in this series will cover recognizing tenants’ needs, how to best handle them and manage their expectations.