Managing your Real Estate Investments by Remote

Assume Life is Not Perfect

It usually happens that when you are selling your property (or buying a new one) you discover something is broken. Maybe the roof is leaking, or the chimney is falling apart, or the air conditioning has been serviced, but the vendor missed something, or the elevator has not been inspected. There is a myriad of things that can happen and do happen at properties. How do you protect yourself from these surprises?

First thing to remember is that all properties are living, breathing things and need proactive maintenance care. This means that you need to focus on keeping your real estate in good condition and work with your property manager to schedule at least annual property inspections.

For example, I was involved in a transaction for an almost 30,000 sq ft multistory building that had been well built and well taken care of. As a result, all inspections went well and the buyer paid almost full price, because he was not nervous about the building quality and its performance. Unfortunately, that was unusual. Most of the time we find significant deferred maintenance and other issues during the due diligence phase of a purchase, usually starting with a leaking roof and poorly maintained air conditioning and ending with the failed crawl space sump pump someone has forgotten about.

 Physical Inspections

Of course, it is always best to inspect your investments personally at least once a year. If you cannot make it, hire someone to do it for you, or have your property manager take pictures or prepare a drone tour. Drone inspections work well for building exteriors but are more difficult for property interiors. Some of our clients consider this too hands on, but it is my position that it’s your property and you have the responsibility to take care of it.

Drone Inspections Shed New Light

Just this week, I had a vendor come out to give me a bid for a chimney repair at a property we own. He was one of three vendors that were available.

While this vendor used a drone, the other two used a ladder. There is nothing wrong with the ladder approach, but with the drone he was able to quickly document the problems and prepare a bid within 45 minutes and without the risk of anyone climbing on a roof. Not only was the speed reflective of the vendor’s knowledge, but also his impressive professionalism, so he got the job.

No, he was not the most expensive vendor, but he was priced in the middle of the pack. Why is this important? Because if you cannot get to a property, it is much more time efficient to hire someone who is able to fly by with the drone and record your properties for you. The results make successful operation of your properties much more likely. That being said, I am still a strong advocate of an in-person walk through of your properties as you just have a more in-depth view.

Financial Statements

Equally important is a monthly review of the financial statements. This arduous task is critical to making sure tenants are paying rent as well as understanding the financial operations of your property. It never hurts to confirm with the property manager which tenants may be delinquent, who is paying on time, and establish that all bills are paid on time. This helps particularly as you are making decisions to renew tenant leases.

Good Property Management

Critical to the success of your operations is your communication with your property manager. As with any property that is over four commercial tenants or over ten apartment units, you should be checking in with your property manager to review your monthly reports, bids, and delinquencies at least once per month. A well-organized property manager will help make this process easy for both of you. By running an ongoing property by property project list, you can tell which projects are being bid and completed on time. Remember a building is impacted by weather, age, use, and tenant turnover, so it constantly needs to be cleaned and updated. How do you track that if you and your property manager don’t have a running list nor constant communication?

Managing By Remote

It’s not easy to manage your properties from far away. It takes discipline and organization, and most importantly goals you want to achieve regarding the increase in value and the maintenance of your property. Make sure your property manager is aware of your ownership goals so that you can both move in the same direction. Real estate needs to be attended to. How can you negotiate leases if you have not seen the inside of a vacant space and gained the ability to visualize the cost for tenant improvements? Leasing agents need your collaboration and to clearly understand your expectations.

You can successfully own property if you live far away, but you need to take time to notice all of the property issues. Remember, up to 80% of all learning comes through visual pathways.* Paying attention to these details will help your property operate more smoothly and also help you maximize its value when it’s time to sell.

Sources

* https://www.optometrists.org/vision-therapy/guide-vision-and-learning- difficulties/

Clifford A. Hockley, CPM, CCIM, MBA

Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.

He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.

Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses.  He can be reached at 503-267-1909 , Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.