Hey guys, my question is how your fees for commercial properties are structured? All advice and info is appreciated. Thanks for your help guys.
You may have already seen my post on another thread but I'm paying $2 per sq ft to fill the space if realtor represents both tenant and owner, $4 if two different ($2 per realtor). Management is 5% of rent per month
@Greg V. Hey Greg, thanks for the response, what neighborhood is the amount of rent in? Thanks for the help bro.
You may have already seen my post on another thread but I'm paying $2 per sq ft to fill the space if realtor represents both tenant and owner, $4 if two different ($2 per realtor). Management is 5% of rent per month. I invest in suburb towns around the Twin Cities, MN no more than a 45 minute commute to downtown and are all on the thoroughfare in the downtown areas of towns from 10k to 50k people. Perfect place with not a lot of big money. Rents are running about $10 per sq ft so, depending on where you are, the lease fill rates may be different.
Sorry about the repeating text. I'm still working through the bugs of the app.
Sounds good Greg, I wish you the best in your ventures and yes I just reviewed your other post. Do you do residential properties as well or just commercial?
I started with single family then went to multifamily then went to commercial office/retail/medical. I just got tired of residential renter drama. Plus this is much more lucrative. Forced appreciation is the name of the game. The big difference is that you need a lot of cash. It takes a lot for tenant build out and realtor fees. I always plan for a space to be vacant at least a year so you have big carrying costs. Payoffs are over years so it's a patient game.
Sounds interesting, I always figured that commercial tenants are usually a little easier to deal with as opposed to residential tenants because commercial tenants are usually professionals and established in their fields. Is it possible to charge management flat fees on a monthly basis for larger properties? I've seen firms charge $1,000-$2,000 in management fees for Class A properties (Aprtments, Anchor properties, Ofices etc.)
A flat fee would make sense with larger single tenant properties and depending on the terms, $1000-$2000 would be a good rate for you. If it's NNN, I would be surprised if you put in more than 10 hours a month. That's just my guess. I don't have any experience with big box stores. If it's a multi unit property like a strip mall, I would probably scale your fee up. As an example, we just closed on a 16k sq ft property. When it's filled at $10 per sq ft, the monthly management of 5% will be $667 which I find reasonable for both them and me. After talking about it with you I think when the rate gets to $750 maybe $1000 based on lease increases, I'll go to a flat rate. Thanks.
I should also say that there will probably be 2-3 tenants so the management will not just be collecting checks but paying landscaping, snow plowing, and any other maintenance of roof, HVAC and exterior.
I work in retail specifically and we charge, depending on rental rates anywhere from $3 to $4 psf on up to 4% of the net rents over the term. Each market varies. Again, highly dependent on net rates and size of space. 4 to 5% of gross revenues as mgmt fees with a minimum of $1,000/mo typically. Hope that helps. Yours rents in CA are probably different than ours here so fees may vary.
You guys are pretty damn helpful so thanks a lot guys. And I find that landing several big fishes (Commercial properties) that feeds you longer is better than managing 40-50 properties and barely breaking even. In my opinion and based on some observations, commercial property requires a firm that specializes in commercial management. Diversifying in both Residential and Commercial is fine, but residential management is extremely time consuming. Just my 2 cents guys, appreciate it.
So I would also say that it would be hard to trust a management company I haven't dealt with. Where I really see the good ones stand out is in filling vacant space. That involves negotiation, knowledge of numbers and markets, personality, motivation, and hard work. Once the deal is signed mine works with the contractors for the build out and makes sure everyone gets paid on time. I also get to see their accounting system. My advice is to start with working to fill vacant properties and have them sign on for management if they think you did a good job. Our leases are minimum of 5 years so you have a good income stream for a while. Just my two cents.
What are your best tips when it come to filling vacancies?
When it comes to commercial properties using any realtor will not do. Go with a commercial broker with a history of placing tenants is the way to go. The commercial broker is out there in front of businesses and franchises daily.
Great tip Scott, just out of curiousity how many commercial properties do you guys currently manage?
I don't manage properties I own commercial Shopping centers in New Jersey. I have a good management company that tend to the daily activity of my centers. In commercial you want to distance yourself from your tenants. As far as my professional I am Vice President of Chicago Title, always available to help with advice or service.
You seem well established Scott congrats on that buddy. If you don't mind discussing it, what kind of fees do you pay to your managers? And what qualities/traits do you look for when it comes to selecting a firm to manage your property? Thanks.
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