How to manage a property from a distance

Question

Up to now I have always been "involved" in my real estate, whether it is maintaining it, managing it, and so on.  Now I would like to broaden my horizons and I am thinking of building a commercial/industrial building in another province.  Does anyone know anything about hiring a property management company or realtor to manage it?  I will not be able to be as "involved" maybe just finding the location/building and visiting the town once a year.  Are there any downfalls for putting a management company/person in place?

Will Barnard · Answer

Do not let that stop you. Feasability is not the question, the question is your skills in overseeing your team, hiring your team, etc.
Make sure you are well versed on this and then go for it.

Howie NA · Answer

Thank you.  I agree.  Now I am starting to doubt whether or not this is a feasible idea.  Maybe I should stick with where I know.  But on the flip side I dont want to put all my eggs in one basket (same city, or vicinity)...

Howie NA · Answer

Thank you everyone for your responses.  I am an trying to weigh whether or not it will be worth the headache.  One one hand, I think that it may be a "setup it up and forget it" but on the other hand I think I will need to be more involved.  I dont know the area very well, but I know enough to know which area I will be looking.  My only concern is whether it will be a good investment, or whether I could take my dollars a longer way, where I know best.

Will Barnard · Answer

Managing/owning from a distance will NEVER be a "set-up and forget it" approach. You must be active in your oversight of the PM company and the investment iteself.
While you do need to rely on the abilities of your team members, you must remain diligent in your management of each team member.

Will Barnard · Answer

Triple net (NNN), double net, single net, and absolute nets all vary from area to area. Regardless, if you have common area, you most likely need maintenance, if you have some expense responsibilities, you may need to have someone maiking sure they are handled.
Mike made a point that you may not need management and that is true. You also, may need it. It depends on your area and investment situation.

Commercial is definately a great place to be. Much less management problems, lower tenant turnover ratios, lower operating expenses (usually), and the ability to force appreciate.

Michael Rossi · Answer

You may not need a property manager for a commercial/industrial building.  Assuming that you're not talking about a residential type commercial building and are instead talking about an office/retail/industrial building, these are typically rented on a "triple net lease".  With such a property and with a stable tenant, visiting once a year might certainly be appropriate and you should almost never hear from the tenant.

Mike

Will Barnard · Answer

Commercial PM indusry is quite different from residential as are the tenants. Failure to pay gives you much better recourse with a business rather than an individual tenant.

The key is knowing how to create and negotiate a contract agreement which protects your interests and is financially reasonable.
It is common that a PM company in commercial will take the entire value of the lease and charge a % of it. 
Example: 3 year lease at $3,000 monthly gross = $108,000 lease value X PM %.

Steve Schow · Answer

From my perspective that is the only way to go, but there are bad managers and if you end up with one it will cost you money. So interview a lot, ask around, get references and find a good one.  And even then plan to spend some time watch dogging them a bit from time to time.  Once a year is not enough.