Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Management

Organization, execution, and follow-up are the key factors in property management. Each property should be viewed as an independent business, as its own profit center.

The management of a project is the overall running of the asset. It can be divided into four segments: planning, implementing, monitoring, and reporting.

Planning

Planning is also discussed in Chapter 1. A written business plan as well as goals, property-by-property action items, and priority lists should be composed. Please refer back to Chapter 1 (including Exhibit 1.1).

An annual budget for each property is essential. The process of budgeting forces you to review your cash flow, your capital reserves, and problem areas in each property. Part of the budgeting process is to compare what was spent last year with what was spent during the current year and what is anticipated will be spent next year on each line item. By doing this, those items that are out of line, the variances, are highlighted and can be discussed.

Additionally, if your portfolio contains several similar properties, comparisons can be made between the properties to attempt to discern standout variances. The comparison is facilitated by translating the income and expenses into a per-square-foot number. Care must be taken to compare apples to apples since different geographic areas can have significantly differing factors that might affect the analysis. For example, the extremely hot summer temperature in Palm Springs, Las Vegas, and Phoenix ...