Commercial real estate properties come in all shapes and sizes, each with its unique blend of tenant demographics, demands, and expectations. Moreover, factors like location, layout, and leasing conditions further differentiate one property from another.
As a result, property teams must adapt their maintenance and tenant management strategies to suit each property's unique requirements.
But how do you know which approach works best? We’ve put together this guide to help you learn how to manage tenants like an expert.
The Importance of Effective Tenant Management
Effective tenant management is essential.
It can improve tenant retention, satisfaction, and legal compliance. Good tenant management can also greatly influence your reputation through word-of-mouth, which can make or break your property's success.
Property owners and managers must provide a safe and healthy environment for their tenants.
Proper tenant management ensures that the property remains in good condition, increasing its value over time and maximizing investors' returns. In turn, this boosts the property's marketability.
If you’re managing your tenants well, you’ll collect rent on time and keep expenses under control. You will also limit vacancies.
Higher-quality tenants will be interested, meaning that the quality of the property and the tenants are top-notch. This can lead to a more predictable and stable cash flow for investors over the long term.
How to Manage Tenants: 5 Key Focus Areas
1. Landlord Obligations
Finding and screening tenants is the property owner’s first official tenant-related duty. It's an essential part of property management that demands careful consideration to minimize risks and maximize returns on investment.
You must ensure that your rental properties are safe and habitable for tenants. Do regular maintenance on the property and respond promptly to repair requests. We discuss this in more detail below.
You must also follow all health and safety codes. Disclose any hazards to your tenants and provide suitable security measures. If you fail to meet these obligations, you run the risk of legal issues and ugly disputes down the road.
2. Property Maintenance
Property maintenance is critical to ensure that the property stays in good condition and meets the tenants’ needs.
Regular maintenance can help extend the lifespan of a property and its systems. It can increase tenant retention and ensure compliance with regulations and codes.
Keeping up with maintenance can also save you money in the long run, as you avoid costly emergency repairs or replacements.
Perhaps most importantly, you keep your tenants happy. Happy tenants are more likely to renew their leases or recommend the property to others. This can further increase the property's value and profitability.
Effective maintenance starts with an in-going inspection and ends with the exit inspection. Routine maintenance involves regularly scheduled tasks such as cleaning, landscaping, and checking systems.
Keep emergency maintenance (leaks, power outages, and HVAC failures) in mind as well.
It is a good idea to do interim inspections occasionally too. These include system checks, pest control inspections, and fire safety inspections. If you hire outside contractors or maintenance personnel, supervise their work. This way, you can ensure that it meets standards and deadlines.
In all this, the most important factor is clear communication with tenants. The property owner or manager should give enough notice of upcoming maintenance.
They should also explain any maintenance-related disruptions and respond promptly to repair requests.
3. Tenant Management
Effective tenant management starts with regular communication. It is crucial to understand how to manage tenants effectively to maintain satisfaction and ensure a positive relationship.
Provide regular updates on property maintenance and improvements, respond to inquiries promptly, and always be available for your tenants. It is a good idea to provide them with helpful resources and safety information.
It will make maintenance much easier. Send rent reminders to ensure that tenants stay current on their rent payments.
Another important aspect of tenant management is maintaining safety standards. Regular inspections will ensure the property is safe and secure and will help you to comply with all applicable safety codes and regulations.
What happens if your tenant is still not happy and lodges a complaint? Knowing how to manage tenants' complaints is a significant part of your role as a property manager.
You might be tempted to ignore some tenant complaints but it’s best to deal with them as soon as they come up. We’ve listed a few complaint-handling tips to help you with this not-so-pleasant part of tenant management:
- Respond promptly to the complaint.
- Listen attentively to the tenant's complaint and take notes. Show that you understand their perspective.
- Investigate the issue thoroughly and determine the root cause of the problem.
- Offer solutions and options for resolving the complaint.
- Keep the tenant informed of the status of their complaint. Give them updates on progress.
- Follow up with the tenant after the complaint has been resolved to ensure that they are satisfied.
4. Record Keeping
Record-keeping can be tedious but is a crucial aspect of effective tenant management. There are a few important records you should have on file.
Proof of insurance shows that you have an active insurance policy for your property. Property owners may need proof of renters' insurance, which can protect the tenant's personal belongings in case of damage or theft.
Additionally, you should file all rental applications and accompanying documents. These documents include lease agreements, rent receipts, and walkthrough checklists.
They outline the terms and conditions and the physical condition of the rental property before the tenant moves in. Keeping these can help prevent disputes over damages at the end of the lease.
5. Rental Accounting
Making money through commercial real estate is rewarding, but there should also be a proper ‘paper trail’ of all the income and expenses.
Firstly, you’ll want to have processes for collecting rent. Timely rent collection is critical to maintain a steady cashflow.
Rent collection procedures can include collecting rent in person, through online portals, or by mail. It is wise to include a few rent collection options in your tenant management toolkit.
Set clear rent due dates, send reminders to tenants who are late on rent, and establish consequences for late or missed rent payments.
Always keep accurate records of security deposits and follow local laws and regulations for their management.
Keep track of all rental income and expenses, including rent payments, property maintenance expenses, and property taxes, for tax purposes.
When a lease agreement is ending, you must decide whether to renew the lease or terminate it. Get to know some of the best practices for lease renewal. Start the renewal process early and communicate clearly with tenants about renewal options.
Review the lease terms to make sure they are fair and reasonable.
If you decide to terminate a lease agreement, you must follow local laws and regulations for ending a lease. Give adequate notice to the tenant or follow specific procedures for eviction.
Whether you’re renewing or terminating your lease, these practices will keep the process running smoothly.
Final Thoughts on How to Manage Tenants
Managing tenants can be a challenging task. With the right approach and clear communication, you can learn how to manage tenants successfully, and create great long-lasting tenancy relationships. This will likely result in improved performance and long-term success with your property investments.