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Strip Mall Management and
Expense Savers
by Christine Harvey
Since Strip Malls are next on my list for real estate
investment, I spent a few days with a good friend who runs a property management
firm for commercial property – mainly strip malls.
The first thing I learned is, ‘yes, strip malls are
profitable.’ Of course you must do your due diligence, profit analysis, etc. But
if you buy wisely in a good location, and land a good management company like
his, then your management headaches may not be any greater than when you invest
in residential property. You’ll just have a few more zeros on the end of your
expenses. But then again, you’ll have a few more zeros on the end of your income
figures!
The days I cherish most are the days I spent on the road
with his colleague, inspecting properties.
Parking Problems Vanish
I remember that parking was a big problem in many of the
mixed use office building – mall complexes. The owners and management wanted to
restrict the office tenants and their employees from using up the parking
spaces, which left little space for the shoppers. At first they gave out notices
asking tenants not to park, but little change was made. Then they issued a new
policy of intention to tow employee vehicles, and instructed their on site
cleaning man to monitor cars three times a day. Whenever he saw a vehicle of an
employee, not customer, towing was authorized and within 3 days word spread and
no more vehicles clogged the lots. Customer activity rose dramatically.
Holding Down Expenses
Also, holding down expenses, while maintaining property is
a HUGE issue in commercial property. When your resurfacing of parking lots quote
comes in at $100,000, you start to look carefully at options. One clever option
I liked was that they repainted the strips and curbs in bright white alternately
with resurfacing, which gave the property a spanking new and welcoming look.
Since that process was ‘only’ $40,000, they had a whopping $60,000 saving each
time they alternated with resurfacing.
Another expense saver was with the repainting of shop
exteriors. Normally shops experience the most wear and tear on the first 4 feet
up from the ground where bike and people pass. So the expense saver
here is to diligently track your paint formulas, and repaint often in the exact
color, but only from the ground up to that 4 or 5 foot level to cover the nicks
and scratches. Your new paint then blends in and you save thousands on paint
costs.
A management report that predicts!
What about management reports? We all expect financial
reports, but those always report after the fact.
In the firm my friend runs, he sends an employee out each
month to interview each shop lease holder. Then he produces a one line report
for the strip mall owner, highlighting their conversation. By skimming the
report, I was able to put myself in the shop owner’s shoes and get a feeling
from afar on how my property was progressing.
Line items looked like this:
Unit 203 – Video store – Wants to know if they can carry
CD’s, (non-compete with other lease holders.)
Unit 204 – Chocolate shop – Think they might leave at end
of lease
Unit 205 – Card shop - Owner away, manager report all is
well, holiday sales up
Unit 206 – General store – Plan to redecorate in 3 months
Unit 207 – restaurant – experiencing roof problems again
By scanning this you can guess what vacancies to expect or
not, what expenses to expect or not. A side benefit is that the shop owners feel
well supported by the mall owner and property management company.
Want to learn more about commercial real estate? The 11-CD program
called
Take The Leap! Commercial
Real Estate Program actually interviews experts from across the United
States to give us a comprehensive view of all the aspects of buying and
owning commercial real estate.
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