Who is minding the store? Examining what you should expect from your property management team

The tenant-in-common (TIC) investment model has gained widespread use throughout the real estate community, and as a firm that acquires, structures and syndicates TIC offerings we have seen the industry expand dramatically during the past seven years. And while the manner in which real estate is bought and sold may vary, the key to successful real estate doesn't-property management. The TIC model, with up to 35 co-owners in each property, can create some management challenges and only the best management expertise will aid investors in achieving their goals as real estate investors. While TIC investing eliminates property management headaches for the individual investor and transfers that management to a professional property management firm, each owner is still very much a part of the management process (or should be). Historically, not much focus has been placed on this aspect of TIC investing, instead, investors concentrate on property location, income projections and preservation of capital. While these should be among the highest priorities when analyzing a potential investment, property management cannot and should not be overlooked. Without a quality property management team to execute the plan of the property, location and projections do not matter. During the ups and downs of every real estate cycle, it is critical that the property management team works with the best interest of the owners in mind when "actively" managing a property. Therefore, what should you expect from your professional property management team if you are considering passing that responsibility of your investment over in a TIC investment? A full service property management company handles day-to-day management, leasing, accounting and strategic planning of your asset. This includes developing customized property operations programs with a focus on proactive strategies, cost efficient operations, and tenant retention. Your management company shouldn't be just a "rent collector." If your property management team is not focused on customer service and property enhancement, your property may not realize its financial goals. For instance, a property management firm should review day-to-day operations to uncover operating efficiencies; perform comprehensive budgeting with capital improvement planning, establish preventive maintenance programs to maintain building quality and extend the effective life of building components, and manage third party vendors to achieve economies of scale. These remain the backbone, the "critical functions" of property management. These strategies improve the physical condition of the property, enhance service delivery to the tenants and should lead to increased financial strength of the asset, which in turn will help to enhance tenant relationships, your sole income source with most properties. A property management firm is only as strong as the team members they employ. There are a variety of designations that employees can earn to remain at the forefront of the property management industry. Among them are certified public accountant, real property administrator, certified commercial investment member, certified property manager, facilities management administrator, systems maintenance administrator and systems maintenance technician. These designations are affiliated with such venerable institutions as The Institute of Real Estate Management, Certified Commercial Investment Member Institute, Building Owners and Managers Association, National Association of Realtors and the Boards of Accountancy for each state. Team members who take the time to earn additional credentials reinforce the concept that the property management firm is committed to managing properties as a profession and dedicated to maintaining the asset to its highest level. Are any of these highly educated and certified individuals minding the store for you? In addition to the individuals, organizations too have the opportunity to enhance their skill sets and credentials at a corporate level. The highest level of certification a property management firm can achieve is the Accredited Management Organization (AMO) designation from the Institute of Real Estate Management, an affiliate of the National Association of Realtors. This accreditation demonstrates a company's commitment to the highest level of performance, experience and financial stability in order to exceed its clients' expectations. There are currently only 511 property management firms worldwide that have earned this distinguished accreditation. AMO management companies excel in market knowledge, tenant satisfaction and retention, and have the ability to provide exceptional service in all aspects of property management. In addition, AMO firms must have a certified property manager directing and supervising the management team. To qualify for the AMO certified property management designation, real estate management professionals must complete extensive course study, meet experience requirements in both fiscal and operations management, and adhere to a professional code of ethics. The AMO designation signifies excellence within the industry. Credentials and structure of investment aside, at the end of the day where the rubber truly meets the road is in performance. It's easy to show successes in up markets, but how has an operation worked during periods of economic turbulence and unpredictability? It is important to not only look to a firm's success during those good times, but how have they handled issues at properties, preserved investor capital and even turned properties that may have once been in trouble? Your property management firm should have a stellar track record, and make it available to investors for review. Historical returns do not guarantee future results, but they can certainly provide some insight into how a firm handles their responsibilities over the long term especially if your property management firm is experienced through differing real estate cycles. When taking the time to review potential real estate investments, simply looking at the initial underwriting models and current market data is not enough, especially when considering a fractional ownership interest with multiple owners unknown to you. Real estate investors should thoroughly review the property management firm and team before acquiring a property to best take advantage of prosperous times and have faith the management firm is able to help mitigate risk during market downturns and that your property will be managed and maintained to the highest levels of excellence. Barry Gruebbel, CPM, is the president of TIC Properties Management, LLC., Greenville, S.C.