Just Bought a Commercial Property? Here’s Your First 90-Day Checklist.
Congratulations on your latest business! The first three months of your investment are the most crucial, be it one of the cute small shops of the downtown shopfront, a big industrial park or a slick office tower. The choices you make today will determine the profitability of the building, legal status and tenant contentment of the building over the next couple of years. This checklist should be thought of not as a strict guide, but as a vibrant map that keeps you concentrated and at the same time lets you make some changes.
During the first month, the Legal and Financial Foundations will be established.
The initial one month is dedicated to solidifying paperwork and making the financial ground safe. Begin with a thorough examination of the purchase contract, title reports and any zoning or environmental reports that have emerged in the course of due diligence. Any lapse in attention including the pending lien or a zoning variance can become an expensive nightmare when unchecked.
After developing the legal moat, focus on the financial side. A new business premise is a blank canvas, but you will have to decide the way you will paint it. Get adequate insurance coverage- occupancy, liability and in case you are renting to businesses, business interruption. Next, engage a tax expert to install an internal accounting system to record all expenses and revenues. It should be kept in mind that the real-estate business is as much about figures as it is about the brick and mortar. A well-designed accounting system will enable you to see trends, cash gaps in the cash-flow, and other areas to cut costs.
During this stage, you will also need to come up with a depreciation schedule of rental property. This is not a mere bureaucracy but a strategic tool that could cut on the amount of taxes to be paid, open up cash, and give a better view of the true value of the asset in the long run. You should be aware of the differences between MACRS, straight-line depreciation and state specific regulations which may be in force. This will provide the foundation to your future financial planning and keep your books going in line with the IRS requirements.
Day 31-60: Day of operation, cleaning and tenant relations.
The legal and financial framework is now established, and the focus can be directed towards the day to day business that makes tenants happy and the property running smoothly. The initial two weeks will be spent on the installation of the basic facilities: utilities, security, waste management, and most importantly, cleaning.
A clean environment is not merely being neighborly but it is a competitive strategy. Supposing your property is situated or around Richmond, it is recommended that you hire the services of a professional like office cleaning Richmond that focuses on that market. The professionals have a network of recommended suppliers that have knowledge of the specifics of the climate, building code, and expectations of the tenants in the area. Hiring a trusted cleanup agency can minimize downtime of the maintenance, safeguard the aesthetic worth of a building, as well as provide a feeling of welcome that can promote long-term stay.
At the same time, initiate the development of friendship with your tenants. Establish a channel of communication, either through a tenant portal, regular newsletters or face to face meetings and get them to provide feedback on their experience. This will provide you with an indicator of possible points of pain even before they turn into expensive issues. It is also a demonstration of tenants that you are concerned with their satisfaction which can be translated into increased retention rates.
At this stage, provide a complete functioning audit: assess HVAC, plumbing, electrical loads, fire safety equipment, and parking facilities. Find any immediate maintenance or refinements and develop a step by step schedule that fits your budget. It is cheaper and simpler to deal with small problems before they escalate into great disturbing undertakings.
Day 61-90: Marketing, future planning and Performance Analysis.
In the third month, your property is supposed to be more of a business, rather than acquisition. It is high time to work on marketing and performance analysis and strategic future planning.
To start with, create a marketing plan that places your property in the limelight of its strengths, the location, facilities and unique selling points. Advertise in social media and online listings and make use of targeted email campaigns to access potential tenants. Develop an attractive brand image that can appeal to your target audience, be it startups, well-established companies, or the shopper base.
At the same time, assess your performance in finance. Make a comparison between actual rent roll and operating expenses and projected values. Determine any deviations and see their cause. Are tenants paying on time? Are the utilities more than expected? Are there any unrecognized expenses like high-maintenance costs or insurance costs that need to be addressed in the budget? What you learn here will guide your negotiation of lease, your adjustment of rent, as well as your capital improvement plans next quarter.
Lastly, begin to plot out the next 90 days-or the next year. Do you have any chance to diversify the tenant mix? Will it add value to your property by a minor renovation and fetch a better rent? Evaluate the possible ROI of any upgrade in comparison with your existing cash flow. When your property is located in a high-growth neighborhood, you can add something that the competitors will not be offering such as flex workspace, high-speed internet, or green roof to stand out.
In summary: Your First 90 Days, Your Future Strong.
The initial 90 days following the acquisition of a commercial property are a legal storm of law verifications, financial arrangements, operational arrangements, and networking. With a well-structured approach, attraction of trustworthy local providers, and a very sharp focus on performance indicators, you will create a framework that will allow achieving long-term success.
Now that you have this list on your hands, go ahead and check yourself against this list to see where you are and what you have achieved. Where do you see gaps? What are the most prominent opportunities?
