What’s involved with managing an industrial building?
We frequently sell buildings to investors who have never invested in industrial before. This is particularly true for buildings under the $3 million price point. Often these are investors experienced in owning small multifamilies, retail, or suburban offices. They have seen the astronomical returns achieved by industrial owners over the past five years and want in on the game. The inevitable question is “How do I manage this thing?”. Here’s who you’ll need to know in order to self-manage an industrial property.
- Bookkeeper: Properly account for expenses in order to bill them back to the tenants(triple net leases). Hiring a bookkeeper familiar with this process will make the process much easier.
- Attorney: Negotiate leases: Small industrial leases typically have a 2-5 year term, annual escalations, and expenses reimbursed by the tenants. Find an attorney that has experience with commercial real estate. Develop a template that you can generally stick to for every simple lease. For more sophisticated tenants, you may need more complex leases.
- Leasing Agent: If you’ve never owned industrial before you should hire a good local broker to handle leasing, at least initially. They will know the tenants, rental rates, and who fits the property well. A bad tenant can become a real headache if they trash the property, fill your parking lot, or need to be evicted.
- Contractors: Industrial buildings are basically big boxes, so management is easier than other product types. You will need snow removal, landscaping, a handyman, a roofer, a plumber, and an electrician. Build relationships with these people, pay them quickly and they will take care of you.
- Investment Sales: Once you’ve built up your rents you’ll either want to sell this building or find your next investment property. If it’s in New England you can call up The Klein Group and we’ll help you find your next property.
