With many Physicians looking at diversifying their cash flow and buying investment office space, either alone or with partners, it’s a good idea to explore how this investment property will be managed. By leasing their office space back from a related entity, such as a Family Trust and/or an Investment Group formed by like-minded Doctors, each lease becomes a value-enhancement to the Investment Property.
The need to add a professional property manager to your team has never been greater. Over the years, Castlebrook Management group has seen many multi-tenant medical office properties being managed by doctors, their staff and/or their financial planners/advisors. In most cases this has turned out to cause major headaches for everyone, often causing disruptions in office operations and ending up costing far more in the long run than they hoped to save in management fees.
Retaining a professional management company, or at least an Individual Property Manager, particularly one that specializes in medical office properties, can offer multiple benefits, many of which tend to be overlooked by medical professionals:
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- to reduce the liabilities inherent in owning real estate
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- to maintain a professional relationship with other medical practitioners who might be
tenants, investors and/or competitors
- to maintain a professional relationship with other medical practitioners who might be
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- to let those in the medical field do what they do best, practice medicine
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- to keep medical professionals current with regard to changes and new developments
affecting their real estate investment
- to keep medical professionals current with regard to changes and new developments
- to enhance the value of the Medical Property investment
Let me explain.
The Vendor/Supplier Jungle Often, we have seen Medical Professionals opt to hire uninsured vendors, thinking they are saving money. Such might be the case in hiring an HVAC, plumbing and/or electrical contractor, or even a landscape maintenance company. You might be able to guess the problems and damages that too often ensue from such decisions. A professional management firm begins with competitive bidding and follows through with supervision of the work until the job is completed. You can also count on a professional property manager to bring in fully vetted and insured vendors and suppliers to limit liability exposure to the owners.
Vendor/Supplier Relationships Professional Property Managers can use their leverage with business from multiple properties, to help lower costs. For example, two areas where we’ve seen significant savings from aggregating the operations of multiple properties have occurred when purchasing Property Insurance Policies and when selecting electrical providers. This relationship should not preclude Doctors referring patients who might be excellent potential vendors/suppliers, but it would provide a buffer when the selection decision is made.
Knowledge Of significant importance is the ever expanding body of knowledge a good Property Management company has in the field. For instance, their familiarity with the range of operating costs for similar buildings helps when negotiating with suppliers and vendors. Access to valuable resources only available to management professionals provides another reason to retain a good management firm: a professional organization’s annual building income and expense compilations, like those offered by BOMA (Building Owner’s and Manager’s Association) and IREM (Institute of Real Estate Management), help their members compare costs between similar types of properties.
Money Matters Many of the doctors Castlebrook Management has worked with find it awkward asking their colleagues to pay their rent and/or adhere to the terms of their lease, preferring instead to shift that responsibility to a third party, in this case a real estate professional, thereby separating personal from business relationships. The use of an unrelated entity to oversee the management of their multi-office investment also helps prevent the comingling of investment operating income and expenses with their medical income and expenses and helps prevent issues when preparing tax returns. Some of these issues, if not perceived from a business perspective, can lead to thorny relationships among the individual doctors versus a more generic Ownership Entity, based on business principles. Very often medical practitioners see their staff and practice resources being diverted to tasks unrelated to their practice when they don’t delegate property management functions to a professional Manager. Hidden expenses, like overtime payroll liabilities and larger than necessary staffs, result from going it alone.
Focus On What You Do Best Being able to delegate property management functions to an independent third party allows medical practitioners do what they do best, practice medicine. Responding to sewer backups, HVAC outages, light bulb outages, need to replace a roof, major storm damage is simply not a good use of a medical practitioner’s time. To compound these issues that are guaranteed to occur, not all property related issues
occur from 8 am to 5 pm, nor can they always be resolved during normal business hours.
Keeping Current A professional property manager keeps up with changing laws, insurance requirements, best practices, technology innovations and trends that affect managing medical real estate. These professionals can provide invaluable insight into how decisions can impact the liability and value of an investment associated with the management of multi-tenant medical office buildings and owner’s associations. Through the use of monthly reporting, offered by all professional managers,
informed planning decisions can be made.
Today is a great time to consider hiring a Professional Property Manager to help navigate the many aspects of managing investment medical office property! We guarantee you’ll save money, time and unlimited amounts of frustration by retaining a professional management company.
