Note: Homee on Demand & Darren Wilson/Kennedy Investments recently collaborated on this article to help you prepare for the important decision of selecting an integrated commercial property management platform for your company.
In commercial real estate, significant swings in profits and values are often determined by just a few percentage points. So, commercial property managers (PMs) are always on the lookout for products or strategies that will give them an edge over their competition.
Managing commercial real estate is a capital intensive and highly transactional business. Investing in the right real estate management technologies can deliver significant gains in efficiency, dropping more profit to your bottom line and increasing the value of your property. A recent internet search for “property management software reviews” yielded no less than 104 different product offerings. Unfortunately, the vast majority of these platforms won’t be the right fit for your business. With dozens of competing commercial property management software products on the market today, choosing the right technology platform for your real estate business can present a daunting challenge to even the most sophisticated, seasoned owner or property manager.
The cost of an integrated commercial property management software platform can range from a few hundred dollars per year to a few thousand dollars per month, so it’s tempting to make the price tag your primary consideration in selecting a platform. While affordability is certainly important, careful evaluation of the unique characteristics of your properties and tenants will unlock opportunities for savings and profits that can help offset your technology expense as a PM. We’ll explore some of those considerations later in the article, but since cost is an important factor, we’ll go ahead and get it out of the way.
Modern commercial property management software is often marketed as an “integrated” property management solution, meaning its key property management features either include, or are directly linked to, the property accounting system. While you can certainly manage your properties with an inexpensive and popular general accounting product like QuickBooks or FreshBooks, an integrated software platform designed specifically for commercial real estate management will provide distinct and valuable advantages to your business — especially when its features or modules are tailored to the specific needs of your property type.
We encourage you to carefully consider your company’s current and future needs before gathering software quotes. Once you’ve determined which property management software features will best serve your business objectives, there are a few additional questions to ask when evaluating the “all-in” cost of competing commercial property management software solutions:
The Cost of the Software
Developing good software is an expensive, time-consuming endeavor that usually involves thousands of hours of engineering and testing before the first version can be brought to market. Once released, however, the cost of each additional copy, installation, or license is usually relatively low for a software company, and they’re incentivized to generate as much revenue as possible to recoup their heavy investment in research and development.
As a result, industry software pricing models can become quite complex. Here’s an anecdotal story: When a young saleswoman at a big software company asked how to answer clients who were inquiring about pricing for the firm’s latest software offering, her manager suggested she inform them that the new product was “very affordable at just $100….” pausing to add, “per user… per month… per module… per property…” and so on, until the client objected — and that would be their price.
Jokes aside, be sure to ask the right questions when assessing the commercial property management software licensing costs for your organization, not just at purchase, but over the lifetime of its intended use throughout your operation. Since you’re investing in a product you are likely to be using for a few years, try to negotiate a contract that will help protect your company from dramatic price increases in the future.
Hardware & Operating Environment Costs
In the age of the internet, many commercial software applications are designed to run online in a web browser (as opposed to on your own server or computer), meaning that additional hardware costs will usually factor less in your decision than they did in years past. For the purposes of a generic example, consider the hardware requirements of QuickBooks Desktop Pro (a server and a PC for each additional user) vs. QuickBooks Online, which multiple users can access over a mobile device with a browser — no PC or server required.
However, a number of leading commercial property management systems that began as PC-based applications will still require hardware and operating environment cost considerations, especially for specialized modules. If your company hasn’t upgraded to the latest version of Microsoft Windows in a while, or if most of your users will only access the system via iOS or Android devices, you’ll want to make sure the property management software you select is compatible with the technology you already have. If it isn’t, you’ll want a line item in your budget for those purchases or upgrades. A quick Google search of “(insert property management platform name here) system requirements” (include the quotes) will give you more than enough to think about in this department.
Additionally, if you’re making the transition from a PC-based commercial property management application (or one which resides on your local network) to a wholly contained online platform (often referred to as SaaS, or “software as a service”), you’ll need to determine the internet “speed” or bandwidth requirements for all of your users as they access the new system entirely online, whether in the office or working remotely.
Over the last decade, a lot of small companies phased out their expensive PBX-based office phone systems in favor of “voice over internet protocol (or “VoIP”) business phones that are less expensive to operate but require significantly more internet bandwidth to function properly. A similar calculation is needed if you’re planning to move your company’s key software platform into the “cloud.” A browser lag of even a second per transaction will frustrate your users, and the cumulative cost of those delays could outweigh the advantages of all the efficiency gains promised by the new platform.
Additionally, if your office (or home office) is in an area where high-quality internet service isn’t guaranteed (e.g., due to inclement weather or surges in demand) you may want to budget for a second “backup” internet service provider (ISP) to ensure that your online property management remains accessible and functional in the case of a temporary outage. If you’ve invested thousands of dollars into an online property management system to make your business run more profitably, sending the whole office home for a day or two because the landscaper ran over your only fiber connection can be a frustrating loss of productivity.
It’s clear that the costs of identifying, implementing and operating the right commercial property management software solutions for your real estate business can easily spiral into the tens of thousands of dollars. However, investing in the right solutions will deliver savings not only for your property management operation, but also for the properties themselves. If you manage commercial properties on behalf of third-party owners or investors, review your property management contracts to determine how much of these costs should be fairly and reasonably allocated to the individual property budgets.
Implementation, Training & Support
As with any major technology project, the successful implementation of your selected platform is a high-stakes, costly endeavor. The more advanced your property management platform is, the more people and departments within your organization will be expected to learn how to use it. Earlier generations of commercial property management applications were primarily accounting-centric and as a result, frequently only accessible to the accounting staff and senior managers with years of experience using computers and software on the job.
As we’ll see when we delve into “features and modules” below, modern property management platforms usually offer a comprehensive set of tools which impact every department and function of a professional property management company. Potential users of a new system may include every member of your staff, but also your property owners or investors, tenants, and vendors. You don’t want to alienate your maintenance engineer with 30 years of property-specific expertise by requiring him to respond to all his work orders on an iPad without investing in enough training and support to make him comfortable using the new system.
To fully harness the productivity of your commercial property management platform investment and ensure its success, you’ll want to invest heavily in training and support. So, make sure that your budget takes these costs into account. A few of the larger software companies provide in-house experts who will guide you through the implementation process either remotely or on-site (for a significant fee), while others have invested heavily in online videos and training for your staff.
In our experience, once the sale is made, few of these software companies are able to allocate enough time and expertise to training and support to ensure the success of your implementation. This means that support must come from within your organization in the form of power users who train the other staff members and lead the implementation, or from an outside consultant. If you and your top staff are already busy keeping up with the existing demands of the business, ask your software provider about the third-party implementation consultants they recommend, get a proposal from a couple of them, and put a line item in your budget for it.
Features and Modules
Modern integrated property management applications are so varied in their feature sets and modules that it would be impossible to go into each of them in detail here. Instead of listing the many dozens of distinct features offered by the different providers, we’ve compiled a set of general areas to consider while identifying your primary needs (the “must haves”) and evaluating opportunities for productivity gains and savings (the “nice to haves”).
The types of properties you manage will usually dictate the types of tenants you have, and how they interact with your property management system (if at all). Managing residential properties, whether large multi-family apartment complexes or a portfolio of single-family homes, is quite a different business than managing a commercial property like a warehouse or office building.
Hence, the most important tenant-oriented considerations of your property management software will depend greatly on what types of properties and tenants you have. Some types of commercial property, such as self-storage or parking garages, are so distinct in their operating characteristics that there are whole companies and software platforms solely dedicated to meeting their specialized needs. Some of the key tenant-oriented questions you’ll want to consider when evaluating your feature requirements are covered below.
Online Payment & Account Access
Do you want your tenants to be able to pay online? Does the amount your tenants pay vary from month to month? Do you normally send them an invoice? If so, they may need to be able to receive those invoices or statements electronically via email or be able to access and view their account charges online via a “Tenant Portal.”
Tenant Maintenance Requests
How do your tenants notify you of their property maintenance needs? Is it important for them to be able to track the progress of their requests to resolution?
Do you need to deliver important messages to some or all of your tenants from time to time? For example, how do you currently inform the tenants of your office building the elevator is being taken offline today for service, that the fire alarm is being tested on Saturday, or the parking lot is being resurfaced next week? How do you want to continue to deliver these notifications in the future? A property management platform with sophisticated tenant communications features may save you considerable time over delivering these messages individually via phone, e-mail or in person.
Some property management platforms allow you to deliver and share important documents (such as leases, floor plans or invoices) with your tenants and or allow them to upload and share critical documents with you (such as insurance or financial verifications). If you regularly perform functions like these in your property management company, a software platform with a sophisticated “Tenant Portal” may be useful to you.
Some of the property management platforms on the market today offer sophisticated tools to aid in the marketing and leasing of your properties. If your company performs the marketing and leasing duties for your properties (rather than contracting with third-party agents or brokers), you may want to evaluate some of the features these products offer. Here are some questions to consider:
A handful of commercial property management software platforms provide features which allow you to easily create a property-specific web presence, either as a page on your management company’s website, or at a dedicated property domain such as www.StPeteOffice.com. If you manage large office buildings or apartment complexes and would benefit from having a dedicated property presence online, being able to do this without the help of an outside website development firm may provide your company with some advantages and savings.
Marketing Property Vacancies
Does the software you are evaluating allow you to track your vacancies and automatically publish those listings to your company’s website? Some of the more sophisticated residential property management platforms will even “syndicate” or publish your vacancies (with photos) to popular real estate listing websites like Zillow.com or HotPads.com, saving you the time and effort of entering them multiple times.
Processing Applications & Leases
Once a prospective tenant has found your listing, how do they currently contact you to inquire about the property? If you’re leasing residential properties, you may need to track your prospective tenants, collect tenant application documents and fees, and perform background and credit checks on them. Once they are approved, how is the lease presented to the tenant to be signed?
Believe it or not, some of the more advanced property management systems allow you to perform all of these functions entirely online, without the need for a single piece of paper. These features can save you considerable time and expense, getting your tenants moved in and paying rent more quickly, increasing your occupancy, and adding to your bottom line.
Maintenance & Vendors
Whether or not you allow your tenants to submit maintenance requests to you electronically, chances are good that you’ll be responsible for ensuring property maintenance and repairs are being handled properly. Responding to repairs and overseeing regularly scheduled maintenance is usually an important function of most property management companies, regardless of the types of properties managed.
Some of the leading commercial property management platforms offer features or “add-on” modules which enable you to create and track property repair needs (such as a broken window or leaky toilet), schedule maintenance at recurring maintenance intervals (such elevator inspections or AC filter change-outs) and assign the work orders or tasks to your maintenance personnel for completion.
A few of the more sophisticated software platforms will even allow you to assign your property maintenance work orders to outside vendors to bid on and complete. If you work with a lot of outside vendors and contractors, you may be required to collect copies of their liability insurance, workers compensation certificates, licenses, or tax identification documents. Find out whether the commercial property management platform you are considering offers tools to make this process more efficient and reliable. If it doesn’t, you may want to evaluate an application or service that performs these functions outside of your commercial property management platform.
For example, Homee On Demand allows PMs to field requests for handymen, HVAC specialists, plumbers, electricians, and more. Each of these experts is background-checked for criminal histories and qualifications to verify their reliability. Furthermore, each job is tracked by the minute, not the hour. This way, you only pay for the time the maintenance tech spends working.
Property accounting is, arguably, the single most important aspect of a property manager’s duties. Most modern integrated property management solutions offer sophisticated accounting packages designed specifically for managing real estate, but choosing the “right” one for your needs is absolutely critical to the success of your business.
The complexities of evaluating different accounting software feature requirements for your property types and management company demand much more time and attention than we can give them here so those will be covered in a future article.
The software you ultimately select for your property management company is likely to have the greatest impact on your accounting department and their processes. If you aren’t the head of accounting for your property management company, be sure to involve your CFO or Controller in the software evaluation process and make his or her feature requirements for a new system your utmost priority. You won’t go out of business if your maintenance department can’t figure out how to upload pictures of the work they completed, but you will go out of business if you can’t collect your rents or pay your bills on time.
Selecting the right commercial property management software isn’t necessarily easy. However, by considering the features and points listed above, you can identify the software that is the best fit for your needs.
Want to learn more about property management software? Download the Homee guide to property management software at the link below: