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The Downward Spiral of Investment Real Estate

Last week, I signed up a new investment real estate client who owned a shopping center in the suburbs.

When I pointed out several areas of deferred maintenance that he hadn’t been keeping up with, he told me that it was because a few of his tenants were delinquent and he didn’t want to put more money in the property for tenants who weren’t paying. When I questioned him further, it turns out that while most tenants were paying their rent on time, a handful weren’t.

When I asked the tenants why they weren’t paying, they claimed that business was down, because the center wasn’t has nice as other centers in the area. The tenants that were paying on time also expressed frustration at the state of the property and while it wasn’t terrible, there was definitely a lack of attention to detail.

This is viscous cycle of investment real estate that can turn good properties into bad ones. Luckily, this owner found me and I was able to institute my turn around plan before it was too late.

  1. Re-establish a positive relationship between property management and the tenants. The tenants have grown so accustom to the landlord either not being there, ignoring problems or making promises without delivering that they simply didn’t believe the landlord cared about them, their business or their struggles. My first step was to speak to each of the tenants and listen to their concerns. Because they never met me before, they were skeptical, but hopeful.
  2. The second step is credibility. The owner had none. I had to prove to the tenants that they could rely on me to address their concerns. I did this by visiting the property frequently and made sure that I delivered on my promises.
  3. The third step was to take active steps towards addressing their concerns. Some of their concerns were more expensive than the owner could afford or would take time to do. Others were smaller and easier. I addressed the small items quickly. On the larger items, I communicated an active plan with the tenants with steps that I made sure that we achieved.

    The final step is consistency. I consistently lived up to my word, and set the expectation for the tenants to do the same.

If your investment real estate is falling into a viscous downward spiral, contact REMA before it’s too late.