5 Things to Keep in Mind During a Commercial Building Renovation Project
As a real estate investor, there will be times when renovations are necessary at your commercial properties. Sometimes renovations are necessary in order to prevent a building from falling into a state of disrepair. Other times, renovation is a choice made by an owner to update the look of their building and make it more desirable to both tenants and customers/clients. The renovation process can be overwhelming! Between the budget, scheduling with the contractors, and figuring out how renovations affect the financial statements, there are many moving parts. A Miami property management company like JMK Property Investment helps investors throughout the entire renovation process. From start to finish, we are with you every step of the way. There’s no need to feel overwhelmed when you have an experienced property management company on your side.
Let Your Miami Property Management Company Determine What It Will Cost
The first thing to keep in mind when undertaking commercial building renovations is the total cost. Go into a renovation with a budget in mind. Understanding your financial limits will prevent a renovation project from becoming too costly. JMK Property Investment will take bids from various contractors in the area to make sure you are getting a fair, competitive price. Once a contractor is selected for the job, we will go over the costs as a team.
Beyond seeing a total cost, it’s beneficial to get a detailed breakdown so you know exactly what is being spent on materials, labor, etc. As the project progresses, it’s essential to compare the budget to actual financial reports to determine variances. The variances allow investors to know if they are spending too much or if they have some extra cash to spare.
Does the Renovation Add Value?
As you are considering a renovation to your commercial property, think about whether or not the renovation truly adds value. For example, does adding an outdoor promenade to your shopping center make sense? On one hand, it could attract customers to your shopping center. On the other hand, it’s an expensive project and may not be something customers take the time to use. With many renovation projects, there is no clear-cut answer about whether the renovations will add value to the property in the future. The important thing is to weigh the pros and cons and make the best decision possible at the time.
Who Will Do the Work?
As mentioned above, JMK Property Investment will take bids from local contractors for your renovation project. The bidding process keeps things competitive and ensures that you are getting a reasonable price. Since we have worked in and around Miami for years, we have built good relationships with many contractors. We carefully vet each contractor before the project begins. We make sure they have proper insurance and licensing so that there are no issues in the future. Choosing contractors is a significant task. Let your property manager take this task off your hands. Rest assured that we will pick a highly-rated, experienced contractor to handle the renovations.
What Does the Schedule Look Like?
Scheduling renovation work is vital for commercial buildings. Renovations are often disruptive to the daily business at the commercial building, though, so all parties involved should know the schedule. For example, if you are renovating an office building, you will want to let your tenants know when and for how long their office will be unusable and help them find an alternative space to work in the meantime.
If you own a customer-facing business like a shopping center, you will want to let customers know about your renovations. Proper signage is essential in order to redirect/detour customers away from the construction site. Also, you will want to know when the renovation should be completed. Keep in mind that renovations often take longer than planned. If your renovation project should conclude in June, don’t promise to a new tenant that they can move in during July. Schedule in buffer time so that you aren’t in a tough position if renovations take longer than planned.
How Does the Renovation Affect the Financial Statements?
Renovations can get a bit complicated when you record them in the financial statements. Even though renovations cost money, they typically fall into the assets section of a balance sheet and in the cash flow statement under the investment in property, plant, and equipment category. This is because renovations are considered capital expenditures. A capital expenditure increases an asset’s basis. If the renovation cost can be capitalized, the costs then amortize or depreciate over the life of the asset.
By working with JMK Property Investment, you don’t have to worry about knowing the detailed rules and regulations regarding financial reporting. We have state-of-the-art financial reporting software that allows us to create detailed monthly reports so that you always know what is going on with your assets. A careful review of financial statements is especially critical during renovations. In the years following a major renovation, analysis of financial statements can show whether or not the renovation is adding value.
JMK Property Investment Can Help With Miami Property Management
Renovating your commercial property is exciting! It’s a great way to revamp your building to bring in new tenants or to attract new customers/clients. The look and feel of a commercial property are critical to the success of the investment. JMK Property Investment, a Miami property management company, can help you decide when to make renovations and what renovations should be made. From creating a budget to finding the contractors to do the work, we are with you every step of the way. For more information about our property investment and management services, contact us today. We look forward to helping you with property renovations and more!