The real estate industry is a progressively competitive one. This is why real estate businesses must stay on top of their game. Although there are many ways to do this, including diversifying their portfolio and exploring up-and-coming neighborhoods, the most vital way is through business administration.
Excellent administration strengthens businesses from their core, which solidifies their stance within the industry. Like in every industry, a real estate business requires comprehensive administrative knowledge, whether it’s efficient management or effective customer service. This is why many aspiring and established real estate business owners opt for a Master of Business Administration (MBA) degree to hone their administrative skills.
Today’s digitalization has made it possible to easily obtain this MBA online. The online MBA from St. Bonaventure University covers networking and skill development alongside marketing, finance, and business analytics. These universal tools can be an effective way to better manage a real estate business.
This article will also explore the positive impact of good business administration on a real estate company.
Seven ways business administration is important
A business owner must effectively manage every part of their company to promote its success. These are the seven benefits of good business administration in the real estate business:
- Efficient management
Business administration means managing every aspect of a business to ensure it is stable and growing well. For real estate businesses, good administration keeps all systems that are vital to a company’s growth functioning smoothly.
Effective tenant management is the first touchpoint in this context. An efficient administrative system responds quickly and effectively to tenants’ inquiries. A tenant may ask about a part in the lease terms they don’t understand or even make complaints about maintenance issues. The company must address these situations promptly. This enhances tenant satisfaction and retention rate. Like a concierge service in a hotel — the faster and better the response, the happier the customers.
Another vital area is the lease agreement. Administration must handle lease agreements with care and precision, clearly noting the start and end dates, rental amounts, and other specific terms. This is highly important in the property business, as it helps businesses keep track of contracts. It can also help them avoid unnecessary altercations with tenants and clients.
It can help simplify rent collection processes too. Good administration means that businesses have adequate records, which enables them to collect rent regularly. It also allows them to issue receipts promptly, and in case of any financial issue, they can accurately track the company’s transactions. An efficient administration will streamline operations and improve tenant and client satisfaction. This, ultimately, drives growth for businesses.
- Strategic planning
Strategic planning usually involves a multi-faceted approach when it comes to real estate management. First, market analysis plays an integral role. Property businesses must regularly evaluate the market, keeping track of factors like price trends, rental yields, and the overall demand-supply situation.
Good business administration uses this information to identify opportunities and threats that can inform decision-making. For example, an increase in demand for rental properties in a specific area might prompt a property business to build additional units there.
Second is location. Real estate is big on location. Housing in one area may be more expensive than others due to several factors and landmarks. A good property business must analyze different geographic regions based on their potential return on investment (ROI). This analysis isn’t only about current property values but also factors like neighborhood amenities, future development plans, and demographic trends. For example, a location with plans for a new public transit hub might be a profitable target for property acquisition, anticipating future demands. Why? Because it makes their movement more accessible. Business administration provides the analysis skills and strategic planning abilities to take advantage of demand such as this.
Next, businesses must formulate and execute property acquisition meticulously. It’s not only about selecting which properties to buy, but also negotiating the terms, arranging finances, and completing legal procedures. This is where good business administration comes in. A correctly administered real estate company will seamlessly coordinate these activities to ensure all opportunities are seized and potential pitfalls are avoided.
- Financial oversight
Financial oversight provides a solid foundation for businesses’ future growth and stability. A practical example of this is the accurate tracking of revenues. This involves keeping a meticulous record of rent payments to ensure revenue flows consistently and that the company promptly addresses defaults. This way, businesses can keep track of profits and income.
Like revenue, expenditure tracking is equally essential. Administration should record and analyze every cost associated with property maintenance, renovations, staff salaries, and other operational expenses. This allows businesses to track spending and how they can optimize the expenditure to increase profitability. For instance, a renovation could mean an increase in rent.
With income and expenditure comes tax. Taxes are financial obligations and the responsibility of the administrator. It’s crucial to calculate and pay taxes, such as property taxes, income taxes, and other applicable ones, timely. Accurate tax management will help the business avoid legal issues and penalties.
Ultimately, keeping an eye on cash flow can boost business success. Good administration monitors the inflow and outflow of cash from all business activities. It helps the company understand its liquidity position, identify potential financial risks, and make informed decisions about future investments.
- Risk management
Risk management is an essential component of business administration that can critically determine the success of a real estate business. Companies that identify potential risks and create contingency plans can easily thrive in uncertainty.
First, administrators should consider property damage, which is a common risk in the property business. Property damage could range from minor issues, like plumbing leaks, to major accidents, like fire or natural disasters. Effective business administration involves preventative measures, like regular property inspections and maintenance. It should also include contingency plans, like comprehensive home insurance coverage, in case of disasters. This ensures that the business can quickly recover and continue operations, even with significant property damage.
Besides property damage, another significant risk is vacancies. Vacant properties don’t generate income but still require the cost of maintaining them. A reasonable administrator will mitigate this risk through effective marketing. They push the property out, through their marketing team, on social media platforms, emails, and ads. They also set aside a financial cushion during the marketing period to help cover costs during unavoidable vacancies. Managing vacancies effectively can go a long way for a real estate business’s financial stability.
Legal disputes are another area of potential risk. Disputes could arise from various situations — a disagreement over lease terms, issues with local zoning regulations, or even disputes with contractors. Situations like this are almost unavoidable, and how administration handles them is crucial.
Businesses must have robust legal support to handle disputes and a strong understanding of all relevant laws and regulations to avoid potential legal pitfalls. They could also have mediation mechanisms to resolve disputes amicably without involving legal teams. Managing these risks enhances the resilience of a property business. It ensures that the company is prepared for potential setbacks and can recover quickly when they occur.
- Marketing and promotion
Marketing and promotion are essential facets of business administration, and their efficacy can significantly impact the success of a property business. Like the marketing strategy used to reduce vacancies, the right strategies can also help a business reach its target audience and increase revenue through online listings.
Online listings offer a platform to showcase properties to a global audience. It’s an online profile with the business name, phone number, address, and other important information listed. Businesses can provide high-quality images of properties, detailed descriptions of what is offered, and necessary information, like price and location. But it’s also about optimizing listings for search engines and using data analytics to understand what works best. This is similar to how e-commerce businesses manage their online catalogs.
Businesses can also opt for traditional methods, such as print ads and billboards. Though they seem old-school, these methods can effectively target a local audience, especially when they are well-designed. For instance, a business may use billboards to target retirees for properties in an area with attractive features, like retro clubs or vintage game areas. Elders may access billboards faster than a social media advertisement. Another example is placing a billboard near a busy intersection. It could capture the attention of hundreds of potential tenants daily.
Another effective marketing strategy is having a solid brand identity. Real estate is an expensive investment, and customers are likely to trust a recognized and respected brand. Administration should oversee creating a professional logo and maintaining a consistent tone and style in all communications. A strong brand identity builds credibility and trust, which can make a business the first choice for potential tenants.
- Customer service
Customers will have enquiries, complaints, and reviews for any business. It may be something they don’t understand in the lease, a kitchen sink that keeps clogging, or how well they enjoyed the rental outlets. Whichever it is, effective communication is the first pillar of customer service.
In the context of real estate business, effective communication could include explaining the lease terms transparently, notifying them of renovation work in advance, and replying to their reviews online. An excellent administrative system ensures that these communications are handled promptly and professionally. For instance, it could leverage technology, like chatbots or artificial intelligence, to automate responses to common queries or to provide updates about maintenance work.
Improving customer service has numerous benefits. For example, tenants that can easily access customer service will develop trust, and this can lead to enhanced tenant retention. This is significant because finding new tenants often involves considerable time and expense. Satisfied customers can also become advocates for a business. They may recommend the company to their friends and family which will attract new tenants. Good administration lays the groundwork for superior customer service, which creates a virtuous cycle that benefits both the tenants and the business.
- Performance evaluation
Effective administration creates systems to capture and organize crucial data about different aspects of the business. This data could be about revenue generated, operational costs, and occupancy rates, for example. These data points, like the readings on a car’s dashboard, provide a clear picture of the business’s current performance.
Once data is collected, it needs to be analyzed; this is where good administration comes in. Good administration ensures that the data is accumulated and turned into actionable insights. For example, if the data shows a high tenant turnover rate, the administration could investigate why. It could be due to high rent, poor maintenance, or inadequate customer service, for example. Performance evaluation involves observing these factors and finding ways to improve or correct them.
Furthermore, it also involves benchmarking the business’s performance against industry standards or competitors. Good administration can facilitate this by staying on top of market trends and competitor strategies. Administrators research and observe the trends in the real estate industry, whether their competitors are focusing on social media marketing to push their business successfully or there’s an updated regulation in the area.
Performance evaluation helps a business identify strengths and weaknesses, which paves the way for strategic improvement. It can also guide decision-making processes, helping a business prioritize areas that need attention or investment. Most importantly, it keeps the business aligned with its long-term goals by providing a reality check on whether the company is on track or should adjust its course, especially with marketing.
Good business administration is essential to the success of a real estate business. Effective business administration directly translates into tenant satisfaction and improved business performance, whether through efficient management of day-to-day operations or marketing and promotion. This, ultimately, contributes to the growth of a property business.