Miami's real estate market is one of the fastest growing in the U.S. Over the ten-year period from Q1 2013 to Q1 2023, property prices have nearly tripled.
It follows that commercial property revenue will increase, but that's not always the case. How can property owners maximize revenue? One way is through lease audits and cost recovery.
Unlock your potential today with expert insights on revenue optimization in Miami, FL. Keep reading to discover how lease audit and cost recovery can maximize revenue for commercial property owners in Miami.
Understanding Lease Audits
A lease audit is the process of analyzing a landlord's books and records to make sure the expenses that are passed on to the tenant are fair and accurate. It examines the operating expenses of the property investment business.
The question being answered is whether or not the expenses meet the terms outlined in the lease agreement. Does the bookkeeping comply with the lease agreement?
Common Leases in Miami
Once you get around the zoning codes and local laws in Miami to obtain the real estate property you desire, you have various common leases from which to choose. The most common leases in Miami properties include the following:
Full-Service Lease
With a full-service lease, the rental agreement specifies that the landlord covers all of the operating expenses related to the property. It means things like property taxes, insurance, and maintenance expenses.
Some of these leases have something called an expense stop that sets a cap on what the landlord is responsible for paying for operating expenses.
Modified Gross Lease
This is a modified agreement where the tenant pays a portion of the operating expenses after the first year of the lease. Both the tenant and landlord are responsible for a portion of the operating expenses.
Key Areas for Cost Recovery
When it's time to take a look at these leases and the operating expenses, that's called cost recovery. Lease cost recovery includes focusing on some key areas when conducting a lease audit:
- Operating expenses
- Common area maintenance (CAM) charges
- Utility costs
- Property tax pass-throughs
Operating expenses include things like marketing and advertising expenses, property management, repairs and maintenance, insurance, and property taxes in addition to recurring costs necessary to keep the rental property in good shape.
Benefits of Lease Audits in Miami
Lease audits identify billing errors and discrepancies. They help you recover lost revenue. They ensure lease compliance to reduce legal risks and improve the tenant-landlord relationship.
Conducting Effective Lease Audits
To be effective, lease audits need to be on a regular schedule. Gather the necessary documentation. Use professional auditors or hire an in-house team. Leverage the best technology to ensure efficient audits.
Best Practices for Cost Recovery
Always practice clear and transparent communication with tenants. Implement robust lease administration systems. Stay updated on market trends and benchmarks.
Lease Audit and Cost Recovery: Boost Revenue
Now that you know the importance of lease audit and cost recovery practices, you should implement regular audit processes in your property investment business.
Are you looking for property management in Miami and a professional to conduct an audit? We at PMI Biscayne Bay offer a complete portfolio of property management services, including audit services for landlords. Contact us today through our website or by calling 305.204.286 and let us deal with the day-to-day responsibilities.
