5 Property Management Mistakes
5 Property Management Mistakes. Image courtesy of digitalart / FreeDigitalPhotos.net
“It doesn’t matter how good you are in the property management business, there’s always something you’re can get sued for,” Lori Burger, CPM and the Institute of Real Estate Management’s 2014 president-elect, said at a property management forum Thursday during the REALTOR® Party Convention & Trade Expo in Washington, D.C.
Part of it is just the nature of the business: Balancing relationships and contractual agreements with both property owners and renters can leave property managers open to litigation from all sides. To mitigate this, Burger outlined five common mistakes property managers make and five ways they can protect themselves.
Mistakes
- You don’t have a written property management agreement. Burger calls this “your greatest protection.” The agreement should clearly state your responsibilities as the property manager and your client’s responsibilities as the property owner. Do not perform work that is not listed in the agreement as part of your management duties.
- You’ve pieced together a makeshift lease agreement. “Don’t take a lease agreement you found somewhere and edit it to meet your needs,” Burger said. Draw up a lease with your attorney, and make sure it complies with laws while still meeting your needs.
- You don’t put the security deposit in a proper trust account. If you hold a renter’s security deposit for the owner yourself, you may be required to pay interest on it.
- You don’t make the tenant sign a move-in and move-out form. “You should personally do a move-in and move-out inspection and checklist with the tenant,” Burger said. You need to be able to document the condition of the apartment at both move-in and move-out times. Take photos and video, and save them to the tenant’s file. One thing many property managers overlook is documenting the serial numbers of a unit’s appliances. That way, if tenants take appliances with them when they move out, you can track them down more easily.
- You incorporate a lease-purchase agreement into the lease agreement. Should an issue with a tenant arise that lands you in court, a judge could have a hard time determining whether the property is purchased or leased — thus making it more difficult to determine what your rights are as the property manager. Keep lease-purchase and lease agreements separate.
Successful Strategies
- Keep properties close together. You might not have the staff to manage properties that are too far apart from one another. Distance shouldn’t be a factor that makes it difficult for you to keep an eye on your inventory. Generally, properties shouldn’t be more than 25 or 30 miles apart, Burger said.
- Select tenants very carefully. “I would love to believe that I am the best judge of character there is, but I’m not,” Burger said. “It’s unfortunate when people you think will prove to be good tenants turn out not to be.” Have strict criteria for renters to meet, and do not make exceptions.
- Be visible to tenants. Keep in communication with tenants, and be responsive to their needs. Most times that will give you an opportunity to swing by and check on the property.
- Stay in touch with the client. “We’re not just collecting rent,” Burger said. “We’re there to preserve, protect, and enhance the owner’s investment.” She said her company once set up roof inspections for all its clients for $250 apiece, giving the owners a chance to opt in or out. “If the owner knows you can add value like this, you can turn that client into a referral,” Burger said.
- Charge what you’re worth. Many will be tempted to lower their fees to land the deal. But that can backfire. “You need to be compensated for the work you do,” Burger said. Don’t sell yourself short, and if you do extra work, charge accordingly for it.
