Property management is a multifaceted career that requires a diverse skill set, and an ability to adapt and make fast decisions in the face of emergency. A property manager’s responsibility is far-reaching, and requires a balancing act of customer service and keeping an eye on the bottom-line. While providing a good environment for tenants is crucial, the importance of finding the right tenants for the environment can’t go overlooked. These common property management mistakes can be costly, and making sure to avoid them will save you a lot of money in the long run.
Tenant screening is widely considered to be the most important step in protecting your property. A bad tenant is bad for business. Not paying rent, expensive evictions that can take months to complete, sabotage from bad reviews, and damage to the property are just a few problems that an unruly tenant can cause for your business. It is absolutely essential to do your homework on potential tenants with proper tenant screening.
There are 3 important elements in every tenant screening.
- Credit History
- Criminal Background
- Eviction History
These factors will give you some insight into a potential tenant’s character, and help you decide if they are right for your property. A bad credit score, recent criminal background or eviction should be an immediate red flag. Giving a tenant the benefit of doubt based on a first impression can be a costly mistake. One bad tenant can cost your business thousands of dollars in lost profits. In addition to costing you money and a bad headache, an unruly tenant can also cause problems for other tenants (loud noise, smoking in unit, rude demeanor etc.) It’s best to do due diligence, and make sure you are thoroughly screening applicants.
Not All Tenant Screening is Created Equal
It is important that you use a FCRA / HUD compliant screening to make sure you are getting an accurate report on the applicant. Make sure you do some research on the screening company to see if they are a trustworthy service. Unfortunately, there are many screening services today that cut corners and provide inaccurate or outdated information. If your screening software is providing inaccurate information on new applicants, this can create a PR nightmare for your property management business and bring in poor reviews.
This is another common mistake that can be corrected with some market research. This will require you to take an honest look at your business. How does your rent compare with similar properties in the area? What amenities are you offering? What value are you offering your tenants? These questions can help you understand if you are charging a fair price.
Charging Too Much
If your building is older, more outdated and offers fewer amenities than the competition, but you are charging the same rent, that will explain why you are having trouble filling your units. The market is always changing, and housing prices are constantly in flux. While some programs like Zillow can help you asses value, you shouldn’t rely on any one digital tool. Do some research and make sure you periodically monitor the competition. Also, find out what amenities the competition are offering. Sometimes a simple addition such as a workout space can increase rent value, and the investment will be worth it in the end.
Charging Too Little
Sometimes you need to charge more. You don’t always have to lower the price to beat the competition. Keep an eye on the market, and know your worth. Charging too little can be a turn-off for some residents. It can leave them wondering why the discount is there, and they may correlate the discount with a lacking of service.
In general, rent should go up slightly every year along with inflation as the economy improves. Make sure you are offering a price that is fair for your business and tenants.
Property management can be a tough business. You will hear your fair share of excuses and sob stories, but it is important to have a policy that you stand by firmly. If you have a late fee, charge the fee whenever a tenant pays late. Offering leniency in these sort of situations can snowball into bigger management problems. One late check will turn into two, and cutting some residents slack will make you seem biased. As a manager, it is your job to enforce policy. You can not cut corners in this area.
If there is a situation that requires eviction, act immediately.
As a property manager, it is important for you to be familiar with the laws of your state and know how to proceed. The longer you wait to begin the eviction process, the longer the trouble will drag out. These situations should be handled according the the agreements in the lease. If a lease is violated, it is time to take action. Think about options, and try to find the cheapest and fastest solution. In some situations, cash for keys may be the best way to proceed.
Managing a property can be a messy business, and if you do it long enough you are sure to have a problem tenant eventually. Having a firm policy that property managers enforce strictly will help prevent these situations, or at least fix them sooner.
Periodic apartment inspections will tell you two things. What kind of quality tenant is living in the units, and what amenities need an update or replacement. This is an easy way to stay up to date on the condition of your property, and will help you decide if there are tenants that may not be eligible for an extended lease.
Occasional inspection will also give you a good idea on what amenities you are offering across the board. Maybe some units are more recently renovated. It is important to keep track of the health of each unit.
These inspections will allow property managers to make sure tenants aren’t violating their lease agreement. Are residents obeying the pet policy? Is there illicit drug use happening in the units? An occasional inspection will help you determine these things.
How do you store documents? Are you paying a premium fee for a la carte services that you could get cheaper with a subscription? Do you have a budgeting and accounting system? Do you have a convenient payment system for your residents?
As your business grows, it is important to standardize your process. Google docs and excel files may work early on, but as your units grow and tenant records begin to take more filing cabinets, it is wise to streamline your workflow.
ValencePM is designed for multifamily properties that need to organize and conduct their workflow in one place. Our features cover everything a property management business needs to function in day to day operation. As your business continues to scale, our management software can help you stay organized and in control of your properties.
In conclusion, avoiding these common management mistakes can save you from a lot of headaches. Small changes in operation can mean big changes in profit and customer satisfaction. Take action on improving your business today.