4 Most Expensive Mistakes Property Managers Make
Life as a property manager means a constant balancing act. You’ve got to keep your current tenants happy with repairs and good service, you’ve got to find new tenants to keep your open inventory low, and you’ve got to work hard to keep the whole enterprise profitable.
With so many moving parts at any given time, it can be difficult to be sure you’re always making the best financial decisions for your properties. From keeping rents attractive enough to get new tenants but high enough that you’re not losing money to knowing which repairs need to be made now and which can wait, there’s a lot of risk involved in your job.
These are the 4 most expensive mistakes property managers make, and how to avoid them:
Not Screening Tenants
When you’re desperate to fill that rental property, it can me easy to just sign up the first person who calls your office and shows up with a security deposit. But that rush can quickly backfire, costing you time, money, and even other tenants depending on the situation.
Think of it this way: A car dealership would never let someone drive off the lot with a $60,000 vehicle without first running a full credit check and verifying that payments will be made reliably, so why should you let someone rent space in your $200,000 home if they aren’t going to be able to pay for it?
Not running a thorough credit screening and background check can cost you money in a variety of ways, including:
Lost rent from non-payment
Expensive repairs if the tenant is destructive
Lost income from other tenants if the problem tenant is aggressive or disruptive and drives people away from your property
Expensive eviction and legal proceedings
Decreased reputation of your rental properties, making them more difficult to fill
Before you let any new tenants sign that lease, be sure to run as complete a background and credit check as possible, and call their listed references. Verify their income sources, as well as any debts that are owed to be sure that the ratio of income to debt is low enough that paying rent shouldn’t be problematic.
Check for any criminal convictions or history of police reports that could be an issue. Talk to prior landlords to see if there were any major complaints from other residents or if repairs needed to be made when the tenant moved out.
Taking the time to fully vet any potential tenants can help you find the best people to live in your rentals, helping you get rent collected reliably and on time, decreasing the need for post-move repairs, and keeping everyone in your rental community happy.
Not Regularly Inspecting Properties
Finding a long-term tenant who pays rent on time each month is a dream for many property managers.
You get the reliable income monthly, and the time and expense you need to invest in finding new tenants frequently is decreased.
However, having people occupy your properties long-term without getting inside to check on their condition can leave you with expensive repair bills and possible renovations when those tenants do move out.
Pipes leak, drywall gets damaged and broken, and carpets gather mysterious smells and stains, all with little to no notice of many tenants. Over time, these “little” issues can become big and expensive to fix, meaning you’re out a lot of money when all is said and done.
Rather than just letting things be for the entirety of a tenant’s residency, make a plan to get inside every unit and property on an annual basis for a quick check-up inspection. Look for signs of leaks, problems with electricity, infestations, and other damage. Repair anything you find.
Write an annual inspection into your leases, and work with your renters to schedule these inspections. If necessary, bring in a separate inspection company to complete all inspections in a few days’ time to take the pressure off yourself and your team.
While it may cost you some money to complete these inspections each year, you’ll save money in the long run by catching issues before they become major.
Not Vetting Contractors
The upkeep required on even a small set of rental units can be expensive. You’ve got appliances to keep in good repair, flooring that needs to look nice, plumbing and electrical to keep up to code, and a whole host of other items, small and large.
Staying on top of the sometimes seemingly endless list of repairs and upgrades to each of your units can be daunting, and you may need to bring in contractors to help you finish the job.
But trying to cut costs by not hiring a fully vetted and licensed contractor can cost you big time.
Whether you get stuck with shoddy work that needs repaired, one of your contractor’s employees gets injured and you have to pay for the medical bills, or an unlicensed contractor doesn’t pay fair wages, you’re taking a gamble when you don’t take the time to make sure you’ve hired a reputable contractor.
To protect yourself, take the time to interview and check anyone you think of hiring to do work on your properties.
Some things to be sure to check include:
License: Be sure that your contractor is licensed if it’s required in your area, and that they’re in good standing with all local governing bodies.
Insurance: Check that your contractor is bonded and insured, and carries workers’ compensation insurance if required where you are.
References: Ask for a few of your chosen contractor’s references among other property managers or commercial building owners and call them.
Lawsuits or complaints: Search for any pending or past lawsuits that your contractor may be involved with. A couple suits isn’t that much to worry about, but several is cause for concern.
Skimping on Marketing
A great rental property should market itself, right? Just putting up a Craigslist ad should do the trick, and you’ll have potential tenants lining up to sign a lease, won’t you?
Not so fast.
The old adage that you have to spend money to make money holds true for marketing your rental properties. If you’re not taking the time to properly advertise everything your properties have to offer, even when you don’t have vacancies, you’re running the risk that you won’t have new tenants waiting in the wings to fill empty spots when they come available.
For every month that a unit sits vacant, that’s money you’re spending on keeping the utilities up and running and also losing out on the income from rent. Invest in high-quality photography and even some walk-through videos of your units. Make sure you’ve got detailed floor plans for every type and layout of rental, along with full descriptions of any amenities you offer.
And if you don’t already have a website, get one up as soon as possible. Having an online presence is crucial to getting noticed by potential renters and giving you a wide pool of candidates to choose from when you next have a vacancy.
Software Supporting Successful Property Management
As a property manager, you can feel pulled in a thousand different directions on any given day. You have to manage your employees, collect rent, keep track of repairs, and show empty units to potential renters.
Staying on top of all the to-dos, information, and finances of your property management company is key to ensuring that your business is stable and thriving for years to come.
With @Assist Sugu, we make it easy for you to manage invoices and accounts payable, collect and store renter data, manage employee workflows, and more, all with a cloud-based software platform that’s easy to use. Access your important data anywhere you have an internet connection, so you can take some time off for a vacation! Try Sugu for free today!