A New Age in Property Management
At Full Service Property Management we like to pride ourselves on forward thinking. We are not satisfied with the status quo — collecting rent and repairing broken appliances. We are constantly pushing ourselves and the envelope in search of new and innovative solutions to residential property management.
Property management as an industry is a very dogmatic, archaic industry that has been slow to change and respond to new ideas and solutions. Heck, it took the industry about 20 years to realize the internet was here to stay. Now most PM software offers portals for tenants and owners alike. But even then features are limited relative to other industries. And some PM firms are still shackled in the ole paper chase — creating, printing, signing, and filing pages upon pages of hard copy.
The Solution – a proactive blueprint for property management success
The industry as a whole is reactive. Don’t pay your rent and we’ll come lookin’ for ya. Have something break and we’ll send someone out to fix it.
What if there was a plan to turn the operation upside down? Instead of being a reactive management company we were a proactive management company. What would that look like?
Proactive Rent Management
Why reduced late fees is a good thing
This part may sound weird, but the goal will be to cut late fees in half. It is unrealistic to expect to eliminate them. But a 50% reduction is within reach. How could such a reduction benefit a PM company? Because it makes everyone happy. The owners are thrilled they are getting their rent on time more often and will be quick to refer others. The tenants are happy that they are saving on late fees and that they have found a PM company that cares about them. Internally the whole operation is running more efficiently and smoothly. Less time is spent doing collections. Everyone wins.
Identification of struggling tenants
Instead of waiting to see who is going to be late this month, what if the company engaged some strategies to help struggling tenants? What would that look like? First off would be the need to identify who is struggling and who is not. This requires continual monitoring, inquiring, and engaging. People with financial struggles often are not keen to share their situation with others, particularly debtors. So a combination of incentive strategies coupled with trust building is required. The campaign must be continuous since any tenant at any time could be “flying high in April; shot down in May”. So the program, the incentives, and the trust building must begin at lease signing and then never stop.
There are a myriad of ideas that can be applied to this situation. The easiest is an incentive plan that rewards tenants who provide early notification for intervention. Providing resources and tools to the tenants can go a long way to alleviating future challenges, including rolling lates.
This one is far easier than the rent management, and a small percentage of PM companies are already engaged in this. It starts with a thorough 100+ point inspection of the property at each turnover to identify items before they become problems. That common task is extended to scheduling and bundling of common, periodic maintenance items over and beyond items identified in the inspections. Exterior examples include roof & gutter cleaning, landscape maintenance, window washing, and pressure washing. Interior examples include furnace servicing, refrigerator coil cleaning, and exhaust fan service. The scheduling of each property can be combined on to a master schedule for the whole company to help maintenance plan for busy and slack periods. The preventative maintenance increases revenue for the company while saving the owner from the costs associated with crisis management.
The next step is to combine the maintenance schedule for each property with financial tools to create a long term plan for larger repairs and remodels (reserve analysis), as well as setting goals and an exit strategy (if desired). Capital reserves are funded and economic/demographic projections are incorporated into recommendations for long-term planning/management. An increased management fee is charged for this intelligent management. The goal is to convert 40-70% of the management portfolio to this system within 5 years.
The company is happy because revenues are up. The owner is happy because the long term plan that real estate requires has been addressed, and the property is being taken care of better than their own, personal home. The tenant is happy because things are not breaking all of the time and rent is being paid (more) on time. Everyone wins!!
Reactive management is the first cousin to crisis management. Proactive management is the next step towards 21st century property management.
Putting it all together
Now we have a program to help keep tenants on time with their rent payments. It is not perfect, but it is a start. And not all of the late pays are going to go away magically. But a 50% reduction is not an unreasonable expectation. There is a preventative maintenance plan in place. This works in concert with current maintenance practices.
An intelligent management system is put into place which expands the planning horizon of the average owner,