The Importance of Establishing an Annual Inventory in Property Management

Importance of Establishing an Annual Inventory in Property Management

Taking regular inventory is critical for having proper control over assets. This also holds true for property management, who not only have to keep track of inventory but also need to implement strategies for maintaining a respectable return from their assets. Properties should have a policy of conducting an annual inventory, which will provide the property manager adequate information to review and control the assets. Here are the main advantages of the annual property inventory.

Estimating Replacement and Insurance Costs

Inventory will provide detailed information about assets that includes supplies, fixtures, and furnishings. This information will help the property manager in making a decision about the type of insurance required and the coverage limits. Secondly, for taking insurance itself, you need to provide an accurate inventory of the assets to the insurance company. Failure to accept the proper coverage will mean increased risks, while paying for coverage on nonexistent assets will be a waste.

Reviewing each unit annually for the inventory will also help the property manager in detecting potential issues early, and repairs can be done immediately to prevent expensive breakdowns. For instance, timely cleaning of the HVAC unit could mitigate costly damages and replacements. While taking inventory, the usual checklist for units should include:

  • §Furniture
  • §Appliances
  • §HVAC
  • §Bathroom fixtures
  • §Window treatments

If the units are fully furnished, then convenience items like dishes and linens will also be included.

Preserving the Image of the Property

Appliances and property tend to become damaged, succumb to time and decay, or they simply seem to disappear over time, especially in the high frequent areas. This will make the property look quite shabby as years go by. Regular inventory will help property management detect items that are missing or damaged. Replacement of damaged or old items such as trash receptacles, flowerpots, and decorative fixtures can improve the image of the property substantially. With regular inventories, the property manager can figure out items that require frequent replacements and repairs. Such items can be replaced with things that are more durable, or they could be shifted to places where the traffic is not heavy.

Control over the Budget

Annual inventory covering the whole property will provide critical information that can be used for maintaining better control over spending and overall budget for the next year. Costly items such as digital devices, maintenance tools, and office equipment should be tagged with identification codes that will help in monitoring and tracking them more closely. Regular inventory will also promote a better program for asset management, which will be able to identify wasteful spending. Inventory will also help property management to record losses while filing tax returns and valuable data will be available for making more accurate budget estimates.

Forming a policy and introducing an effective system for taking inventory every year has many advantages for property management. The property manager will be able to exercise tighter control over the budget, and reduce wasteful spending which in this recession, could be the difference of creating strong financial health or insolvency. Damaged and old stuff can be repaired or replaced in time to avoid and more expenditures and to avoid a reputational hit, while the image of the property can remain unblemished. 

Handling Security Deposits for Property Managers

Handling security deposits for property managers

Almost all property owners like to have a security deposit from their tenants. This deposit is used for repairs if the unit is damaged by the tenant. The money is kept in a separate account and returned at the end of the tenant's lease. However, the security deposit has always been a contentious issue between tenants and property management or property owners.

In certain instances, where the property owner has not returned the deposit, the court has awarded twice the amount of the deposit as damages to the tenant. Therefore, the property management has to be very careful while handling matters concerning security deposits and here are some pointers that can make this task easier.

Know State Laws

Property management should be clear about the state laws regarding following aspects:

  • §How much amount can be collected as a security deposit
  • §After receiving such a deposit, how fast it should be deposited in the required account
  • §Whether any interest has to be paid to the tenant, and how such payment should be made
  • §Whether any reports need to be generated regarding the deposits

When it is a residential property, all state laws are clear about equal treatment, and being nondiscriminatory in charging these deposits.

Do not Categorize it as a Type of Rent

Security deposits have to be returned to the tenants at the end of their lease provided they have not caused any damage. Therefore, they should be treated as a deposit and not categorized under rent.

Charging Less is not a Marvelous Idea

Some property managers think of charging a lesser security deposit than what is legally allowed, in order to attract more tenants. However, this is a big risk, and it can cause many issues in the end, which can cause more loss compared to having lesser tenants. By charging an adequate security deposit, property management can:

  1. Weed out prospective tenants who are financially unstable
  2. Create a hedge against default in rents
  3. Create a protection against unannounced departure of tenants

Open Separate Trust Account

The bank where the amount is deposited, should know the money is for escrow or trust funds. Such funds are not forfeited, even when the property owner or property management is encountering legal problems. Secondly, even when the state laws permit mixing the security deposit amount with a rent account, it is always better to open a separate account, since that will keep the amount safe from accidental spending.

Record it on Video

A security deposit is the most contested issue, and therefore it would be wise to take a video recording of the condition of the unit when the tenant is moving in, since this provides strong evidence if the tenant takes the matter to court. In fact, the tenant can be provided a copy of the recording or a link to the video, which will help in resolving any issues, even before they start.

Inform the Property Owner about Policies

The property managers should inform the property owner about the policies adopted regarding security deposits, since there should not be any inconsistencies in this regard, when issues arise. And they most certainly will!

Providing Multiple Options for Paying Rent is a Clever Strategy in Property Management

Providing multiple options for paying rent

One of the most important jobs of property management is to get tenants to pay their full rents on time. This is quite a tricky task, even when you have a friendly reminding strategy and stringent measures in place to punish delinquencies. Certain studies that were conducted, found that tenants were more likely to pay their rents on time when they had access to multiple and convenient payment options.

 

Digital Payment Options are Preferred

 

These studies also revealed some interesting facts about the preferences of most tenants. Apart from having multiple payment options, most tenants now prefer the convenience of online transactions and ability to pay their rent through mobile channels. The study revealed the emergence of the following trends:

 

  1. More than three quarters of tenants use more than one payment option every month
  2. Tenants feel it is important for them to have multiple options for getting their bills and making payments
  3. Tenants who were provided with the facility of electronic billing, found they were able to manage finances much better
  4. People who pay their bills through their mobile phone has increased by about 50% in the last couple of years
  5. More than 70% people, who are online even once a week, prefer to pay their monthly bills online.

 

This study has revealed the shift in preferences on how people choose to pay their bills. Therefore, it is important for property management to provide the options that their tenants now prefer. The study also revealed that tenants who paid their rents online were much less likely to be late with their payments compared to tenants who paid the rent through the mail or any other offline method. Hence, the best strategy would be to provide not only online payment options, but also to encourage tenants to use this mode of payment. 

 

What Tenants think of Online or Mobile Payment Options?

 

It is interesting to note, why tenants like to pay their bills through online or mobile channels. According to the study, more than half the people said that they preferred these payment options since they saved time, while 45% people preferred them because they could access it anytime and from anywhere. However, the majority agreed that electronic billing and online payment options were very convenient, considering their busy schedules, and it enabled them to make payments when they were on the go.

 

Additionally, over 90% of the tenants like paying their rent online, because they were able to receive email reminders when their rents were about to be due, and were able to attain an immediate acknowledgement when they made the payment online.

 

Making Life Easier

 

From the point of view of property management, online options have several advantages, apart from the fact that it makes tenants pay their rents on time. Once the system is in place, the billing process and payment procedures are streamlined, hardly requiring any effort or time of the administrative staff. Hence, from every angle, property management can greatly benefit, when they are able to provide multiple online and mobile payment options.  

 

On top of this, property management was able to keep less people from trafficking in and out of the office. Convenience counts!

Going Green in Property Management

Going Green in property management

More and more people are starting to appreciate green initiatives, and certain tenants are not averse to paying more rent for properties that are focused on saving the environment. However, property management still has to tread carefully before committing to going totally green, as there is a substantial percentage of people who would not want to be inconvenienced, or pay more for green properties. Green initiatives can be brought in gradually, and it can be implemented in certain properties that have a local demand for such measures. Here are certain steps that can help the property implement green solutions.

Metered Utility

Installing equipment to meter utilities can help property management keep track of consumption, and maintain efficiency standards. This might attract a proactive crowd of tenants who have similar ideas for protecting environment and saving resources. Prospective tenants who search for such properties will be more inclined to manage their energy usage optimally, which will bring down shared costs of utility in apartment complexes.

Focus on Recycling

Start with the property management office, where program for recycling paper and ink cartridges can be initiated. Make the recycling program known to everybody, by displaying a prominent sign. Take this initiative further by encouraging tenants to do the same by placing convenient bins that will help to recycle cardboard, paper, aluminum, and plastic. If the recyclable material fetches money, it can be used towards purchasing eco-friendly lighting and other environmentally beneficial initiatives. 

Green Lighting

Steps should be taken to phase out incandescent lighting, and switch to CFL and LED lamps, which are, much more energy efficient. Incandescent lamps are available cheaply, as they have been overstocked, but they work out more expensive in the end. In fact, many prospects now ask the property manager, why olden type bulbs are still being used, when they are touring the property.

Overall Changes

There could be certain practices existing on the property that may seem not so eco-friendly, and this might discourage "green" prospects. Here are certain aspects to consider, when you are trying to build a green reputation for the property.

  1. oIf the property has a nice pool with beautiful surroundings, it is definitely going to attract prospects. However, make sure there is not any strong odor of chlorine or any toxic chemicals emanating from the water. Such odors might indicate, property management does not care about what they use to keep the pool water clean.
  2. oAnother major attraction for tenants in any property is the landscaping and the well-manicured lawn. However, make sure the service vendor sticks to sustainable eco-friendly practices. This would include use of proper fertilizers that are mainly organic, growing only those plants that need lesser water, especially in arid areas, and energy-efficient equipment and vehicles.
  3. oWhile inviting prospects, a delectable layout is always welcome on the refreshment table. However, make sure to avoid Styrofoam cups and plates, since that does not provide a green impression.

Taking care of these smaller details will make a sunny impression on prospective tenants, who are looking for eco-friendly properties. Additionally, make sure to communicate and advertise your stance on the environment through newsletters and Facebook postings. 

Proactive Approach in Property Management

proactive approach in property management

Many tenants are under the impression that property management starts acting only when an issue pops up, and therefore they should be available any time of the day or night. Most tenants are highly sensitive if their issues are not addressed immediately, which could be anything from a noisy neighbor to peeling paint. Unfortunately, tenants do not realize that property managers have a very hectic schedule, where they take care of daily tasks, do administrative work, and conduct inspections to prevent issues before they start affecting tenants.

Therefore, it is necessary for property management to educate tenants about priorities, and in exercising discretion about what is considered urgent and knowing about issues that can wait.

Emergencies

Tenants should know what would constitute an emergency that would require immediate action from property management. Such things would include fire, pest or mold infestation, and lapse in security, water damage, and severe structural damage. All this situations call for immediate intervention on the part of property management to correct the issue.

Do Not Delay

At the same time, delaying in complaining about any issue is not going to help property management. For instance, if the tenant notices an issue with the dishwasher, it can be reported immediately, instead of delaying the complaint for a few days and waiting for an appropriate time. When the matter is delayed, property management will not be able to contact the service contractor on time, and could end up with extra charge for coming on weekends to repair the problem. If the parts are not available, it could cause further delays. Hence, it is best to report issues as soon as possible, but wait for them to be fixed according to their priority.

Expecting After-Hours Service

Some properties provide 24 hours resolution service through a call center. However, the staff is mainly trained to resolve simple issues like providing information about property rules, pool hours and so on. The call center will of course relay urgent issues to property management, but tenants cannot expect immediate resolution of issues like noisy neighbor or a dog barking, after office hours. Calling repeatedly is not going to solve the problem, and the tenant might not even receive a return call.

Service and Responsibility

Even though excellent customer service should be the priority for property management, the responsibility of tenants cannot be ruled out. The property manager is not expected to bend rules to resolve a problem that has been brought on by an irresponsible tenant. For instance, when a tenant forgets to pay for utilities, property management is not required to address the problem, until the bills are paid.

Establish Guidelines

Property management will have to take the initiative for managing all types of situations by taking a proactive approach. Establish guidelines for reporting issues and complaints, and communicate to tenants when the various services will be available. It is important to be consistent in delivering what is promised, as that will promote goodwill and build better relationships with tenants. Additionally, review service contract policies and adopt measures to create a better work environment and at the same time resolve problems quickly and efficiently. 

Property Management During Leasing Season

property management during leasing season

There are certain months during the year when comparatively more people are seeking to rent suitable apartments. During these months, property management will encounter more prospects visiting the property, and there might be existing tenants wanting to renew their leases. Therefore, property management should implement a two-pronged strategy of keeping the property ready for visiting prospects, and committing resources for encouraging renewal of lease from existing tenants.

During this crucial time property owners, administrative staff, and the property management team should work collectively to meet the set or ingrained goals.

Maintenance and Repairs

The first step would be to check for potential issues in maintenance and getting them serviced or repaired. This could present an excellent opportunity to interact with your tenants, build better rapport, and retain outstanding tenants. Here are certain points for implementing maintenance checks:

  1. Most maintenance issues are to do with plumbing. Hence, inspect tubs and sinks, and check for dripping or leaking faucets. Visually inspect plumbing fixtures for rotting gaskets and leaks.
  2. Inspect doors and windows to check the caulk and weather stripping. If it is worn out or causing leaks, immediately repair the issue.
  3. Fire protection devices such as smoke alarms should be tested and their batteries should be replaced.
  4. Air-conditioning system is another major area where various issues are possible. Before the onset of warm season, test the air-conditioning in each unit.
  5. Check for any signs of possible mold, fungus, or pests, and take necessary measures to prevent an infestation.
  6. Check the overall structural integrity of the building, roofing, and the condition of the common areas.

Online Solutions

While proper maintenance and repairs will mostly take care of tenant retention, offering streamlined online solutions for rental processes will attract new tenants. Many communities are taking advantages of technological advances and now offering better online solutions for rental processes. It is not just about providing the virtual capability of paying the rent online, but the complete process.

Modern tenants are looking for e-applications, and other online methods that are convenient and help save time. Approval methods involving paper processing may not be appreciated by most people, since there are quicker and more convenient ways of doing these things now. Hence, offer a complete solution to prospects, where most of the things are taken care of online. 

Take Care of Your Team

Whether it is on-site or off-site maintenance team, the administrative staff, or the property manager, they all should be adequately trained and prepared before the onset of leasing season. Review equipment, supplies, tools, and make sure adequate staff is available to meet any type of situation. Consider, extended work hours during the leasing season, since you never know when you will need personnel for additional work. This would be an extra investment, but a well thought of strategy for having more staff on the premises during these times could pay off well.

Lastly, property management should keep in mind that first impressions count a lot, and therefore before the start of the leasing season it would be a marvelous time to upgrade or update the property website and social media pages. 

Improved Occupancy Rate in the Property Market

improved occupancy rate in property market

Many property managers and owners feel that new constructions and increased supply of rental units is going to create improved supply and bring the rent down. There are also concerns about increased vacancy rates, as people might want to move to newer units. However, there is no need for panic, as statistics prove otherwise. Even though close to 200,000 new units have come into the rental market, the occupancy in existing units have not decreased, and the rental rate has continued to grow and seen the best levels.

In fact, the occupancy rate has been 95% for the second quarter of this year, and growth rate for rent is 2.4%, which are very promising signs. Hence, this time, even with new supply of units the property market is flourishing. Here are some of the reasons why it is different this time.

Diminishing Popularity of Single Homes

Even though rate of construction of new apartments for last couple of years has remained almost the same, the demand for apartments has increased. This is mainly because many families now are not eager to move to single homes, and prefer apartment units. Secondly, the rate of homeownership has also fallen considerably since 1995. This indicates there is lesser supply of residences, since homeownership is providing costly for many people. Even though rent may be high, people prefer to stay in apartments for a longer time, because the cost of owning a home works out to being even more of a financial burden.  

In addition, it is easier to move out of an apartment than a home. On top of this, the recession still continues.

Ownership is Scary

People have not forgotten the foreclosure crisis, where homes and equity were lost within minutes. Many people are now much more cautious and do not much care about homeownership. Secondly, families now prefer living in apartments compared to suburban homes, since they do not want long commutes and prefer to be near workplaces and play areas available at the core of urban areas. Additionally, most of the people seeking accommodation are young professionals, who are repaying their student loans. This means, they do not have the credit rating required for down payments on new homes.

Median salary ranges of America have continued to decline. The American economy is nothing to smile about and this is reflected in all those renters across the landscape.

Supply has Still not Caught Up with the Demand

During the recovery period after the recession, financing home construction was difficult, which means deliveries were late and inventory rate increased. Secondly, even though there is growth in new construction now, it has not caught up with the increased demolitions of obsolete structures. Additionally, many structures were converted to senior housing and condominiums, which increased the divide. Therefore, the market has not really caught up with the increasing demand, as can be clearly seen from the higher occupancy rates of some of the metropolitan areas.

New Apartment Units are Class a Category

Most of the new apartment units are in the top pricing bracket, since they come under Class A urban core category. This means only a few renters will be able to afford an upgrade to these expensive apartments, and only the new upwardly mobile crowd can think of renting these new apartments. Therefore, there is still a heavy demand for existing Class B and B+ units, which are generally more affordable by a vast section of society.

Property Management―Frills vs. Size

property management frills vs. size

Requirements of various types of tenants keep changing, and it is important for property management to keep on top of the current trends. An emerging category of young professionals is taking prominent position in the property market. There are many professionals looking for proper accommodation, especially near commercial areas and in metro cities. The interesting fact is that most of these professionals are willing to trade size of the apartment for frills and better amenities.

The Trend

According to statistics, the average size of the typical apartment in major cities has been steadily reducing for the past five years, and most professionals are more concerned about amenities and other facilities provided in the units, compared to living space. In many modern apartment complexes, there is the trend of allocating quite a bit of area to micro units, which shows that living space is becoming smaller.

Even though living space area has been reduced, rents have steadily increased, especially in properties that provide better amenities. Young professionals and even families are willing to pay higher rents, provided there is parking space, Wi-Fi connectivity, fiber optic broadband, and better satellite television or cable connection. 

This is because the poor banking situation has forced many people to rent. It is more difficult to obtain a loan nowadays and certainly a few years after the Alan Greenspan financial crisis.  

Small units, particularly in urban areas are very much in demand, as many professionals are relocating to cities with better prospects. It is not only the amenities provided in the units making a difference, but also the jobs, facilities, entertainment, and shops available in the immediate vicinity. Secondly, stringent standards implemented for mortgage (briefly mentioned above) and rising prices of new homes has reduced the number of homebuyers and increased the number of renters. This has put added pressure on cities, since the demand for accommodation keeps increasing. 

The Proper Focus

All these statistics and trends provide important clues for property owners and property managers. The focus should be on increasing amenities and developing better facilities that young professionals are looking for in apartments. Investing in better storage space within the units, and providing better Internet connectivity would be a good idea. Property management can also think of renting the ground floor areas to shops and small businesses that will make it convenient for tenants to shop and access important facilities and services.

If the property is relatively old and the living space of most units is quite large compared to modern standards, then strategies should be in place to facilitate sharing of the apartment unit by multiple renters. This would involve careful drafting of the lease agreement, where the responsibility of the rent is shared equally by all members renting the single unit. Many young professionals are not averse to sharing their living space, provided there are separate bedrooms.

A Long Commute is not Appealing

Property managers facing increasing vacancy rates can think of revamping their marketing strategy to attract young professionals. Investing resources for this category of tenants promises solid returns, provided the property has a sparkling location, and is near offices and commercial establishments. Most modern professionals are now looking for accommodations near their place of work, and do not want a long commute. Property management can carefully consider all these factors and implement strategies to tap into this emerging category of tenants.

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