This article was published in Forbes on June 27th, 2024
by David Crown
After being in the business for over 30 years, I’ve seen owners and their property management companies make just about every mistake in the book; I’ve even made half of them myself.
Anyone who has experience with management understands just how hard it is to serve so many different parties, including but not limited to the client, the tenants, the vendors and your own employees.
There are countless reasons management can fall apart and relationships can break down, but when I get a phone call from an owner interested in trying professional property management for the first time or switching companies because of a relationship that’s gone south, it’s almost always because of one of the five common pain points listed below.
I hope owners and property managers staple this list to their office walls like I have because if they can avoid these five issues, they can, in my opinion, weather just about any storm this industry will blow their way.
1. Poor Communication
No surprise here; the key to any relationship in life is communication, and if you’ve got a breakdown in trust with a tenant, it’s going to create issues down the road.
I’ve found that healthy communication between any two parties is based on two things: Availability and expectations. If the party can’t reach you when they need you, trust tends to break down and problems multiply. There’s so many different means of communication today between text, calls, emails, website work orders, it’s easier than ever to reach someone. Conversely, because there’s so much communication in general travelling through these different means, it’s also just as easy for communication to get lost in the shuffle.
Expectations can be varied, too. Your job as the property owner and/or manager is to make your availability and expected responsibilities as clear as possible from the start. Break out the stone tablets and etch into eternity your procedures for these two pillars, and you’ll see not just a return on investment but a return of mutual trust and satisfaction.
2. Poor Tenant Screening
We all know someone who just wants to be in a relationship—just maybe not the right relationship. We jump into something, like approving a tenant, who might not be the right fit because we want that pesky vacancy filled. But the whole reason the screening process exists is to avoid substantial long-term losses that will ultimately result from jumping into a relationship with the wrong party.
I knew an owner who spent two years building a beautiful six-unit complex, and they were so eager to start renting the place out when it was finally finished that they missed several red flags on the very first applicant they screened. It took six months to evict the tenant and a few additional months of renovation to get the unit back on the market. Plus, the investor’s real estate career started with a grueling eviction that has left them scarred ever since.
Standards are an important thing to establish in your relationships and anyone who doesn’t meet them isn’t worth your time or energy. You decide your income, background and credit requirements for a reason. Make sure they’re met before the lease gets signed.
3. Failure To Clarify Maintenance Responsibility
This is an extension of the second pillar of communication: Clear expectations. Maintenance is the number one area where disputes occur, where resentments are first born and where owner-tenant relationships go to die.
Don’t skip the fine print during the leasing signing just to get that name on the dotted line. Owners might think that it’s the tenants who are the only ones who don’t read the lease, but I can’t tell you how many times we’ve had one of our property supervisors inform an owner about the actual text of their own lease. Take pride in your knowledge of the lease that you use.
4. Failure To Inspect Property On An Annual Basis
This is the annual health physical equivalent of the property management world. We do our annual medical exams not because they’re fun or because we need a bone snapped back into place. We do annual checkups to avoid those hidden but deadly issues that accumulate over time.
And just like any good doctor would tell you, a great inspection revolves around a great checklist. Make sure you live and die by your inspection checklist because the tenant could live or die based on the work performed. Those are the stakes here. Health and safety are no small matter in this business and could lead to the worst-case scenario of the fifth and final mistake on our list.
5. Not Knowing The Updated Laws
Lawsuits are the dark cloud above all real estate management. One big mistake can turn a profitable year into a major loss. I’ve found that the key difference between a new property owner and an experienced property owner is that new owners fear a high vacancy rate or low rent collection. Experienced owners fear lawsuits.
Keeping up to date on federal, county and local regulations can be a handful, and if you’re not making a concerted and organized effort to stay educated, you’re going to fall behind.
While keeping yourself up to date with legal developments is important, working with a manager who is up to date on the latest laws is critical. Simply asking what a manager does to stay current on the laws in their area can be telling. We pay for training from our favored law firm regularly. I have three hours coming up this week, and the invitation isn’t an “invitation.” It says it is mandatory for everyone in our company who interacts with tenants and owners.
In Summary
While it may sometimes seem like property management is a cursed industry with impossible expectations, I think those with a dedication to clear communication, proper screening, consistent inspections and regular legal education will find there’s an incredible amount of opportunity and profit in this industry.
