Every day, property managers deal with risk. The bigger the portfolio, the greater the risk. When property management does not manage risk, they put their business could face potential lawsuits and large fines. In researching risk and mitigation for property managers, it often doesn’t appear in the list of their biggest concerns. It should be in the top three.
What Is Risk Management for Property Managers?
Society has become very litigious as people look for any opportunity to line their pockets. The property management industry is no different. It’s critical for property managers to have the skills to mitigate risk as much as possible. Otherwise, they could end up losing a lot of money in a court battle.
Everything about property management involves risk. There’s a risk with hiring employees, risk with accounting, a risk with residents, and a risk with physical damage to name a few. Is it really possible to reduce risk? Yes.
Property managers can transfer risk to another party, mitigate against risk with a process, or avoid the risk by making decisions to prevent becoming responsible for the risk. One way to transfer risk and help reduce liability is by obtaining general liability insurance. It’s also possible to transfer risk to residents by stating specific conditions in their contract to hold them responsible.
An example of how you can take action to minimize risk is to conduct regular inspections. When you catch a problem early, it will be far cheaper and easier to fix than a problem that builds up over time.
How can you avoid risk? You can do this by not investing in a property that’s in a neighborhood with a high rate of crime. Perhaps, don’t add a pool to the property. Then, you won’t have to worry about someone drowning or getting hurt.
However, swimming pools are an often-requested amenity. It’s possible to control risk with a pool by putting up a lockable fence around it. Make sure it’s impossible to climb the fence.
If there are no lifeguards, then put up signs indicating there is no lifeguard on duty and it becomes the residents’ responsibility to manage their safety. You can further reduce risk by installing video cameras
around the pool that are remotely monitored.
Here are eight ways property managers can help mitigate risk.
1. Screen prospective residents
Do your due diligence before the resident signs the dotted line. Conduct a resident screening process that includes credit checks and contacting their references. You can automate the screening process, which has the added benefit of removing bias and emotions from the process. This reduces the risk of being accused of discrimination and ensures compliance with rules and regulations related to fair housing.
Screening residents helps reduce your risk because you’ll be less likely to run into late payments and property damage. Yes, a process can determine a resident’s ability to pay rent. Obviously, accidents happen and you can’t prevent damage from happening. But you can minimize it with a reference check.
2. Conduct regular inspections
As mentioned before, it’s often cheaper to fix things when you catch the problems early. Doing regular inspections can find problems earlier. Ensure that high-traffic and public spaces receive more frequent inspections. Document the inspections and take photos. This comes in handy for insurance claims. Schedule regular maintenance and document it. Don’t forget about landscaping. Overgrown landscaping can create hiding places for criminals. They’ll use it to enter the building unseen.
For instance, you most likely have regular check-ups and maintenance of your HVAC systems. Usually, the vendor will proactively schedule the maintenance. Don’t leave it completely in their control. Things fall through the cracks. You don’t want your property to be without air conditioning in the hottest part of the summer. When the building gets hot, it puts residents at risk for illnesses related to overheating.
3. Require insurance
Physical damage happens. A resident trips, falls, and puts a hole in the wall. Perhaps while moving in, the movers scratch the paint while hauling the furniture. No one can completely prevent property damage. However, property managers can transfer the risk to an insurance company. General liability insurance can shield property management from property damage.
You could suggest or require residents to have insurance. This covers the cost associated with the damage caused by the resident.
4. Choose qualified professionals for repairs and maintenance
The property management team and residents should never do repairs or maintenance unless they’re qualified professionals. To guarantee you hire experienced vendors, ask for recommendations from trusted people. Some states or local governments require certain professionals be licensed and insured. Find out what your state or county government’s requirements are.
If you can’t get referrals, contact the local Home Builders Association and consumer protection agency. Ask if there are any complaints against the contractor. As you narrow the list of contractors, search the company’s name online with “scam,” “complaint,” or “reviews” to see if there are problems with the contractor.
Always obtain at least three estimates and don’t automatically select the lowest bidder. Ask the vendor to explain what’s involved in the repair or maintenance.
Review the written contract. Verify it contains the contractor’s name, contact information, and license number. The contractor should also have an estimated start and completion date, the scope of work, cost of labor and materials, and a statement of your right to cancel the contract within three business days.
Never pay the full amount of the project upfront. Some states or local governments have a law about down payment amounts. Make the final payment after you’ve inspected the work and you’re happy with it.
5. Invest in a property management system
Property managers have a lot of data to manage in the day-to-day business. They need to track current resident information, rent payments, maintenance tasks and costs, insurance claims, and contracts. The right property management system will track everything and proactively send notifications and reminders.
6. Hire a qualified and trusted accountant
Sometimes the risk comes from within the organization. Accounting is one example. If property management doesn’t know how accounting works, it could put the business at risk for embezzlement. That’s why it’s important to have checks and balances to protect the business from illegal activities.
Like doing background checks on residents, you’ll also want to run background checks on employees including the bookkeeper or accountant. You can further shield the business from internal risks by having a second person who knows the accounting process. If the first person quits, takes a vacation, or gets sick, you don’t want to be stuck without someone to watch the books.
7. Maintain policies and procedures for employees
It’s not just the accountant who could put the business at risk. Other employees can too. Create, update, and maintain a manual of policies and procedures for the company. Every new employee should undergo training to understand these policies and procedures. The training should also cover security procedures. Hold a refresher for all employees at least once a year.
8. Implement remote video surveillance
Remote video surveillance involves placing cameras in strategic locations around the building and perimeter. This puts eyes on the entire property while recording everything that happens.
Video surveillance with remote monitoring is a proactive security system that can help deter crime. Many security solutions don’t do anything until after a crime has already taken place. Video surveillance that combines artificial intelligence with human operators can increase the chances of spotting suspicious activity before it becomes a problem.
Without support from artificial intelligence, monitoring operators can miss something in the tedium of watching cameras for hours. Effective artificial intelligence contains many programmed scenarios. When it encounters any one of its programmed scenarios, it alerts the monitoring operator who checks out the activity.
How the operator responds depends on the situation. If there’s an intruder, the operator can issue a warning on an on-site speaker. If the suspect does not abscond, then the operator can call the police and direct them to the person’s location. Often, the police arrive and arrest the trespasser before escaping.
Video surveillance helps reduce many of the discussed risks. It can typically see problems and damage fast. You won’t have to wait for an inspection and you’ll be able to address it. For example, a safety hazard pops up in the lobby. The monitoring operator can notify property management before a resident or visitor gets injured.
It also helps minimize employee theft and crimes because employees know there are cameras watching everything on the property. A new employee onboarding training can cover this. If residents claim they got hurt on the property, you’ll have the video evidence to counter the claim.
You’d be surprised at the affordability of video surveillance. It offers one of the fastest ROI in security. With video surveillance, you’ll maximize security and make your residents happy. To find out more about the possibilities for apartment security, please download your free Complete Guide to Securing Your Apartment Building or contact us.
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