As a business owner there is always some level of Risk. Property managers and property owners have specific areas of increased risk that they must manage and protect against to protect themselves and their business. Below are different areas of increased Risk for rental property owners as reported by Forbes and different ways to mitigate these rental property specific risks.
Rent Collection: Collecting payment is the key piece in managing a rental business. Any delay or issue in collecting rent can drastically impact cash flow required to run a rental property business. Forgetful tenants can be problematic but a landlord’s nightmare is a tenant that refuses to pay rent and must be evicted. Not only is the landlord losing out on rent from the tenant, but they will also have to go through a timely and costly eviction process. One of the best ways to mitigate this risk is with tenant screening. Based on what is legal in your state or county, only accepting tenants with average or above average credit scores (around 704) can help mitigate the risk of non-payment. Also, if a tenant has a lower credit score requiring a cosigner on the lease can help landlords and property managers mitigate the risk of non-payment while not restricting rentals to a large customer segment that may have low credit.
Ambiguous? Always Follow the Lease: As a landlord or property manager, there may be some situations that seem ambiguous in what is the best course of action especially if these situations are not spelled out in the lease. For example, any basic lease should include when rent can be increased, which is almost always at the end of the lease term. Therefore, even if a landlord decides to upgrade the rental they cannot increase rent until the end of the lease period. Other issues that can crop of may be related to the sale of the property while the lease period is still in effect. Therefore, make sure the lease is as encompassing as possible, and if it is not clear in the lease, you may have little recourse until the lease period ends.
Lease Application Process: During the leasing process there are federal, state and county laws and regulation that a landlord must follow or face legal consequences. For instance, landlords or property managers cannot ask an applicant about race, religion or ethnicity during the screening process. To avoid potential claims of discrimination, one recommendation is to automate the screening process. Automating part of the screening process can reduce the risk related to violating tenant screening laws by reducing the questions that a landlord or property manager would ask or even be perceived as asking about race, religion or any other prohibited topics.
One of the most effective ways for property managers to reduce risk besides for those mentioned above is to make sure they are organized and using an efficient property management system. Property Managers that are not organized can lose important documents, miss important deadlines and end up with a mountain of legal and financial issues
This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.
Disclaimer: The information provided in this post not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.