The Property Manager's Dilemma: Top Challenges and How to Tackle Them

8/29/2024 (Permalink)

Manager with house model

The Property Manager's Dilemma: Top Challenges and How to Tackle Them

Managing rental properties is not simple, regardless of their size or number of units. The complexities of finding and retaining quality tenants, keeping properties in pristine condition, and tackling other challenges require a strategic, disciplined approach. Exploring some top challenges and practical resolution strategies can ensure your rental property maintains its value and stands out in any market.

1. Finding Reliable Tenants

Finding reliable renters is consistently rated as one of the top challenges for property management companies. This multifaceted challenge hits new property managers especially hard. The best place to start is by understanding the Fair Housing Act and the federal and state legalities that apply when choosing and managing tenants. For example, landlords can reject a potential renter based on their credit score. However, denying them due to their familial status or race is considered illegal discrimination if they are otherwise qualified.

Before your rental ad goes live, ensure your property looks its best. The first rental applicants are often those who have been watching the market and waiting to pounce on a suitable property; they tend to be organized and motivated, which also describes conscientious tenants.

Have a rental application ready that includes rental laws applicable to your state. Include a printed list of policies, such as pet guidelines or rules, minimum credit scores, and whether you accept applicants with a co-signer. Regarding the lease agreement, use a boilerplate copy and alter it to include specifics such as who handles property maintenance and where tenants can park.

Regardless of how much you like a prospective tenant, keep showing the property until their deposit check clears. Ensure the property is cleaned and in good repair, as tenants will treat a property with more respect when they see the landlord maintain it.

2. Increasing Tenant Retention

Tenant turnover is a significant expense for property managers, which makes tenant retention strategies a priority whether managing one property or multiple units. Low-turnover properties incur fewer marketing costs, leasing staff fees, and lost rents due to vacant units. Actions that retain more tenants can lead to increases in profitability.

Assuming you pre-qualified and screened your tenants, keep rent increases fair and consistent over time. Tenants expect rent hikes, but keeping them slightly under market rates with smaller increases can incentivize cost-savvy tenants who will find it challenging to find a better deal elsewhere. Track the local market to ensure your rental rates remain competitive.

Well-maintained properties with an understanding yet professional property management team often experience higher retention rates. If a good tenant has an emergency or unexpected job loss, work with them to address their financial situation, which can go a long way in maintaining a solid landlord-tenant relationship. It is also likely less expensive than the hassle and cost of securing a new, quality tenant.

Make it a priority to respond to tenant maintenance requests and provide top-notch service in other tenant-facing areas. When the lease term is coming up for renewal, offer incentives such as a discounted first month of renewal-period rent.

3. Financial Management

One of the top challenges for property management companies is the accuracy and transparency of rental properties’ financial data. It can become overwhelming and, if not optimized, can significantly impact the ability to generate consistent profits. Collecting rent and tracking expenses is only one part of the equation. Forecasting, budgeting, cost control, financial statement preparation, and other financial duties require time, expertise, and accuracy.

Property managers must streamline rent collections and disbursements to property owners using electronic tools such as property management software designed to track and pay bills and handle other financial and administrative tasks such as sending late notices. Inconsistent rent collection leads to erratic cash flow or missed revenue. Conversely, timely rent collections maintain a steady cash flow stream for maintenance and other activities that ensure tenant satisfaction.

Property managers must also track expenses accurately to produce meaningful and reliable financial reports. Expenses to track include maintenance and repairs, insurance, marketing, and property taxes. A clear understanding of these costs allows property managers to make informed financial decisions and adjust their strategies to optimize and maximize profits.

Property managers must also track security deposits separately from rental income, which is essential to manage the business effectively from a legal and ethical perspective.

Creating a budget is crucial for guiding financial decisions, and forecasting monthly income and expenses allows for strategizing and course correction as needed. Financial forecasts should consider current rents and adjust for increases and changes in occupancy rates. The expense forecast should consider seasonal changes in expenses and one-time costs such as annual or periodic maintenance projects.

4. Property Maintenance

Maintaining rental properties keeps tenants satisfied, improves curb appeal, and maintains property values. However, it can become challenging due to maintenance requirements, replacements or upgrades, and emergencies such as flooded parking areas and first-floor units caused by problems such as clogged storm drains.

Maintenance is often delayed due to staffing or cost constraints, but it can impact tenants’ rental experience, especially if management does not promptly address their maintenance requests. Software that tracks maintenance requests can provide property managers and tenants a central place to track active requests. It should show progress and status, have a chat or message area for tenants to ask questions, and allow them to open new maintenance tickets.

Property managers should regularly review the status of open maintenance requests to prevent delays and ensure project completion. The software serves as a tenant portal, and the clear communication channel can serve as a dedicated maintenance center and enhance customer service and tenant satisfaction.

After heavy rains, first-floor units may experience pooling water that seeps inside, while top-story units could experience roof leaks. Likewise, unaddressed Plumbing maintenance can result in leaks and extensive water damage. In either scenario, mold, mildew, and damaged walls and ceilings can result if not promptly addressed. Partner with a professional restoration and mold damage company to ensure you have expert staff available 24 hours a day to handle issues related to water damage.

High maintenance costs present another issue; property managers may choose a least-cost repair or maintenance provider to minimize expenses. However, a network of reliable vendors will ensure that you always have options, and using quality firms reduces the chance of shoddy work that needs to be redone every few years. Partner with plumbing, roofing, and HVAC firms that can provide regular maintenance on a contract basis. This strategy can prolong the lifespan of roofing, HVAC systems, and other equipment, saving money on replacement costs.

Strategize for Improved Property Management

By implementing these strategies and refining your methods, you will take a proactive approach toward handling the top challenges for property management companies.

Finding professional, skilled service contractors to handle maintenance and repairs is essential to a successful, routine maintenance plan that can accommodate emergencies as needed. For individual rental properties, SERVPRO of Arcadia provides residential restoration services and much more. Contact us today to see how we can serve you.