Are you prepared?
Every property manager (or managing owner) works constantly on keeping their tenants prepared for the events that could occur while they live in our properties.
We help them plan their rental payments, report maintenance needs, handle emergencies, acquire insurance, check their smoke and carbon monoxide alarms, and be good neighbors besides. But all too often, property owners and even managers fall victim to the ‘do as I say, not as I do’ mentality.
The fact is that it’s even more important for the people in charge of properties to be prepared for any possible contingency. And in many ways, the potentials we face are much more severe: evictions, tenant damage, natural disasters, and other emergencies can hurt both you and your tenant emotionally and financially.
It’s on you to be prepared and competent enough to make things at least mildly less bad for everyone involved. Here are some important things to think about in advance:
The most obvious one; if your property isn’t fully insured, you’re going to want to take care of that first and foremost.
The thing about insurance that a lot of people forget is that conditions change over time; they tend to think that their policy is like a Showtime Rotisserie: ‘set it and forget it.’ But the truth is that is pays — often quite a bit — to sit down every year or two and review your policy with your agent, and talk about changes to your circumstances and to the insurance market as a whole.
Insurance companies are continually making policy changes, and many of them are prone to putting major coverage alterations in the small print of their monthly newsletters (which are often treated like junk mail in the first place.)
Ask every time you see your agent: what disasters, tenant damage, emergencies, and rent losses are covered by your policy? To be safe, you may want to get their responses in writing, just in case they’re wrong. It may behoove you to alter your coverage or even switch companies if your policy gets altered out of usefulness.
There are so many reasons to focus a lot of attention on good record keeping.
When you’re doing it, it feels like drudge work — but when you need it, it feels like Proper Prior Planning. Is the IRS auditing your business? Is a tenant accusing you of not communicating according to your agreement? Does the judge need to know exactly which day the tenant in 34b first complained of that musty smell? Proper record keeping is there for you when you need it.
Keep all of your incident reports, tax returns, maintenance records, receipts, communications (written, recorded, and electronic), and other documents in a single organized location where you can easily retrieve and review them.
Keep a second copy electronically by scanning in every document. Have a private archivist look over them annually, ensure that there are no obviously missing pieces, and create a further backup on a long-lasting storage medium like a DVD or one of the online solutions.
Prepare For Your Maintenance Needs
Too many property managers have a standing policy of “if it ain’t broke, don’t fix it.”
Just like with your own car and home, this is a bad policy if what you want is to save money over the long haul. Your body benefits immensely from preventative care — and so does a rental home. Roofs, carpets, paint, fences, appliances, plumbing, wiring, HVAC — all of it (and lots of other miscellaneous items) need to be on your maintenance schedule.
You should be able to look at the purchase records of each of the major items in a home and work out a decent estimate of when they should be maintained in order to prolong their lifespan and prevent an unnecessarily early replacement. For major appliances like HVAC, a yearly checkup is necessary; for more long-lasting items like exterior paint, a coat every five years could be more than adequate.
Consider Your Finances
Your maintenance plan should also include predictions about the cost of these items.
Understanding what your anticipated costs are should put you in the right frame of mind to consider your unanticipated costs as well. What are your exact financial plans to deal with an eviction and subsequent loss of four months’ rent while you find a new tenant?
What if a natural disaster ruins the home? Insurance will cover a lot of it, but you should have a detailed plan for exactly what it won’t cover and how you can pay for it without going bankrupt.
This doesn’t mean you necessarily have to have a rainy-day fund big enough to cover any disaster. Your plan can and should wisely include options such as turning to the bank for a business loan, or if necessary selling a lesser-performing property in order to maintain an all-star property.
Clearly, however, the best plan is to set up a sizeable emergency fund (in an interest-bearing account.) That way if worst comes to worst, you have the resources you need to respond immediately.
Everyone in the business has heard someone say it at some point: “failing to plan means planning to fail.” Engage your six P’s and get your affairs in order today, and you won’t find yourself floundering because of an unexpected (but perfectly expectable) event in the future.
Do you have a story of a time that you failed to plan?
Be sure to leave your comments below!