By far the highest number of commission penalties, consumer complaints, and license suspensions and revocations in most states, are connected to property management. Not that those property managers are being inefficient. It’s just that the business of property management is very transaction-intensive. Though your typical agent might do a dozen sale transactions yearly with a purchase agreement and related documents, the typical property manager can do hundreds of smaller transactions.
The fact that they’re smaller doesn’t make such transactions less important, and it doesn’t lower the risk involved in doing them. If you’re a property manager, you’re dealing with an owner as you market and rent their property, collect and remit their rent, and handle practically all other aspects of property management, from implementing tenant rules to maintenance.
Doing this means you’re transacting with owners and tenants, repair companies, advertising agencies, contractors and the rest. All of these transactions inject some type of risk into your business, especially those which are related to finances.
Risk management is, of course, extremely important. The property’s economic survival can be threatened by a big disaster. Record-keeping plays a significant part, with any legal action taken by others being easily disputed by existing detailed records that contest their claims.
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A considerable part of risk management is determining risk versus reward. Let’s say a property has a swimming pool on it. The property manager and owner must balance the value of the pool and the risks it brings. After a risk is identified, it should be addressed in one of three ways:
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The pool will be removed as the extra rental income it brings is far less than the insurance cost or the risks involved.
Retaining the pool is possible with the installation of a coded lock and fence to keep small kids out.
The most usual manner of dealing with risk is to buy insurance to transfer the risk to the insuring company. A good property manager plans for problems, keeps records of each activity, and keeps assessing these functions in order to determine if change is needed.
Documents and Email
In several states, you only have to keep transaction records for six years. It is best to keep them for much longer though, especially if you may do so digitally or electronically. For sure, if any of the parties has a claim and someone wants to sue you for something that occurred earlier than six years ago, they will still be holding their document copies. It’s a lot harder to plead your case without your own copies. Lastly, in terms of email, whatever court action that involves a federally guaranteed loan (pretty much every residential deal), can force you into producing emails that are related to your transaction and communications with your customer.