How to Overcome the Top 5 Residential Property Management Challenges
How to Overcome the Top 5 Residential Property Management Challenges
Whether you’re managing a single-family property, a multifamily property, or both kinds of properties, there are many residential property management challenges that property managers face.
What are some of the biggest obstacles to residential property management? And, how can you overcome them?
Residential Property Management Challenge #1: Handling Renter Turnover
Turnover is a fact of life for residential property managers. The reasons that renters leave are varied, but typically include:
- Changes in employment status or location;
- The renter’s budget going up and wanting to move to a nicer unit;
- The renter’s family growing—so they need more space;
- Dissatisfaction with the current residential unit (or the property manager); and
- Changes in the market making home ownership more attractive to renters.
To avoid revenue loss from vacant units, residential property managers need to find ways to reduce turnover and to attract new tenants as quickly as possible when renters do leave.
A couple of quick tips for reducing turnover include:
- Communicate Regularly with Renters. Don’t be a stranger! Reaching out to tenants to keep them informed of major updates to the rental property (both physical and to the rental agreement) as well as upcoming events (such as property inspections or community gatherings/parties) helps to build relationships and keep renters happy.
- Ensure That Work Orders Are Completed in a Timely Fashion. When rental properties need repairs, time is of the essence. The longer renters have to deal with property maintenance issues, the more likely they will want to move when their lease is up.
Some renter turnover is inevitable, unfortunately. However, it is possible to prepare ahead of time for renter vacancies by getting leads on potential new renters to replace the ones who are leaving. The issue then becomes how to get these “leads.”
In a Follow Up Boss article on the biggest real estate trends of 2019, Donna Stott, a Broker/Coach for Your Coaching Matters, discussed the value of generating leads versus trying to buy them, stating that:
“Most agents dabble in both, yet they require completely different systems and strategies. This has caused confusion as well as profits being moved from the ‘Agent’ to the ‘Lead Seller.’ Most lead purchasing programs have about a 2-5% conversion rate. This means that for every 100 leads worked by agents, only 2-5 will end up in a sale. That’s a waste of time… When we go after our own leads from people we know or people we come to know, such as our past clients, centers or spheres of influence, geographic or other ‘farms’ that include networking groups and other groups we belong to, even ‘for sale by owners’ and expired listings — the ratio of wins is astronomically higher.”
When the time comes to find new renters for a multifamily or single-family property, it’s important to consider the local market to determine what’s affordable for your target audience and what it is they want in a property. In some cases, it may help to perform some light remodeling to match renters’ needs.
Residential Property Management Challenge #2: Collecting Rent
Collecting rent is a massive cash flow concern for any property management company. If the process for paying rent is too difficult, then renters are more likely to miss their due dates and fall behind on payments—which creates a cash flow problem for the residential property management company.
The best option for curtailing this issue is to make collecting rent as easy as possible for your renters. Many property managers achieve this by using third-party online payment platforms or property management solutions with built-in rent collection features—such as AppFolio. Using these solutions allows renters to pay online with a few mouse clicks and eliminates the risk of physical cash or check payments becoming misplaced in the mail.
Online payment methods are fast, simple, and consistent—which is good for both property managers and for renters.
Residential Property Management Challenge #3: Renters Subleasing/Subletting Property
One common issue with residential property management is that renters may sometimes engage in “subleasing/subletting.” Subleasing/subletting is when a renter allows another person to occupy the property—whether for a fee or free of charge. This is a major issue for property managers because it opens them up to additional liability without the protection of the rental agreement. It also increases the risk of damage to the property and of items being stolen.
The simplest solution for this property management challenge is to make sure that the lease specifically forbids the renter from subleasing/subletting the property. Having a “No Subletting/Subleasing” clause and a “Guests and Invitees” clause that each spell out the rules in no uncertain terms can help provide legal grounds for denying renters from subletting their single- or multifamily property.
When reviewing the rental agreement with potential tenants, be sure to highlight the “No Subleasing” rule, why it’s there, and the potential consequences of breaking the rule. This helps the renter understand that this rule isn’t arbitrary and that it will be enforced.
Residential Property Management Challenge #4: Inspecting Managed Properties
Periodic inspections are a necessity for both single and multifamily properties. Routine inspections help property managers uncover critical maintenance issues so they can be fixed sooner rather than later. However, property inspections can be viewed as a nuisance by renters because they disrupt daily routines and may require further follow-up visits for property maintenance.
When scheduling a property inspection, property managers are required to inform tenants well before the inspection date. The requirement may vary, but it is typically between 24 and 48 hours prior to the inspection. However, it can be helpful to give renters a heads up about impending inspections even earlier than that.
Having set property inspection dates listed in the renter portal of your property management platform (assuming it has one with a calendar for listing events) or emailing the schedule of events a week or more prior to the date of the inspection helps keep it from being a surprise. This allows renters to work around your inspection schedule so it’s less disruptive to them.
Residential Property Management Challenge #5: Evicting Residential Tenants
It’s unfortunate, but there are times in residential property management where a renter must be evicted for one reason or another. In some cases, it could be because they have stopped paying rent; in others, it could be because of a lease agreement violation. Whatever the reason, there is a need to evict the tenant from the property so it can be prepared for another renter.
In a perfect world, a property manager would only need to hand the renter an eviction notice and the renter would leave without any issue. However, evicting tenants is rarely so easy.
One of the major challenges in evicting renters (aside from them not wanting to leave) is that the eviction process may vary from one city, county, or state to the next. However, in most regions, the property manager is not able to simply kick the renter out of the property—regardless of how justified the action may be.
To prevent legal issues, it is necessary to follow all applicable local and federal regulations regarding tenant evictions. These regulations may vary from region to region, so it’s impossible to list a concise, universally-applicable process here. To give you a general idea of how evictions may work, here’s an example of how the process works in California (special thanks to Nolo.com for the information):
- Sending of “Notice of Termination” with a Listed Cause. There are three general types of notice of termination that the state of California requires. In order of increasing severity, they are: “Notice to Pay Rent,” “Notice to Cure,” and the “Unconditional Quit Notice.” Each notice needs to be delivered three days before the deadline. The “pay rent” notice provides a warning to pay rent or be evicted, the “cure notice” warns renters to fix a violation or else the eviction process will continue, and the “unconditional quit notice” is a warning to move out or a lawsuit may be filed.
- Note: If the cause of the notice of termination is addressed by the renter for the “pay rent” and “cure” notices, then the eviction process must stop.
- Note: The officially-recognized reasons allowed for an “unconditional quit notice” are limited to one of four events:Subletting the property in violation of the rental agreement,
- Tenants causing “substantial” damage to the property,
- Tenants causing or allowing a “nuisance” at the rental unit, or
- The renter engaging in illegal activities at the rental unit.
- Tenant Chooses Whether to Fight the Eviction. The tenant may choose to fight the eviction, in which case they may file motions to block the eviction. As noted by Nolo, “a common defense is procedural mistakes the landlord made during the eviction, such as improperly serving a notice or not waiting long enough before filing the eviction lawsuit.” So, it’s important to make sure to follow the proper procedure.
- The Courts Evict the Tenant After the Eviction Lawsuit. The property manager CANNOT remove the tenant on their own—even if they win the lawsuit and have cause. Instead, as specified by Nolo, “the landlord must use a sheriff to actually perform the eviction.” So, if the evicted tenant refuses to leave the premises, the property manager should notify the California Sheriff’s Office and arrange the removal through them.
It should be noted that an eviction could be arranged without cause in California, but only in a month-to-month agreement (with 30 days notice) or after the agreed-upon lease period has ended for a “fixed-term tenancy.”
Evictions are difficult and should be treated as a last resort for if there are irreconcilable differences between the residential property management company and the renter. Instead, it may be better to investigate alternatives such as helping renters find a different property or working with them to correct violations when possible.
Hopefully, you find this information useful for resolving some of the biggest residential property management challenges you might face. If you have any questions about how you can optimize your property maintenance, please reach out to the HOMEE team!