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Top 10 Property Management Pitfalls

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Daniel Bornstein, Landlord Attorney, gives an insiders view on how to avoid common property management mistakes that cost your business money and result in potential liability.

Daniel Bornstein, Landlord Attorney, gives an insiders view on how to avoid common property management mistakes that cost your business money and result in potential liability.

Published in: Real Estate, Technology, Business

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  • Great presentation! I’d like to have a copy if available. Please forward to caquesinberry@aol.com, Thank you. Carl
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  • I found this information very valuable to have available to provide a checklist for establishing and maintaining a relationship the client and the tenant. As I read through I missed any information regarding the screening of tenants. This topic is very dear to my heart as I run Tenant Watch a complete tenant screening solution for landlords and was interested in hearing your perspective on this topic as it related to your presentation. Do you have a perspective regarding this topic as it does seem to take up a large part of property managers time? I am attempting to build a relationship with Brian and Jason of Appfolio and would be curious to hear your thoughts.
    Thank you,
    Jeremiah Stephen
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  • Discussion of property management best practices my insider’s knowledge as a real estate attorney, a property manager, and an investor.
  • Discussion of property management best practices my insider’s knowledge as a real estate attorney, a property manager, and an investor.
  • .
  • .
  • Ask for a show of hands for who still use the CAR property management agreement. Discuss its deficiencies
  • The way you set expectations is you have an outstanding OPM agreements Set expectations: Deliniate responsibilities for extra charge Ins. coverage for yourself Provides a method for termination for non compliance
  • Many pm are adept at selling and market, but utterly unfamiliar with laws involved, true for brokers and pms, whether there is a re license or not
  • Many who work in property management companies are not licensed, but act as if they are. This makes them dangerous.
  • Refer to Legal knowledge and education best practices as a solution.
  • Example: Pay for training for the talented assistant’s RE license. Reminder that you can’t share commission with an unlicensed agent.
  • Refer to Legal knowledge and education best practices as a solution.
  • Too often, 20% of clients take up 80% of your time. It is not worth working with them, considering the opportunity costs.
  • Discussion: do not to act until eviction is served due to the time and cost it takes to execute an eviction. Could reference article with eviction chart on www.PropertyManager.com
  • Perfect Tenant: no problems The Political tenant: Makes everything a politicized drama. Sees you as the bad guy by virtue of you being the landlord’s agent and them as the powerless tenant. The Non-communicative. Will not cooperate with you on any matter. The Tenant who is incapable of communication with anyone. The Passive Aggressive Tenants appear nice in face-to-face conversations, but they will send you a letter a day later that will shock you by the way it characterizes the conversation.
  • Talk about why you were interested in presenting w/ AppFolio, can you reference that you use it for your business?
  • Talk about why you were interested in presenting w/ AppFolio, can you reference that you use it for your business?
  • Give examples of property managers hiring contractors to perform renovations without knowing if their licenses are valid. Example of permits required for certain projects. Example of local laws prohibiting construction projects being performed by unqualified personnel. Give example of property managers penalized for OSHA violations for not reporting an injury. Discuss workers compensation liability.
  • Ethical conundrum: Even if you are acting under your client’s parameters for doing unpermitted work, you can still be liable or penalized or authorizing the work. Hence the conundrum: you have a duty to act as a fiduciary for your client if your client wants you do do work at a cheaper rate, but doing such work can potentially subject you to liability.
  • Questions for me? Time to network and mingle
  • Transcript

    • 1. TITLE Date Speaker Are You Ready for 2010? Avoid the Top 10 management pitfalls that reduce profit and increase liability
    • 2. Introduction
      • Daniel Bornstein, Esq.
        • Real estate attorney and founding partner at the Law Offices of Bornstein and Bornstein
        • Proprietor of Legal One Property Management
        • Real estate investor
    • 3. Today’s Focus
      • Identify 10 areas of property management vulnerability.
      • Provide solutions to insulate against these mistakes.
      • Highlight best practices for property management companies.
    • 4. Outline
      • Inception of the Property Management Relationship
      • Legal Knowledge and Education
      • Staffing
      • Client and Tenant Relationships
      • Bookkeeping and Operations
      • Conclusion
    • 5. #1: Inception of the Property Management Relationship
      • Pitfall #1
      • Failure to draft and execute outstanding property management agreements at the inception of the relationship.
    • 6. #1: Inception of the Property Management Relationship: Best Practices
      • An excellent property management agreement:
        • Sets expectations and boundaries
        • Delineates and monetizes responsibilities beyond rent collection and tenant selection commission
        • Example:
            • NOT COVERED BY THE MANAGEMENT FEE
          •   Owner understands that the following services rendered by the Authorized Agent to Owner shall be reimbursed for their time at the agreed upon rate of $95.00 per hour, with a one (1) hour minimum.  A full accounting of billable hours shall be provided to the Owner(s). These services include but are not limited to: . . .
    • 7. #1: Inception of the Property Management Relationship: Best Practices
      • An excellent property management agreement:
        • Contains a broad indemnity provision
        • Example:
            • SAVE HARMLESS
          •   Owner shall indemnify, defend and save Agent harmless from all loss, damage, cost, expense (including attorneys' fees), liability, or claims for personal injury or property damage incurred or occurring in, on, or about the Premises.
        • Provides a clear method for termination upon non-compliance
    • 8. #1: Inception of the Property Management Relationship: Best Practices
      • Are you still using the CAR form agreement?
      • Compare with a more aggressive agreement:
        • Scope of CAR agreement is limited and not thorough
        • Does not provide you with adequate protection
    • 9. #1: Inception of the Property Management Relationship: Best Practices
      • Two More Relationship Inception Best Practices
        • Of course, visit and inspect the property before accepting responsibility for it.
        • Make sure that property manager is a named beneficiary on property owner’s insurance policy.
    • 10. #2: Legal Knowledge and Education
      • Pitfall #2
      • Lack of formal training and knowledge of the law
    • 11. #2: Legal Knowledge and Education
        • Discrimination / Fair housing regulations
        • Americans with Disability Act (ADA)
        • Contract law, leasing
        • Security deposit accounting rules
        • Employment law (resident manager’s compensation, workers compensation)
    • 12. #2: Legal Knowledge and Education: Best Practices
      • Maintain a program for education:
        • Participate in Trade groups
        • Attend Seminars
        • Maintain a Close relationship with law firm
        • Online education – www.PropertyManager.com
    • 13. #3: Staffing
      • Pitfall #3
      • Employees have little background in real estate and are often unfamiliar with landlord tenant laws.
      • Example – Rent control Law
    • 14. #3: Staffing: Best Practices
        • Hire experienced people in the industry who demonstrate prior knowledge
        • Enlist employees in education programs and trade groups
    • 15. #4 & #5: Still Staffing!
      • Pitfall #4
      • Significant employee attrition due to compensation dissatisfaction
      Pitfall #5 Through employee attrition, losing historical knowledge of landlord and tenants.
    • 16. #4 & #5: More Staffing Best Practices
        • Identify outstanding employees
        • Groom outstanding employees to positions of authority….gradually so they are committed to your business
          • Example – A talented administrative assistant – pay for training for their real estate license
    • 17. #4 & #5: More Staffing Best Practices
        • Set employee retention as a goal in your compensation policies
        • Compensation based on both traditional salary and satisfying key metrics
        • Offer intermittent bonuses and or incentive programs
    • 18. #6: Client Relationships
      • Pitfall #6
      • Failure to be aggressive in terminating toxic relationships with difficult property owners.
        • The “80/20” rule
        • Consider your opportunity costs
    • 19. #7: Tenant Relationships
      • Pitfall #7
      • Failure to proactively address failed tenant relationships.
        • Immediate communication with both owner & tenant
        • Nonpayment of rent
        • Understanding time & cost of eviction
    • 20. #7: Property Manager / Tenant Relationships: Best Practices
        • Communicating with tenants: Understanding the 5 tenant personality profiles
      • The Political Tenant
      • The Silent Tenant
      • The Dysfunctional Tenant
      • The Passive Aggressive Tenant
      • The Perfect Tenant
    • 21. #7: Property Manager / Tenant Relationships: Best Practices
        • Employ a systematic approach to addressing failed tenant obligations
          • Set up schedule to make clear when rent is due and when payment is late.
          • Develop a database of templates for tenant communication
          • Have your law firm ready to act if necessary
    • 22. #8 & #9: Bookkeeping and Operations
      • Pitfall #8
      • Failure to document, disorganized filing.
      Pitfall #9 Failure to properly manage or oversee bookkeeping, trust accounts, and comply with DRE rules and regulations
    • 23. #8 & #9: Bookkeeping and Operations: Best Practices
      • Use information technology to organize and automate bookkeeping and management tasks.
          • Example:
    • 24. #8 & #9: Bookkeeping and Operations: Best Practices
      • AppFolio Features:
        • Complete general ledger accounting, customizable reports.
        • Tools to manage tenants, vacancies and vendors.
        • Track maintenance requests online and email work orders.
        • Generate batch email owner statements.
    • 25. #10: Bookkeeping and Operations
      • Pitfall #10
      • Failure to properly retain, monitor and oversee construction tradesmen, handy man, and independent contractors
      • Examples:
      • Not checking if contractors have valid license.
      • Not checking if permits are required for construction project.
      • Hiring handy men to do work beyond their ability.
      • Not reporting an injury.
    • 26. #10: Bookkeeping and Operations: Best Practices
      • Your client’s willingness to do unpermitted work will not always insulate you from liability.
        • You can still be liable for authorizing unpermitted work even if you are just complying with your client’s wishes.
        • Ethical conundrum: Duty as your client’s fiduciary vs. subjecting yourself to potential liability.
    • 27. #10: Bookkeeping and Operations: Best Practices
      • What to do?
        • Document, document, document
      • Include a proper indemnity agreement in the property management agreement. (Remember pitfall #1?)
    • 28. Conclusion
      • Putting it all together:
        • Property management is part communication, part bookkeeping, and part landlord-tenant coordination
    • 29. Questions? Additional Resources
      • Additional Resources:
        • Property Management Education: www.PropertyManager.com
        • Local SF Associations: SFAA.org, PPMA
        • Web-based Property Management Software – www.AppFolio.com
      • Contact Information
      • Daniel Bornstein
      • The Law Offices of Bornstein and Bornstein
      • 507 Polk Street, Suite 320
      • San Francisco, CA  94102-3339
      • Telephone:  (415) 409-7611
      • Facsimile:   (415)  409-9345
      • Email:    [email_address]
    • 30. TITLE Date Speaker Thank You!