By Kari Negri, CEO Sky Properties
“Ask Kari” is a monthly Question & Answer feature from Kari Negri. Kari has two decades of property management experience, is a featured speaker at many industry trade shows, such asAAGLA’s annual trade show, and is the founder and CEO of SKY Properties, Inc., in Los Angeles.
This month brings a special feature from the AAGLA TradeShow! I gave a free seminar on, “The Pitfalls of Choosingthe Wrong Property Management Company.” Manyowners thought it would make a great article to share andreference. Here are the main points from my seminar:
Pitfall 1: stuck in a 12-Month contract
You could be stuck in a 12-month contract with a company that does not share your vision for your property. Additionally, that company has control of not only the management, but also the building funds. At SKY Properties, we offer month-to-month management contracts due to the number of owners stuck in dissatisfactory management agreements prior to coming to us.
Pitfall 2: Poor accounting and Out-of-control finances
If you suspect anything, ask for copies of the invoices. You don’t want a disorganized company that blindly pays invoices without investigation, or potentially double pays invoices. Make sure to find out what accounting software the company is using.
Pitfall 3: Non-Professional Property Managers as Managers
If you consider hiring an accountant, agent, asset manager, or family member to manage your building, be aware. Due to their lack of property management specific experience, they may be more susceptible to all pitfalls listed here including unnecessary legal exposure, and over-spending.
Pitfall 4: Not Properly screening tenants
Mitigating eviction risk starts with tenant screening. An inexperienced manager may fill a vacancy fast, and temporarily increase cash flow, but in the end, this is the worst thing they can do. Without properly screening tenants, eviction risk and community safety can be a heavy price to pay. At minimum, check: criminal, credit, employment, eviction reports, and get confirmation of current residence via a utility bill. Additionally, look at three months of bank statements to confirm rent and utilities are being paid. Lastly, look at the driver’s license closely and confirm the identity of the person applying is the actual person you are approving.
Pitfall 5: incorrect forms and Not following Proper Procedures
All on-site managers must have a manager contract and submit weekly timesheets. Make sure your management company has an HR department that understands labor law and employee procedures. There are many other examples of improper, or lack of paperwork that is required, which management companies and their on-site managers must stay current on.
Pitfall 6: Neglected Maintenance
To make the bottom-line appear healthier, some managers may choose to neglect maintenance. This is a huge mistake. It results in massive repair bills when a problem becomes out of control and causes city write-ups.
Pitfall 7: inspection schedule Not Kept
Smoke alarms and carbon monoxide detectors must be checked every six months. Utilize these inspections to check plumbing (look for leaks and running faucets that can massively affect your water bill, create unhealthy conditions in apartments, and cause potential liabilities). Keep a copy of the inspection report in the main office and on-site. Also check the pool gate and, all railings – insurance company checks once a year but that is not enough.
Pitfall 8: hidden fees
Not understanding all of the fees before signing a management contract can sting, especially if you’re in a 12-month management contract. Besides the management fee – what else will you be charged for? Leasing? Postage? Office supplies? What is included in the management of your property?
Do you have a question for Kari? Please submit your question today: firstname.lastname@example.org Watch the web video series to this feature at www.skypropertiesinc.com
QUESTIONS TO ASK MANAGEMENT BEFORE SIGNING.
Would you rather wait for the right tenant or just get
Do you like your bills paid within 30 days?
Do you want a janitorial service or does your on-site
manager do the work?
Do you do maintenance just when needed or do you do
What are your priorities and objectives?
What kind of vacancy turns do you want – basic or
remodel or small upgrades?
Bonus: how to best qualify a property management company.
length of time doing business?
length of time with current clients?
involvement with local associations?
is the company bonded?