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4 Common Risks in Property Management

Managing multiple rental properties is overwhelming. You will be exposed to various factors that may or may not help you as a landlord. Issues will come your way regardless if you've been in the business for several years or you're just starting.



From a landlord standpoint, investing in rental properties is both fulfilling and challenging. It is fulfilling in a way that you have the opportunity to secure not just your future but your valuable tenants' as well, providing them the best comfort and safety they ever wished for in their dream house. While at some point, it is challenging because you can't do away with risks. It can be the issues directly relevant to the tenant or the property itself. The reality of it is that property management is not for you, especially if you are not capable of managing both worlds. It's not always about the fun and games.

In our previous blog, I briefly discussed handling tenant complaints. This time, we will focus on risk management. Technically, tons of risks can be associated with property management itself. If there are risks, there are also ways on how to deal with them. The approach may vary depending on how you handle the issues or the risk scenarios. Whatever works for you may not work for most of the landlords, and what works for them may not work for you. However, in property management, risk management often overwhelms property managers.

So, what are the risks associated with property management? Some issues from minor to complex ones like unattended phone calls from tenants, unresolved work order requests, lease agreement discrepancies, payment issues, and property maintenance issues will result in a more complex risk. The most common ones are the legal and administration risks, but other risks will come your way when you manage properties.

What are these risks?

  • Physical Risk

This risk is associated with the property condition itself. It is the most common risk that a property manager and the tenant encounter. For the property condition, issues that are commonly faced by both parties include minimal to complex property damages (if there are any). These damages will trigger risks if not controlled or fixed immediately. A concrete example would be any of the following:

  • Leaking ceiling

  • Exterior wall issues

  • Broken furniture and/or appliances

  • Plumbing issues

  • Broken walls

  • Electrical wiring issues

  • Etc.

If these issues are left unattended, it will surely create a bigger risk. If issues concern the safety and security of the tenants, landlords must handle them with urgency. If it needs to be transferred to a home warranty, schedule work repair the soonest possible time. Have it taken care of by professionals; reach out to the responsible contractor if you have to.

  • Tenant Risk

Why are tenants considered as risks? When you fail to secure your tenants' safety while they are residing in your rental unit, if they got injured, for example, they have the right to file a case against you. If this happens, your property will be at risk. You will be at risk.

  • Market Risks

Market condition is unpredictable. A lot of real estate investors have lived with it. From a property manager's standpoint, one of the factors affecting rental property investment is the external market itself. Let's have the current market situation we have now. Covid-19 has impacted not just a thousand businesses globally. The situation, obviously, has an impact on the real estate industry. Unemployment highly affects real estate investors focusing on rental properties as their tenants no longer afford to pay their rent. Some are forced to lower down the monthly rent, some tenants are forced to move out and look for more affordable units, some landlords don't get paid for months, etc. Some properties are sold at affordable rates. These are just some of the market condition's impact on the real estate industry. And this risk is something anyone wouldn't want to ignore.

  • Administration Risks

As someone who's managing multiple rental properties, I consider administrative work as a risk. More paper works, more tenants to follow up, more properties to maintain, more work order requests to attend to, and more time needed to manage all of these. Time management is not enough to cover all of these, and personally, to get rid of this risk, I invest in utilizing a tenant portal, software/systems digitally. It doesn't just save my time, but it also saves me energy and money.

If we have the risks, we should also have a way to get through them. Basically, as a property owner, you only have three options to address these risks. It may be either any of the following approaches:

  • Risk Control

From the word itself, "control". The only way to do away with all the risks you may encounter as a property owner is to minimize them, control them. If you have to conduct a monthly or quarterly inspection of the rental units, do so. It will help you secure your property and your tenants' safety and will save you from a more complex issue/s in the future.

  • Risk Transfer

For risks that need an urgent response, communicate with your contractors right away. It's not your sole responsibility to fix the issues; you have your insurance company and your contractors to help you maintain your property and provide the best service for your tenants.

  • Risk Avoidance

Well, this approach does not apply to the common issues a property owner may encounter in his rental units. This approach is common to those real estate investors who will not purchase the property (to be turned into a rental one) to avoid the risk. Probably, that property is too complex to handle or has tons of issues. And to get rid of that, the investors will look for a better one.

The bottom line is, regardless of the size of your rental property, as a responsible property owner, you will always, in all ways, secure your tenants' safety and comfort as much as you secure the property's. A good property owner knows how to handle the risks no matter how complex it is. He will not run on the responsibility of fixing the issues. He will make a way to fix them instead. Property management is not always smooth sailing. It is not just about getting all the rent payment. To better understand what good property management is, put yourself in your tenants' shoes. As a tenant, you will always aim to get what you are paying for. So as a landlord, value what your tenants are paying for as you value them.


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