If you’re overwhelmed with the amount of work to be done at your property management company, hiring additional staff is a logical place to start. Before you rush out and post a Craigslist ad, consider the type of work that’s really drowning you — is it maintenance work and showing units to potential tenants, or more administrative type work? The links below will help deal with the extra workload, whether that includes finding the right employee or the right software application for the jobs at hand.

• Entrepreneur.com weighs in on How to Decide When to Hire an Employee.
• If you are a small property management shop or an individual looking to grow your business by adding your first employees, this article from the Wall Street Journal is a great place to start.
• You’ve already decided that software can help save you the time you need by streamlining your more administrative type tasks. But should you be looking for web-based or installed software? 37Signals makes a case for web-based software.
• If you think that software is your company’s best bet, we’re a bit biased towards Buildium. You can hear more about our property management software in this video. You might also want to check out the Buyer’s Guide provided by Software Advice.

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There’s no doubt about it—of all the business problems you could potentially have, being too busy is certainly not a bad option. However, being too busy can become a problem if you lack the bandwidth to stay on top of things. If you consistently find yourself putting off certain tasks or letting them fall through the cracks altogether, it’s time to make some changes. Being overloaded can result in a slip in the quality of the service you provide or oversights, both of which may guarantee you’re not so busy for long.

The obvious answer to too much work is bringing more hands on deck. But, of course, just because you’re busy doesn’t necessarily mean you have the budget to hire additional employees. Property management software may give you the extra help you need at a lower cost than an additional salary.

Multi-tasking Functionality
One of the great benefits of property management software is that it essentially acts as an office generalist. For example, hiring extra staff to take care of accounting work may alleviate that workload, but that same person can’t necessarily take on other tasks such as advertising. Modern property management software, on the other hand, handles a diverse variety of functions. It does accounting, allows tenants to make rent payments online, provides an advertising platform, runs credit and criminal checks, creates reports, and keeps records.

Cost-effective Investment
Property management software requires only a nominal investment when compared to hiring new staff and adding an additional salary to your payroll. Depending on what type of software and package you choose, you may pay an upfront fee, an annual fee, or a monthly fee.

Streamline Systems
A good property management software system will do away with redundancies. Rather than entering information multiple times for multiple purposes, you only have to do it once, saving time and effort. For example, when you pay bills through a software program, it simultaneously records the transaction for you.

Buy Time
At the end of the day, property management software essentially buys you the oh-so-precious commodity of time. Not only does it take care of calculations, notifications, and receivables for you, but it can also decrease the time required on your part to provide great customer service. By providing relevant parties with usernames and passwords they can both look up records and enter things like payments and maintenance requests by logging on to the software program (assuming you select a web-based program).

There are certain situations when taking on a new employee is required. If, for example, you need help performing property maintenance or showing units to potential tenants, no software program in the world will do the trick. However, if you simply have more administrative, accounting, or customer service work than you can handle, software may well be just the cost-effective, low-maintenance solution you’re looking for—no salary or extensive training required.

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This is the second post in our Property Management Stories from the Front Lines series. If you’d like to submit a story for consideration, please email us at marketing@buildium.com.

By Jeanne De Clue, Hermann London Group, Saint Louis Property Management

Imagine that you just put your home the market: you have painted the walls, installed new carpet, and the house is spotless. This home is in what you consider to be a decent neighborhood in a decent part of town. A few buyers are interested in purchasing your home. You have already moved into your new home not too far from your vacant property that is currently on the market. You check on the property regularly to make sure that everything is safe and sound. On a regular visit you notice remnants of a trespasser. There was a forced entry through the back door. You look around and everything seems normal until you go to your newly finished basement and notice muddy footprints all over the new expensive carpet leading to a jagged hole in the wall where the copper pipes have been stolen. As you further inspect your property you also notice that a few air conditioning units are missing, along with some other appliances. You are livid. All the hard work you have put into preparing your home for the market has been ruined. This is a common problem that sellers sometimes face. Vacancy insurance can make this situation more bearable. Without it, this scenario can be a nightmare.

In today’s current market, homes are being left vacant for longer periods of time while they are waiting to sell. Homeowners fail to realize that their property can be at high-risk, even if the home is empty or unfurnished. No matter what neighborhood you live in, when you leave your property vacant, your home is subject to fires, burglary, water damage, trespassers and vandalism. It is common that an incident may occur once your home goes on the market because the property is listed for sale.

These types of issues can be expensive to repair or to reverse the damage inflicted on the home. With proper vacancy insurance, your home will be protected adequately. To obtain this coverage, simply contact your insurance agency to add it to your current policy. It can seem like a pricey addition to your current coverage, but ultimately, if an incident occurs, it will be well worth the money invested. When inquiring about this coverage, some companies will suggest a vacancy permit — if your vacancy will exceed over a week or two, this coverage will not suffice. A permit will not protect against any damage, theft, or injuries that could occur on the property. This is a common mistake many homeowners make because the homeowner is fully liable for any accidents that occur on their property. Make sure that you are familiar with your policy and that you fully understand the terms and conditions of it.

To further protect yourself from common incidents that vacant homes are susceptible to, here are a few additional tips:

1. Come by the house at least once a week to inspect the home for any signs of forced entry or vandalism.  If you cannot make it to your home, leave this job to a trusted friend or family member.
2. Make sure all windows and doors are locked at all times.
3. Install a security system and make sure that it is always set.
4. Cancel your mail and deliveries or have them forwarded to a P.O. Box or your new home address.
5. Turn off or turn down the heat or air conditioning, gas, water, and electricity.


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This is the second post in our Property Management Stories from the Front Lines series. If you’d like to submit a story for consideration, please email us at marketing@buildium.com.

By Jeanne De Clue, Hermann London Group, Saint Louis Property Management

Imagine that you just put your home the market: you have painted the walls, installed new carpet, and the house is spotless. This home is in what you consider to be a decent neighborhood in a decent part of town. A few buyers are interested in purchasing your home. You have already moved into your new home not too far from your vacant property that is currently on the market. You check on the property regularly to make sure that everything is safe and sound. On a regular visit you notice remnants of a trespasser. There was a forced entry through the back door. You look around and everything seems normal until you go to your newly finished basement and notice muddy footprints all over the new expensive carpet leading to a jagged hole in the wall where the copper pipes have been stolen. As you further inspect your property you also notice that a few air conditioning units are missing, along with some other appliances. You are livid. All the hard work you have put into preparing your home for the market has been ruined. This is a common problem that sellers sometimes face. Vacancy insurance can make this situation more bearable. Without it, this scenario can be a nightmare.

In today’s current market, homes are being left vacant for longer periods of time while they are waiting to sell. Homeowners fail to realize that their property can be at high-risk, even if the home is empty or unfurnished. No matter what neighborhood you live in, when you leave your property vacant, your home is subject to fires, burglary, water damage, trespassers and vandalism. It is common that an incident may occur once your home goes on the market because the property is listed for sale.

These types of issues can be expensive to repair or to reverse the damage inflicted on the home. With proper vacancy insurance, your home will be protected adequately. To obtain this coverage, simply contact your insurance agency to add it to your current policy. It can seem like a pricey addition to your current coverage, but ultimately, if an incident occurs, it will be well worth the money invested. When inquiring about this coverage, some companies will suggest a vacancy permit — if your vacancy will exceed over a week or two, this coverage will not suffice. A permit will not protect against any damage, theft, or injuries that could occur on the property. This is a common mistake many homeowners make because the homeowner is fully liable for any accidents that occur on their property. Make sure that you are familiar with your policy and that you fully understand the terms and conditions of it.

To further protect yourself from common incidents that vacant homes are susceptible to, here are a few additional tips:

1. Come by the house at least once a week to inspect the home for any signs of forced entry or vandalism.  If you cannot make it to your home, leave this job to a trusted friend or family member.
2. Make sure all windows and doors are locked at all times.
3. Install a security system and make sure that it is always set.
4. Cancel your mail and deliveries or have them forwarded to a P.O. Box or your new home address.
5. Turn off or turn down the heat or air conditioning, gas, water, and electricity.


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The business entity you choose for your property management company will affect you in very real ways—especially when it comes to taxation and financial and legal liability. This is a big decision and one that you may want to make with the assistance of your accountant or attorney. Following are the four business entities most commonly used by property management companies and some basic information about each.

Sole Proprietor
The title of this business designation pretty much says it all—a sole proprietorship is a business owned by one individual. Unlike more complex options, sole proprietorships do not have to be legally registered with the state you do business in. Rather, a sole proprietorship’s existence is solely based on the fact that you’ve gone into business. In other words, it’s simple and free to set up.

Sounds too easy, right? Well, there is a drawback. Because you are one and the same with your business, business gains and losses are filed on your personal tax forms and, most notably, you are liable for the business, both financially and legally.

Partnership
A partnership is much like a sole proprietorship, but it involves two or more owners. As with a sole proprietorship, no paperwork or registration is required—you are simply in business. Again, partners claim their share of business income on personal tax forms and are held liable for the business’ financial and legal claims.

Limited Liability Company (LLC)
LLCs are a bit more complex to set up than sole proprietorships or partnerships, with paperwork and costs due upon establishment. One of the great benefits of a LLC is that (as the name indicates) owners’ legal and financial liability is limited. Note, however, that in terms of taxes, LLCs function more like sole proprietorships and partnerships—each owner pays taxes for his share of the business on personal tax forms.

Corporation
Corporations are completely separate from individual owners for taxation purposes—in other words, personal and business taxes are filed separately. Personal income gleaned from the business (salary, bonuses, etc.) are filed on personal taxes, but corporate income remains solely on the business’ tax forms. Likewise, owners are not liable for business finance and legal issues.

When setting up your business, think carefully about how various business designations will affect both your taxes and liability. Protecting both should be your primary consideration.

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Whether numbers are your forte or not, there are certain ratios and calculations every property manager should understand. Following is a look at five key ratios that apply to your property management business, how to obtain them, and what they tell you.

1) Vacancy Rate
Your vacancy rate demonstrates the number of units available or unoccupied versus the total number of units available for rent on a property. The lower your vacancy rates, the better. The formula for this is simple:

Vacancy rate = Total number of unoccupied units in a property ÷ Total number of units in a property

This total can then be converted into a percentage.

While average vacancy rates vary from region to region, according to a January 2011 article on MHN Online, “[President of Axiometrics, Inc. Ron] Johnsey’s forecasts call for the average vacancy rate to drop in 2011 to 5.8 percent—a solid statistic considering apartment properties aim for vacancy rates of 5 percent for optimal rent increases.”

Note that your occupancy rate can be easily determined by subtracting your vacancy rate from 100 percent. For example, with a vacancy rate of 7 percent:

100% – 7% (vacancy rate) = 93% (occupancy rate)

2) Depreciation
Depreciation helps you determine how much value your property has lost over time due to age and wear and tear. Depreciation is considered an expense and will come into play as a write-off when completing taxes. Note that depreciation is completed over a 27.5 year period and applies only to the actual building on the property, not the land. To calculate depreciation:

Purchase price – Land value = Building value

—then—

Annual depreciation = Building value ÷ 27.5

3) Operating Expense Ratio
The operating expense ratio is simply the ratio between total operating expenses and the gross income of your property. This total amount shows how much of your property’s income is being used to actually support and run the property. Operating expenses include those expenditures that support the operation and maintenance of a property. Gross income is the actual yearly income—this may include not only rent, but also income from things like laundry machines and parking fees.

Operating expense ratio = Operating expenses ÷ Gross income

This total can then be converted into a percentage.

4) Capitalization Rate
The capitalization rate (or cap rate) will help you determine the actual value of a potential investment property, beyond the actual property’s more straightforward appraisal value. In other words, how much can you really expect to make off of this property, once expenses and operating costs are accounted for? To obtain this figure, you’ll need both the operating income and recent sales prices for comparable properties. Once you have both of these amounts, you can figure the cap rate, which will help you determine exactly how valuable a potential investment property will be for you or the potential property owner.

Cap rate = Sales price of a comparable income property ÷  Net operating income of comparable income property

This total can then be converted into a percentage.

5) Net Operating Income
Like cap rates, calculating the net operating income (NOI) of a property will help you determine how valuable it will actually be. In order to determine this figure, you will need to calculate both your gross potential income and vacancy and credit loss (in other words, the realistic loss of rental revenue due to vacancies, etc. based on previous years’ statistics). You can then complete the following calculations.

Gross operating income = Gross potential income – Vacancy and credit loss

—then—

Net operating income = Gross operating income – Operating expenses

Whether you’re attempting to gain a better understanding of where an existing property currently stands or how much a potential property investment will ultimately pay off, the black and white numbers provided by the formulas above will help provide a clear picture of how your current (or future) properties are actually performing.

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In our previous blog post we identified some of our favorite property management focused blogs — blogs with content covering issues like landlord-tenant relations, best practices for evicting tenants, property renovations to boost property value, and other topics specifically of interest to professional property managers or landlords. While these blogs are great resources to help you stay on top of your property management game, it’s also important to remember that you’re likely also running a small business. There are literally hundreds of blogs out there focused on helping small businesses prosper and grow. Coupling up-to-date property management knowledge with the latest in business know-how is a win-win scenario for your company.

1. Dharmesh Shah’s On Startups blog is one of the most widely read business blogs on the internet. The site specifically focuses on start-up entrepreneurs — perfect if you are in the early stages of growing your property management business.

2. Small Business Trends is the most widely read small business blog on the internet with over 114,000 subscribers via the site’s RSS feed. Needless to say, it’s a great resource.

3. HubSpot’s Internet Marketing Blog is a fantastic resource for learning to drive new business through online initiatives like search engine optimization, blogging, and social media. Best of all, most of these inbound marketing practices are free!

4. Getting the most bang for your buck out of blogs comes from finding blogs that you feel provide useful advice that are written in a style you enjoy reading. With this in mind, check out this list of the top 100 small business blogs on the internet.

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Industry-related blogs are a great way to pick up expert tips, tricks, and insider knowledge quickly and for free. But, of course, there are a lot of blogs out there. Since you only have so much time in the day to surf the web, here’s a quick run-down of five property management-related blogs you should be reading.

Marketing and More
Property management veteran Mike Brewer, who runs the M Brewer Group blog, is one of the most seasoned and consistent bloggers in the industry. While his blog focuses in large part on marketing, you’ll also find various additional industry topics included as well. Brewer has his fingers on the pulse of current industry conversations, so this blog is a great place to stop by to get a quick gauge of what’s currently being discussed by industry professionals.

Cyber Consultant
With Behind the Leasing Desk, Seattle-based property management consultant Heather Blume provides readers with musings on the industry and insights on how to up your property management game.  On her blog, Heather writes about everything from staff-related training class excerpts to tips for greening up your property. With quick, snappy reads, this blog is a great place to pick up a mish-mash of ideas to help you better your own business, including everything from tenant retention to customer service.

Property Renovations
Though Brownstoner.com’s Renovation Blog is Brooklyn-based, property managers from everywhere can learn a lot from the site’s home renovation section. If you’re the type that likes to take on projects—or if you’re looking for renovation ideas for your own or a client’s property—this blog is a great source of inspiration and information. Not only is the writing on this blog fun, but it also includes lots of images to provide property managers with a glimpse into tips and tricks others are using to transform fixer-uppers into highly desirable properties.

Mortgage Insights
If you’re looking to invest in a new property, you should be in the loop with the mortgage environment and current factors to consider. Real estate site Zillow.com has compiled a team of experts to contribute to one blog. Here you’ll find frequent updates on all topics mortgage-related, like interest rates, insurance premiums, and topical legislative issues. Boiled down to bite-size pieces, this blog is a great way to educate yourself quickly.

Video Blogging
Mark Juleen.com (formerly housed under TheApartmentNerd.com) has an up-to-the-minute take on all things property management, both in terms of his message and his delivery.  Primarily delivered as vlogs (video blogs), Juleen has a propensity for filming his broadcasts while driving (not to worry, folks, it’s hands-free). Juleen covers a wide variety of topics including everything from a tenant’s right to smoke in your units to remodeling. Most of all, he emphasizes modern marketing tactics, such as email marketing and leveraging social networking.

Be sure to leave us a comment and let us know about your favorite blogs—even better if you run a blog yourself!

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It sounds far too elementary to be such a good insight — your tenants likely have some great suggestions for improving your property. At the very least they have feedback of some variety that you’d find worthwhile. Yet it’s a pretty rare practice in property management to actively seek out the advice of the tenants who call your property home. These links will help you re-think your approach.

• While holding a tenant forum requires some planning and marketing, another approach to consider is offering a tenant survey on your website or on a periodic basis. Here is an example of a basic tenant survey.
• Doityourself.com provides A Guide to Landlord-Tenant Relations — tenant forums aside, there are several other steps to optimizing your relationships with your tenants.
• This article titled Why Tenants Love to Hate Their Property Management Company will give you some great insight into common pitfalls to avoid. It’s based on over 3,000 reviews of property management companies on Yahoo Local and Yelp!
• Do you know the Golden Rule of Property Management? Surprise surprise it involves your tenants!

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