By Linda Day Harrison, theBrokerList, Chicago, IL

Do you manage your property, or does it manage you? This should be at the forefront of your mind every day. This question is meant to keep you on track and focused. Why? Because property management is an industry that can make or break you! As property managers we are the ultimate in multi-tasking. We know that anyone can become a property manager, but the ones that truly standout and differentiate themselves are the ones that manage their building. Not the other way around.

There can be constant interruptions and challenges throughout any given day. The day starts out fine until you get a call about a flooded property, or an unexpected customer complaint. Now you need to drop what you are doing and attend to the crisis at hand.

As you begin to tackle this new challenge, it is best to keep reminding yourself that you manage the building, the building does not manage you! When the flood hits, do you have a contingency plan? Why is the customer complaining? Analyze the issue and address the problem. The number one solution is to be proactive. Do all you can to prevent these issues from happening again. Manage it and do not just react to it!

When an issue arises, it must be broken down into the smallest components in order to find the reason or cause. Once it has been solved, it is time to develop a new approach or plan so that it can be prevented in the future. This can be as simple as more training in a specific topic, or even just determining if the task should be outsourced rather than performed in-house. Whatever the solution, it needs to be developed, implemented, and then monitored. If a solution is developed but it is never put into action, or if it is put into place but no one follows up on it to make sure it is being implemented correctly, it will do no good and create more headaches for you later on down the line.

For instance, if there is a flood, what caused the flood? Was it the lack of preventative maintenance, human error due to lack of training, a service contract failure, etc.? The point of managing is to anticipate and not wait for matters to arise. The entire premise of good management is to think about “What If” and anticipate everything. Constantly ask, “What is the worst thing that can happen?” or “What if this happens?” Then consider another important question “How should I prevent it or react if it does happen?” If you are prepared, it is no longer a crisis or interruption. Instead, it is just another part of the normal multi-tasking routine. Remember, the goal is to manage your property, not for the property to manage you!

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

In a recent notice received by our legal counsel addressing this very issue, apparently if you own rental property in California the scary answer is yes! The great state of California is widely known as a pro-tenant state when it comes to tenant-landlord related issues. Many cities such as San Francisco and Los Angeles are saddled with pockets of rent controlled areas making investment opportunities less attractive. They also have unfavorable statewide eviction laws that allow deadbeat tenants to continue residing in properties months after defaulting on rental payments.

So this should come as no surprise that according to state law if the tenant is licensed by the California State Department of Social Services (DSS) it only takes a thirty day written notice of their intent to legally start and operate a day care center without the permission of the landlord if the total number of children under care, including the children of the tenant, is limited to six. In fact, permission from the landlord is only necessary if the tenant chooses to increase the total number of children under care to eight. The licensed provider does need to have adequate insurance or be bonded. They must simply provide each parent, in writing, a notice that states the landlord’s insurance will not cover any issues should they arise – how reassuring. In fact, the landlord’s only recourse is that they can require the tenant to increase the security deposit to the maximum allowed by law. This is two times the rental rate if unfurnished and three times if furnished. The landlord is unfairly burdened with extra cost including, but not limited to, increased fees in liability coverage, out of pocket expenses for extra precautions to limit potential dangerous issues, and increased potential for additional wear and tear on the subject property. Most strikingly, the landlord loses control of determining if they approve or disapprove of this type of rental relationship. If they act by refusing to renew the rental agreement they run the risk of inviting a retaliation lawsuit from the tenant! This brings me to ponder a couple of questions, has the state overreached in providing this tenant right and does that seem like a fair exchange for the landlords?

By Carla Toebe, New Century Realty, Kennewick, WA

If you have decided to delve into the world of property management then the banking procedures will be a bit more involved than simply having a bank account, making your deposits and payments, and balancing the register at the end of the month. I want to stress that every state’s laws are different. Much of what I talk about in this article relates to the best practices specific to the state of Washington.

The first rule of business is to establish a trust account with your commercial bank. Oddly enough, once you have sat through the session to get this going, do some telephone banking and ask the representative what kind of account you have set up to make sure it was actually set up as a trust account. Just because they tell you that it is a trust account doesn’t mean it is. You have to follow up to make sure that the personal banker did their job correctly. You could find out the hard way that this account was never in fact a trust even if you were told it was. If it isn’t a trust then it will not be protected from potential seizure in the event of bankruptcy or other issues with separate personal or business accounts. Do your due diligence and don’t rely on the initial set up.

Additionally, you should not have any business operating funds coming into or out of this trust account. The account should only have tenant money or client money. All this money should be attached to a property. You must pay out a monthly commission as stipulated by all management agreements at least once monthly. The checks should also state that it is a property management trust account and the leases should state where and what bank the security deposits are held. If the owner of the property is holding the security deposit then you should hold back rental income in order to keep the security deposit in your trust because you are responsible for that deposit while you are managing the property.

The security deposits may be kept in the same account as the rental income but if you have many units with the same owner then it is advisable to get a separate interest bearing trust account and another trust account for the rental income. If you are dealing with multiple owners that do not have a large number of properties then it is better to get a combined account for both rental income and security deposits. If you have an interest bearing account you should be transferring the interest each month into the regular trust account as interest income to the owner. You will need to transfer the security deposit into the regular trust account before you can pay the owner any money from the refund due to charges as well.

If you keep a combined account, all the security deposits held on account as stated on the balance sheet and the rent roll must match the security deposit liability and the cash in the register must match the accumulation of all the owner balances plus the security deposits. You must balance the rent roll with the balance sheet and the register with the bank statement each month. Failure to do so could put you out of compliance with the state and if you are not in balance each month it could be a serious problem.

There should be two places for receipts, the computerized accounting system and the handwritten deposit ticket for all the payments. Copies of all checks should be kept, whether carbon or photocopied. Copies of duplicate deposit receipts should also be kept once the funds are deposited.

It is always a good idea to write a detailed process and policy for your property management banking to show that you are practicing due diligence with other people’s money held in trust. This way anyone who handles the trust account is fully knowledgeable and accountable about the importance of practicing all the state law requirements.

The rules, regulations, and customary practices vary wildly across the country. As I mentioned above, these are some of the best practices for Washington. For example, in Washington it is O.K. to comingle rent and security deposits in the same bank account, however it’s a big no-no in Massachusetts, and in California it’s customary for rental owners to hang onto the security deposit. Also remember that rules about reporting vary from state to state, i.e. if it’s not customary to get a full month’s rent as security, then your rent roll won’t tie to security deposit liability.

Clients put their trust in property managers and believe that they are doing the right thing. The way you handle your banking will solidify this trust with both clients and tenants, thus keeping you out of trouble!

Editor Note: If you’d like to contribute an article about your state’s best banking practices, please send an email to Justin@buildium.com

By Carla Toebe, New Century Realty, Kennewick, WA

They say that abandonment is a landlord’s or property manager’s worst nightmare when dealing with a tenant. How do you know it is really abandonment? Sometimes it’s obvious when everything is gone, the place seems perfectly empty, and the tenant’s keys are lying on the counter. But what if the place is full of furniture, the food is still in the cupboard, and you can’t get a hold of them? They haven’t paid their rent, they haven’t returned your phone calls, no one has seen them, and you can’t get a hold of anyone on the emergency contact form you had them complete when they moved in. Surely this means they must have abandoned the place. So you change the locks, and uh-oh! There they are coming back claiming you have now burglarized their place. Oh no! This can’t be, they clearly abandoned the place and you took all the steps you had to take that were required by law.

Maybe it isn’t that clear cut. Maybe a tenant still has some rights. Now you are facing penalties, a criminal investigation, and a whole slew of troubles you never knew you had. Let’s back up and figure out how to determine that this is really abandonment and you have the right to take possession of your unit.

You spelled out what abandonment was with your tenant and you had it written in the lease, right? Good, well at least you tried to get the tenant on board with your ideas. Unfortunately they have forgotten about your request for them to tell you they have left, and to turn in their keys. That would be the easy thing to do. However, they don’t want you to know they have left because they are in a hurry, that they are embarrassed that they have to leave owing rent, or that they had to leave things such a mess. They may not want to face you or deal with any of these responsibilities. Maybe they could have left a note telling you to dispose of everything there, and that they are not coming back.

Why didn’t they think of these things for you? Unfortunately abandonment isn’t always so sweet and simple. Usually you have to determine without any doubt and with full public notice of some sort that you intend to declare the place abandoned. You also have to hold onto any property left for so many days prior to disposing or selling it. Each state has their own set of laws and it is very important to become familiar with the particulars of the process to establish abandonment because that tenant could come back. Now you are now expected to return everything that you just disposed of because you thought it was left behind.

Write your abandonment process down if you haven’t already so that tenants, anyone who works for you taking care of the units, and owners who are hands on, consistently follow the appropriate process. Make sure that your complete process complies with the state laws. It may be helpful to have an attorney review it.

Typically in order to establish abandonment, the tenant must be late on the rent and they must have not responded to a 3 day notice to pay or quit that you mailed and put on their door. They have also not responded to an abandonment notice that you put on their door for all to see after 48 hours. What if they are just gone for 5 days and forgot to pay rent? Well you need to start calling their personal phone numbers, work numbers, relatives, friends, neighbors, and anyone you can think of that might know them in order to validate that they are really gone. You need to check and see if their vehicles have been parked there at all during this time. You also need to check with the utility companies to see if any service has been disconnected. In other words, ask around, do some investigating, and document all that you have done.

Once you are inside because the evidence all points to the fact that they have abandoned the unit, take a picture of that abandonment notice still stuck to the door and a picture and/or video of everything inside that has been left behind. Carefully store all items that are clearly not garbage and place it into a safe secure location for the length of time required by law. I don’t know how many times I have seen someone dump everything outside for all bargain hunters in the neighborhood to come around and clear away. Do not fall into that temptation as appealing as it sounds! It is the worst thing to do and it is not worth the potential harm that a little effort would prevent. Do the right things, know the laws, and know what the process should be.

If you are a tenant, please let someone know that you have left. If you don’t, it will cost you more money in the long run than it would have if you just let your landlord or property manager know when you left the property. Avoid getting into legal troubles over abandonment, turn in your keys and leave a note!

A guest post by Samantha Harvey, General Waste Collection, Lancashire, United Kingdom

With sustainability becoming more important to the general population, there is an ever-increasing necessity to provide eco-friendly properties. The rise in popularity of green technologies has led an industry that was once seen as expensive and niche-based into one that has competitive prices for many aspects of the building process. With the decreasing initial price disadvantage combined with the always present efficiency positives, the green movement presents a good deal of incentive to implement more eco-friendly resources. With the majority of greenhouse gas emissions coming from buildings, incorporating sustainable processes in homes is vital for curbing the impact of global warming.

As a property manager, the bottom line is the strongest guide as to how a property is to be managed. Incorporating green strategies can be a very productive aspect of property management. A major incentive for providing eco-friendly aspects to homes are the tax breaks, whether on a local or national level. Whether it is windows, heating systems, or solar panels, incentivized government programs are out there waiting for people to take advantage. Along with tax incentives, the strategies of increased efficiency provide savings in the operating costs of residential buildings. In cases where utilities are included, the bottom line effect can really add up. If utilities are not included, the potential renter will, or at least should, recognize that their own personal utility bills would be lower. This provides a key advantage over non-green buildings where potential customers will be left to wonder how inefficient their potential home might be.

Taking advantage of perceptions, good and bad, provides another opportunity for property managers to keep their bottom line strong. Creating an eco-friendly living environment can be a powerful marketing tool that keeps the properties filled. As previously stated, the green movement has been initiated into the mainstream consciousness. The reasons behind this are twofold: the growing recognition that the Earth’s resources are being taxed by its people and the need to change that, and the cost-effectiveness of more efficient models of building. Taking advantage of this newly invigorated social consciousness by offering people what they want creates a boon of public relations goodwill that will keep property managers busy with potential customers.

One final eco-friendly strategy that can help your bottom line is creating a paperless interface for your customers. Monthly statements, contracts, leases, and receipts are all things that can become paperless. This allows you to save paper for only the most necessary of jobs. This is an effective way to kill two birds with one stone. With the rise in technology, from phones to tablets, more people are keeping digital records, so why not join in this movement and save some money on paper along the way?

With competitively priced green technologies, tax incentives, the obvious efficiency benefits, and the public relations goodwill, updating and expanding properties into more eco-friendly operations provides a strong compliment to your bottom line. Plus, it is becoming increasingly evident that it is the right thing to do. It seems to be a rare occasion where the right thing and the profitable thing travel the same arc, but the eco-friendly property is one of those cases!

By Linda Day Harrison, theBrokerList, Chicago, IL

Touch It Once is a mindset, a philosophy, and a management style. It is the antithesis of procrastination coupled with a smart way to work by stopping redundant behavior dead in its tracks; both of which are the enemy of any efficient and well run organization.

The concept is simple – Touch It Once (TIO). Did you ever notice that each month the cycle is the same? Collect rent, send out 5 day notices, process accounts payable, cut checks, etc. So if this is something you know that’s going to happen, why is it so painful? Then at the end of the 30 day period, the cycle is going to start again! How can you not be prepared?! It happens every 30 days!

If you think about how the concept of TIO comes into play it will change the outlook you have on your business. Every time you do a task, think about how you can do that task perfectly. Save the process, document the task, and create a road map for others to follow that same format or system. The next time the task is required, anybody can use your process, learn how to execute, and actually accomplish it with the least amount of error or redundancy.

So how do you as a property manager or leasing agent “touch it once”? For me it was about checklists and document packets. These checklists include a new resident checklist, a move out checklist, a new vendor checklist, a monthly owner’s report checklist, etc. Every single time a new resident moves in or move out we have a series of steps and actions to take. Of course things change constantly, so the checklist was set up as a packet and saved as a .pdf document. Inside the packet are all of the forms, letters, and actual physical checklists for each item that needs to be accomplished. The checklist is clipped to the top of the file and it travels through the office circulating and being executed as required in anticipation of that new resident move in. So, if there is a form, letter, orientation, or document to be signed for any new resident, just open the New Resident document and all of it will be there. Simply hit print and go! This same concept can be accomplished in a similar fashion via online forms, but the system and procedure is the same – Touch It Once!

TIO is the most empowering tool a property manager can employ. TIO provides training, checklists, procedures, processes, and standards in everything you do. Remember, you are on a cycle. The cycle is daily, weekly, monthly, quarterly, annually, semi-annually, etc. What you want to do when you start to breaking the tasks down is to perfect the task, document the task, and train folks on how to perform the task. You are now building processes.

Those processes can be saved and used over and over like templates. After achieving these cycles and documenting these processes for one year, you now have an incredible roadmap of excellence for all to share. Now combine the power of TIO with today’s technological tools and you have a multitude of ways to execute this legacy of knowledge, which will result in the right tools being shared to your entire department, property, portfolio, or company.

One process that we developed has to do with new vendors. Each time we receive a call from a vendor or service provider we simply send them to our website to click and download our New Vendor Packet. It includes a cover letter, checklist, insurance standards, vendor profile form, all IRS forms, etc. Every single time this task arises, it is only takes seconds of time. It is also paperless and effortless. In addition, we now have a company-wide standard that everyone follows and knows what to expect. The other important element to this process is the image of you and your company. When meeting a new resident or interacting with a potential new service provider, your system is organized and systematic. When you give each process the care and proper attention to set it up and only touch it once, you are showing the world how much you respect, not only your experience with them, but also your organization, your clients, and your people.

Imagine if all employees understood the concept of TIO? If each employee were exposed to this philosophy, the power would multiply even faster and be an exciting approach to management and excellence.

TIO can result in comprehensive checklists, quality control, time saving templates, video training, orientation of new hires, new business tools, etc. It is also the least disruptive way to organize, train, and develop standards on a company wide basis, with everyone contributing. Start off trying it with one task. Remember, do it now and Touch It Once!

Today online property management software company Buildium, LLC launched its new Property Management IQ website. The interactive site uses humor to measure people’s knowledge of property management terms, regulations, and best practices.

“Property management is a serious business, but a little sense of humor can go a long way,” says

Buildium Co-Founder Michael Monteiro. “With that in mind we created Property Management IQ – an interactive site that promises to make you laugh and maybe even raise your property management quotient along the way.”

After completing the test, property managers receive a score and a badge they can display on their website. They can also share their results on Facebook and Twitter and are automatically entered to win an Apple iPad 2.

To take the Property Management IQ test, go to www.propertymanagementiq.com.

By Linda Day Harrison, Manager Labs, Chicago, IL

There are business models in all shapes and sizes. There are retail stores, medical and legal practices, cleaning companies, general contractors, grocery stores, etc. So when you think about a business, how many business models do you know of where the business owner outsources the entire business to another party? For instance, if you visit your local grocery store, is it managed by a grocery management company? How about a retail store management company? So what makes the residential real estate investment business any different? Why are there so many property management companies and outsourced service providers to the property industry?

According to a colleague of mine, the answer is quite simple, “It is not easy, there is so much at stake, and there are many moving parts.” Also, when you think about properties as investments, there are often multiple partners and joint venture groups who own the assets. In those cases, the managing partner realizes they do not have enough time or expertise to do all of the functions required of them to maximize the value of the asset. That is what outsourcing offers.

As a property manager outsourced by these partnerships, the responsibility of managing that asset is crucial in so many ways. First of all you have been selected by the partner on the management of the asset. All of the actions you take as the manager or management company directly reflect onto the reputation of that partner or company that made the decision to hire you.

Next you have the individual people that make up the partnership. In each case, the goal of the investment with each partner is diverse. Whether there is one partner or 100, each one has their own individual investment objective. For instance, one partner may be investing because they have young children and the investment is intended to be a college fund. Another partner may be saving for their retirement. The point is that in managing the property there are many significant outcomes to decisions and actions of the property manager.

Remember, the actions you take need to be considered as part of a global picture. Each action impacts the value of the property. Now enter the customers. The actions of the property customers (aka tenants) also play a pivotal role in the value of the asset as well. For instance, if a tenant does not pay rent, the cash flow of the property is impacted. This is a business and the business must be financially healthy to exist. There are services and debts that the business is obligated to support as well. So if the rent is not collected in a timely fashion, there may be consequences to the service providers looking to be paid. The service providers are outsourced too. Those service providers need to be respected and considered as they are a vital resource to the property ecosystem and the operations.

The entire ecosystem of the property needs to flow in a healthy and respectful manner. If there are members of the ecosystem that do not respect the life cycle of the asset, there is imbalance. An imbalance is what causes tremendous pressure on the other members of the ecosystem. For instance, if a tenant does not pay, there is not enough cash flow to pay the electric bill. If the electric bill is late, there is a penalty. When a penalty occurs, it further erodes the income. When the income becomes eroded, other service providers suffer since the invoices cannot get paid on time. It is necessary to understand how all the actions of the parties involved will affect each other.

When issues arise, keep the ecosystem or big picture in mind. Each move matters and each party to the property ecosystem can make or break the healthy cycle. Hold every member of the ecosystem accountable. Follow up and follow through on everything! Make sure you have an excellent command of the property and your communication to all parties is crystal clear. As with all business habits, be fair and honest about how everyone must work together. If one party falls short of their obligation, be sure to put them on notice. Do not hesitate to follow the letter of the lease or contract or whatever you are obligated to enforce on behalf of the partners who own the property.

Being a property manager is exciting and rewarding, but it does require hard work and the ability to view the business from a holistic perspective. It can be a challenge to maintain the ecosystem, but as long as you’re always looking out for your partners’ (owners, tenants, and service providers) best interests, you will feel gratified about the work being done with the property. Your owners and investors will be pleased that you are increasing their properties’ value, and your tenants will be happy about their living situation.

By Jo-Anne Oliveri, ireviloution intelligence, Brisbane, Australia

Recently, I have been involved in the sale and purchase of a rent roll. I had the rare opportunity of consulting for both the buyer and purchaser. Let me say, this was the smoothest and least stressful rent roll transfer I have ever witnessed!

Now some might say there is a conflict of interest by consulting to both the seller and the purchaser, and yes, I would agree! I definitely had my reservations about consulting and advising to both of them, but I discussed my dilemma with both parties. They both agreed they would retain me as the consultant and adviser through the negotiation, transfer, settlement, transition and retention period. In fact, I even conducted the inspection and overview on the selling rent-roll, and prepared the due diligence report.

This was a tremendous lesson for all concerned (including me)! The offer and settlement process lasted for several months. The buying agency is now in the midst of the four-month retention period. The selling agency must continue to cooperate to ensure all clients (both property owners and tenants) are happy with the new managing agent. Both agencies must not become complacent or lulled into a false sense of security until they are clear of this retention period.

For all intents and purposes the first goal of the buying agent is retention! The second goal is to build on the managements that they have invested in to encourage the investor to buy more property and recommend their services. That’s how a business owner should focus their attention to build on their investment. Principals need to understand and monitor their ROI (Return on Investment).

The amount invested alone should be kept at the forefront of the mind. The managements that transferred with the rent roll should be tracked with the historical information. Performance should also be logged and recorded. This ensures that not only the investment was solid and worthwhile, but also that future investments in purchasing rent rolls are made with factual historical data.

It’s important to understand the impact the previous purchase had on your business, good or bad – and that is just the financial investment! What about the investment of time, the years the principal has invested in developing, growing, and nurturing their own brand, and their personal and professional reputations?

Too many principals purchase a rent roll and never have any way to track the performance and ROI of the investment. Too many principals that decide to sell their rent roll believe once the contract has been agreed and is unconditional that their job is all over. They believe it’s just a matter of transferring the files over on transfer (settlement) day. Nothing could be further from the truth! Some principals even make sure the new managing agent employs their current team to continue managing the properties. They believe property owners will feel more secure with the management continuity and familiarity, therefore have a greater chance of retention. Once more, nothing could be further from the truth!

So, before you decide on buying a rent roll or selling your rent roll, please ensure you are informed. It’s not just a matter of signing a contract and employing a team. Oh no, there is so much more than meets the eye. More thoughts on this over the next few blogs!