By Linda Day Harrison, theBrokerList, Chicago, IL

I came to the conclusion very early in discussions with potential new property management clients that an initial drive-by, preliminary meeting with the owner, if possible, and compiling facts about the property on my own internal “Real Property Inventory Profile” was the best approach for me to take in determining the information necessary. Keep in mind, this approach is only necessary with local owners who were typically comprised of a partnership of local individuals or related persons who pool funds to invest in real estate.

If the potential prospect is an institutional-grade client, the approach is completely different as that type of prospect knows exactly what is involved and generally the real estate has been managed professionally. In that case, a discussion with the existing property manager would be ideal, or you can provide your request for key information included in the “Real Property Inventory Profile” initially. The key fact is whether or not the property has been managed by professionals or self-managed, or is being built or acquired.

Why are all of these differences relevant? Well the basic reason is that a professionally run property has systems and procedures and good habits in place, and generally a self-managed or new property requires much more upfront labor to establish all of the systems and procedures that all reputable owners will concur are necessary.

In my professional opinion, all of these key factors would need to be considered before ever providing a fixed quote to any client. A range would be safe, but never a fixed quote of any kind.

In addition, you need to determine the serious level of interest in this client actually wanting to go down the path of hiring a new management company. That is why I created my own “Real Property Inventory Profile”  as my own cheat sheet of questions and information to gather so I could learn more. In some cases, I can just send this questionnaire to the owner and ask them to respond. The profile helps you to qualify the potential property owner and their level of interest up front. Why? Because providing a proposal to manage a new property is an investment in time and resources. Property visits, analysis, team discussions, research, and preparation of a professional proposal that speaks to that owner personally about their property takes significant time, effort, and in essence, if you do a good job, actually provides the building owner with insight into their own property.

The “Real Property Inventory Profile” is vital because it immediately tells me how much upfront work we would have to perform to actually start managing the property. In other words, were we going to manage something that was mismanaged and needed work from the ground up, or was this a well-managed property that was not going to require a “swat team” (see New Property or Facility Takeover: Where Do I Start?) to take it over and set up all of the processes and systems and procedures from scratch? That is a major point of contention with any new business assignment — how much labor will be required. Labor relates to cost and overhead, so when pricing an assignment, the upfront investment of labor is an important consideration.

It can also demonstrate to the client you are serious and want to know more about what type of owner they are. Are they hands-on? Are they an absentee owner or a rookie owner? Again, all of this information will enable the most accurate quote of labor, which is what business services is all about. Remember, in property management and leasing, time is our industry commodity, therefore we need to understand how much time all of the steps and tasks will take us to execute. There are many people who would take on any new business assignment, and that is fine, but it is fraught with risk and you must go into the assignment with your eyes wide open, as well as be prepared for price objections when a client states that something costs more than they are willing to pay. By doing your homework, you will be more prepared to handle the feedback.

By Linda Day Harrison, theBrokerList, Chicago, IL

When I was on the front line, running a full-service real estate firm, I would be the point person on all new business calls. The first question from a potential client would almost always be “How much will you charge to manage my property?” Or “What percent will you charge to manage my property?”

It was a frustrating position to be in, but one that was easily answered: “There’s no fixed quote to manage your property.” Of course, the argument would be that they called several other management companies and were quoted X or Y. But no matter what, I learned that providing a quote to anyone on the phone is a slippery slope, and a very dangerous approach to gaining new business.

Two things are certain:

1. No two properties are alike.
2. No two property owners are alike.

Based on years of experience and knowing these basic fundamentals, I would always learn about the property and client before offering any opinion on what the cost would be to manage their property. Why? Since I could not possibly know the scope of service required for a property without a site visit and further investigation into so many pieces of information, quoting a fee over the phone would do the client and my firm a disservice. However, it was a balancing act on so many different levels — I would have to keep the client interested enough in my answer and approach as to why just quoting a figure may not be in the best interest of the management company and hence the client.

To calculate a management assignment quote and determine what should be included, you must have a good handle on what your overhead costs are as well. If you have unit costs on your overhead, it’s much easier to simply create a matrix of unit items and then calculate the labor hours that relate to those functions.

The functions can be general categories like:

• - Account Management/Executive
• - Supervisor
• - Property Manager
• - Administration
• - Accounting
• - Capital Project Management
• - Leasing
• - Legal
• - Insurance
• - Technology

This is a sample list of functions; some of the functions may or may not apply to the scope. For instance, the owner of the building may pay and secure property insurance or use their own real estate tax attorney. Although that may be a red flag for smaller property owners, for large clients, it may be that they put their insurance out to bid as they have a risk management department to handle that work. Or they have an in-house legal department. These are important areas to consider, and understand that these tasks take time. And remember, time is money!

I think you get the drift here, but the main points are that no two properties are alike and no two property owners are alike. If you keep that in mind, you will be able to identify clients that understand your value and your concern to do the job right, rather than just provide a proposal blindly, without knowing how it will impact their company and the overall health of the assignment.

A guest post by Sara Thompson, Zenith Properties NW, Vancouver, WA

You bought your investment property to make money over time, and with the right tenant, it can. Selecting a tenant is the most important aspect of managing your investment property. An undesirable tenant can turn your owner experience into a nightmare if they damage the property, fail to pay rent on time or at all, or cost you when you have no choice but to evict them. The situation can get ugly fast. So, let’s discuss how you can be sure to rent your property to the best possible tenant.

Eliminate the least desirable applicants over the phone
Before you invite them into your property, get to know them a bit better. When a renter calls to schedule an appointment to view your property, ask a few initial questions so that you can ensure you are only inviting reasonably qualified renters to look at the unit. If they are unwilling to fully answer your questions or are disrespectful, then you can eliminate them as possible candidates. Ask them questions like:

-Do you have pets?
-How many people will be living in the space?
-Do you have good rental history?
-Can you verify that your monthly income is three times the rental amount?

Consult Their Previous Landlords
Have a discussion with at least two of their former landlords and ask them these questions:

-Did they pay rent on time?
-Why did they move out? If they were evicted, was it for non-payment or for breaking lease rules?
-Did they get along with their neighbors?
-Did they provide 30 days notice before vacating?
-Did they keep the property in order?
-Did they damage the apartment other than general wear and tear?
-Did they complain or request maintenance often?

If the applicant is a first time renter they will not have a rental history, in which case, you may require a co-signer for the lease agreement.

Run a Credit Check
It is important to know that your future tenant has a habit of paying their bills on time. A credit check will reveal their bill paying history and how much debt they have. Even if they earn more than three times the rental amount per month, they may still have trouble paying rent if they have a lot of debt. A credit check will also show prior court judgments and/or bankruptcy filings.

Check Their Criminal Background
With just a name and date of birth you are able to view a tenant’s criminal record, which you can find at state and county courthouses. (It is important to check a valid ID so that you have their correct name and birthday.) Unfortunately, there isn’t a nationwide database of criminal records, so it may be difficult to reveal an applicant’s entire history, especially if they have lived in several states across the country. You will find it easier to justify rejecting an applicant based on drug-related or violent crimes than you would rejecting an applicant with multiple speeding tickets. Remember to reference state laws to make sure you do not unknowingly and illegally discriminate against renters with particular criminal convictions.

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

I recently had a neighbor suggest to me that we jointly fund a new fence along my side of the property that adjoined his. The fence was dilapidated here, but nowhere else. I was open to the idea, but wondered why I should share in the cost if this was the only place my fence was having problems. On all of the other adjoining property lines the fence is fine. Why this one? Maybe because his property was six inches higher than mine on his side of the fence and was pushing into mine? Fences are frustrating.

So why would you want to build one on property you rent? There would appear to be no common law duty in California to erect fencing to prevent entry onto your rented property to prevent injury or property damage. (Check your local laws to see if they are in accord). Some scenarios might compel it — to keep third parties away from a pool or electrical hazard. But absent some kind of foreseeable danger, there would not be a requirement at law.

Indeed, could it promote new obligations if the landlord builds a fence? Certainly, the landlord would have to maintain that fence, once built. He would not want to build a dangerous one. One with loose boarding. With nails sticking out. Or a ladder leading right to barbed wire. And if the landlord builds a fence on his residential rented property, he would have to maintain it to prevent little tykes who reside therein from busting loose onto adjoining property and getting injured.

Wait a minute. What? He would? Yes. If, say, there was a creek on nearby — but not owned — property, and the landlord put the fence up to keep his tenants away from the creek, the act of creating this fence is an act of exercising “control” over the adjoining land, thereby suggesting a duty to prevent injuries on that adjoining property. Cases in California have held a duty in such scenarios.

This is contrasted in those situations where there may be a dangerous condition nearby and the landlord does not erect a fence, such as near a busy road.  There, the landlord does not owe a duty because he did not exercise any control over the busy road by erecting a fence. The plaintiff, in one case which found no duty on the part of the landlord, ”was one of many children residing in an unfenced apartment complex that fronted on a busy road. He was injured when he walked off the premises, into the road, and was struck by an automobile.”  McDaniel v. Sunset Manor Co., 220 Cal. App. 3d 1, 10 (1990).

So is it better not to erect a fence at all? As we lawyers like to say, it all depends on the facts and circumstances of the particular property and tenants. Since ATPM blog readers are responsible types, there is a strong argument to be made that the erection of a fence to prevent injury on an adjoining property is not only the right thing to do, but one which will prevent injuries (and thereby lawsuits). These loyal readers will not let their fences fall into disrepair, and thus avoid the problem altogether.

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submissions do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

By Ken Kmet, Condo Voice, Clearwater, FL

Hurricane Sandy is glancing off Florida, and heading toward the east coast of the U.S., aiming straight for a rare collision with the Northeast U.S. Sitting here, as a Floridian, watching the satellite photos and watching the projected path, I am reminded that many, many part-time residents of Florida live in the Northeast. Even though most Northeast homes and properties are not fitted for hurricane protection, many residents know the drill. The only good news about this event is you have a lot of time to prepare, because tracking software has become so sophisticated.

So, if you only have a couple of days and a couple of bucks, and a couple of helpers or contractors to make you hurricane-ready, what to do? What are the priorities?

First, identify which hazard would affect you most — rising water (flood), wind, or even wet snow. Your property location and type should make this easy. High-rises should take cover, because wind speeds increase every few floors you are up.

Check for trees that overhang roofs, and if they are weak, old, or show signs of age, have them trimmed.

Walk the yard, and exterior, and secure or store anything that could become a missile or flying object. When in doubt, just store it.

If you are likely to have to evacuate, secure your home, not just from the severe weather, but also from vandals and thieves. Years ago, the day after a hurricane ripped through my neck of the woods, I was able to slip through the National Guard troops to get to a few of my properties, which were on the beach. After my inspection, during which I took pictures, noted damages, and called the property owners with my report, getting back in my vehicle I noticed many soldiers with machine guns walking the streets, Guard vehicles, and equipment. They were not messing around, and frankly, it was shocking to me to actually see martial law imposed, more or less, in my town. I managed to leave, also unnoticed, and wondered to myself if I was getting paid enough to have done something out of duty that could have gotten me in a lot of trouble. The point is, it can get that bad, and you could be delayed access to your property for some time if a storm does that type of devastation. Prepare for this, and count your blessings if it doesn’t happen that way.

Gather a bag, suitcase, or boxes with your important papers, CDs, thumb drives, et cetera, including any digital records that are on your desktop computer (and not on your laptop or mobile device). Make this light, compact, and weatherproof, so you can grab it and go in an instant and in very bad weather.

Prepare for power losses, earlier than you think. Make sure you can function if it is pitch black, because storms hit when they want to, not when it is convenient. Gather a mobile power bag also, with flashlights, extra batteries, and consumables, much like you would prepare for a winter storm. Traffic can become gridlocked, especially with people who are not used to this sort of thing, wait until the last minute, and so forth. When storms like this hit, and are rare, there are many more people who are rookies at this on the road.

Property damage is actually the last priority. Life safety, personal and property security, records, and survival kits should be the priorities. We know the drill in Florida. But a northern hurricane is rare, and many people have never experienced anything like it. Northern storms have the wet snow or ice possibility. Not only do you get the same factors that a southern hurricane can bring, but wet snow and ice can down power lines and cause property damage even more than the other factors.

I hope that the storm is not as bad as they are predicting, and my thoughts and prayers are with everyone in Sandy’s path. Do all you can do to prepare, and then hope and pray the effects are minimal. Take care.

By Steve Boudreault, Buildium, Boston, MA

It’s about time that Buildium’s top wordsmith started writing blogs for All Things Property Management. So here I am and here we go!

I’m going to use my first ATPM blog to connect property management to my number-one passion: Star Trek. Specifically, Star Trek: Deep Space Nine (DS9).

Deep Space Nine focused on the space station of the same name, in orbit around a planet called Bajor. Originally an outpost of the evil Cardassians, it was built using Bajoran slave labor during The Occupation, which lasted nearly 50 years. When the Bajorans finally ousted the Cardassians, Starfleet sent officers to take over administration of the station, and try to help Bajor and the Bajorans get back on their feet.

The wrinkle comes in with the discovery of a stable wormhole that connects the area of space right around Bajor to the distant and completely unexplored Gamma Quadrant. Now instead of being at the end of a quiet cul-de-sac in space, Deep Space Nine is at the crossroads of a major interstellar highway. That’s progress for you.

So what connections does Deep Space Nine herself have to property management? I’m glad you asked:

• Responsibility. The station was built by Bajorans for the Cardassians but is administrated by Starfleet. So one of the first questions was this: Whose responsibility is it to clean up and repair the station, which the Cardassians were so kind to trash before they left? Is it the owner’s responsibility or the manager’s? Well, since this is science fiction (heavy on the fiction) the responsibility is shared. (Good luck getting that to work in real life.)
• Ownership. At one point later in the series, the Cardassians returned and reclaimed the station. Sure, they’re evil, but the station did belong to them. Should they have a claim to it? It’s in orbit around Bajor, so does that make it Bajoran property? Back here on Earth, when a property changes hands from one owner to another, it can be confusing and frustrating for property managers when they’re not sure to whom they’re answering.
• Tenancy. Deep Space Nine houses the staff who work there, but it also houses the merchants who operate businesses on the Promenade, visitors, dignitaries, allies, and pretty much anyone who’s passing through. And despite the kinder, gentler nature of Star Trek, not all races get along and things sometimes get heated. Similarly, property managers can face the challenges inherent in renting to people of different cultures, backgrounds, and beliefs.

Though fictional, DS9 dealt with many of the same issues that today’s property managers deal with. And though the writers were probably blissfully unaware, they taught us a thing or two about cooperation and compromise when it comes to running a property. Hopefully we can all take something away from it.

But only if we all watch it.

By Linda Day Harrison, theBrokerList, Chicago, IL

When managing your property staff, encourage them to ask as many questions as possible. In general, people are afraid to ask questions because they think it makes them look less qualified. However, you must listen and treat each question like a nugget of gold. As a property manager you need to train your staff on the ins and outs of your business, but if they are not sure about something, encourage them to ask questions. Otherwise, acting without direction may have serious ramifications!

Hearing questions before an action is taken should be like music to your ears, when compared to hearing about a mishap or a mistake made because they didn’t ask. For example, would you want to risk to an employee’s safety because a team member failed to ask a question about proper safety procedures? Also keep in mind that when something takes longer to do or makes your staff work harder, don’t scream at them for asking, “Why must it be done this way?” and respond with an “it’s my way or the highway” type response. Instead, explain that it is for the greater good of the property, the building ownership, or that it is a requirement of the insurance policy. Make it clear to everyone involved why there are certain processes and procedures in place. In so many cases, if people do not understand the reasons, it can create confusion and problems. Life is hard enough without being caught in the trap of not dotting those I’s and crossing those T’s. Not only does it hurt the individual, when the issue catches up to them, but it causes hardship to the building owner, the company, the customers, and all of your coworkers as well. If people are not sure, they need to be trained to ask! Also remind them to think about every decision they make and visualize all of the outcomes.

Encouraging questions also helps to iron out any miscommunications. If one person is not clear, maybe nobody is clear, but they too, were afraid to ask. By encouraging questions everybody learns. In turn, this allows communication to improve across the entire organization. For example, the failure of staff member to ask a question pertaining to the interpretation of a vendor contract or a clause on a certificate of insurance can cause serious financial hardship to the property owner.  The outcome of this example could be very serious and completely avoided if your staff stops, thinks about the value of a question, and asks!

In my career, the most destructive employees I have ever encountered were those that did not ask questions. If someone stops asking me questions, it is a “Red Flag.” As property managers, it is our job to be available to the team, but we must also recognize those employees who are failing to question or inquire when conditions or situations are not typical. It is no different when you need to ask a question of your supervisor or building owner when you are not crystal clear about a subject or issue. Every issue property managers come upon have so many variables that it is almost impossible to know everything. Keep an open line of communication and embrace the nuggets of gold that come from your employees. The motto should always be “If you aren’t sure? Ask!”

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?