Risk management isn’t the most fun topic, but it is one of the most important. Managing risk can save you from large fines, lawsuits or even a loss of your business. In this week’s article we dive in to the specifics of managing risk and leading your property management company to success safely. I recently had the chance to be a guest on FourandHalf’s podcast and spoke about risk management. You can watch the full podcast below.
Managing risk for a property management business requires you to assess risk within your properties in addition to risk associated with running a business. You must be diligent and attentive while managing risk because the property management industry is very litigious. You should put policies in place to prevent risk associated with hiring, accounting, protecting customers personal information and other aspects about the way you run your business.
Although you may have a complex system for screening tenants already in place, screening the owners whose property you manage can be equally important. You want to ensure that you and your owners agree on key issues such as how you will manage risk or the requirements for tenants.
People often over get carried away in starting their property management business and forget to get their license. While not all states require property management licenses, this is one of the easiest things to check and prevent. Take the time to check if your state requires a license and take action if needed.
With these new laws in 2020 paying attention to fair housing laws has become even more important in managing risk. Make sure that you understand the full extent of fair housing laws to protect your owners, tenants and your own business. Possibly more important than learning these laws for yourself is ensuring your staff has read and understands these laws. Everyone on your team must understand these laws because they are crucial to everyday operations and can lead to a large fine or lawsuit if overlooked.
In addition to fair housing laws, it’s your responsibility to keep your employees in check. One of the first and easiest ways to set expectations for your employees is with a policies and procedures manual. While this can typically be a long and tedious process, we have a Policy and Procedures manual that will make it a breeze. Get your property management company running smoother and safer with ease.
Additionally, you must ensure that your employees understand how to handle customer’s personal information and do so with care. The Federal Trade Commission created the Red Flags Rule requiring businesses like real estate/ property management companies to have a written policy to educate staff and combat identity theft. When you first look at the red flags rule you might be confused about what your policy should include to stay legal and how you should educated your staff. Our Red Flags Rule Office Policy saves you hours of research and writing because it helps you comply with the FTC requirements, protect your clientele from identity theft, and train your personnel on this important issue.
Although you may understand the importance of managing and mitigating risk, knowing exactly how to do so can be much harder. Our friends at fourandhalf.com created a great article giving a framework for managing risk: https://fourandhalf.com/property-management-risk/ . They explain that the first step is identifying risk. You can do this by walking the property and looking for risks like lack of carbon monoxide detectors, tripping hazards, etc. Additionally, you can look for risk within your own business by reviewing your policies and procedures and ensuring your employees are educated. The second step they mention is to analyze the risk. Assess how much damage could be caused and how often this risk could happen. Finally, create an action plan. Based on your assessment of the risk, decide what actions should be taken and when. Turn these into a concrete plan and start executing it.
Kathleen Richards, is the owner of PM Made Easy and The Property Management Coach. With her 13 years as a broker/owner of a property management company she speaks from experience. Kathleen authored, Property Management A-Z and teaches regularly at community colleges and conferences on property management topics. She is active in her field and holds professional designations as Master Property Manager (MPM®) and Residential Management Professional (RMP®) and her company held the coveted, Certified Residential Management Company (CRMC®) designation from NARPM®. She is currently a National Instructor for NARPM® and is honored to be sharing best practices with other NARPM® professionals. Kathleen has served at the local and state level on the boards for NARPM® (National Association of Residential Property Managers)