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Property Management New Year's Resolutions

New Year's property management resolutionsAs 2010 draws to a close, it’s a good time to reflect on lessons from the past year and apply them to the future. As you prepare to move into 2011, be sure that you know not only what didn’t work in 2010, but also what did. After all, the goal is not to create a cycle of constantly tweaking systems and procedures but, rather, to find methods that work optimally for you and your tenants and stick with them. For an overview of where 2010 leaves you, begin by honestly asking yourself the following two questions: What was the highlight of my property management year? What was the lowlight of my property management year? When you’ve answered both of these questions, you should have a good idea of where you stand. Say, for example, that the highlight of your year was filling 40 percent of your available vacancies throughtenant referrals. This indicates that you are doing a great job of keeping your units in good shape and keeping tenants happy—in other words, in both of these realms, you’ve already found a formula that works. Though you may want to make little adjustments in these areas here and there, for the most part, you should continue doing exactly what you’ve done in 2010 on into 2011. Conversely, once you’ve come up with the lowlight of your year, you’ll want to determine why it happened and what needs to be changed in 2011 to prevent a similar occurrence from happening again. Let’s say, for example, ......
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Implementing a Late Fee Policy

Collecting timely rent payments from tenants is essential to keeping your property finances in order and promoting responsible tenant behavior. Writing a late fee policy into your rental agreements is a good way to make sure tenants remain diligent about on-time payments throughout the course of their tenancy. Just as important is making sure you hold your tenants to this policy. Rental agreement payment policies should include the following information: The day of the month rent is due. The day the late fee kicks in. The amount of the late fee. In a standard rental agreement, landlords provide tenants a five-day “grace period” between the day rent is due and the day the late fee is applied. Late fee penalty payments generally fall around $25. However, before setting the fee, be sure to check state and local laws to find out what maximum fees are allowed by law. While some landlords charge a single flat late fee, others charge an escalating amount for each day payment is late (for example, $5 on the first day, $10 on the second day, etc.). If you do use an escalating scale, you will also need to cap the late fee at a reasonable maximum amount. Not only is it important to build late fees into your lease contracts, but it’s also important to enforce the policy. With this in mind, though, judgment and reason are called for. For example, if a tenant has lived in your unit for eleven months and consistently paid rent......
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Setting Your Property Management Fees

Setting your property management fees can be tricky business. Obviously, you’d like to obtain the greatest amount of money possible for your services. On the other hand, it’s important that your prices remain competitive in order to secure new clients. Following are some things to take into consideration when setting and evaluating your property management fees. Know Your Competition While your prices shouldn’t be totally dictated by what your competitors are doing, it is important that you have an idea of the going rate for property management services in your area. While you don’t want to undercut yourself, you will likely also have a difficult time selling your services to potential clients if your rates are significantly higher than your competitors’. If they are higher, be sure you have a compelling answer lined-up when potential clients ask why that is (for example, “We offer more automated services for you to utilize” or “We have twenty more years of industry experience than our closest competitor”). Compare Apples to Apples In that vein, when evaluating competitors’ prices, be sure that you are taking similar companies into account. For example, if you have ten years of experience and several successful properties under your belt, you should not compare your prices to those of a relatively novice, start-up property manager. Obviously, the converse of this also holds true. Account for the Local Economy How are things in your area? Are vacancy rates high? Or is business booming, bringing lots of new residents to town? Keep......
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10 Signs Your Property Management Company is a Success

While profitability is one great sign of success, there are also many other less tangible indicators that your property management business is doing well. Following is  a list of ten signs you’re running a good property management shop. How many items on this list apply to your business? 1. Your vacancy rates are low. Low vacancy rates can mean any one (and often a combination of) several good things: 1) that you’re doing a good job marketing your property to new tenants; 2) that you’re maintaining existing tenants; and 3) that your units are generally sought-after. 2. You receive new property management clients from referrals. In business, referrals are the sincerest form of flattery. When existing clientele are referring potential clients your way, it is a sure sign you’re doing things right. 3. You receive new tenants from referrals. Chances are tenants who are displeased with your property aren’t going to recommend your property to their friends. As with client referrals, tenant referrals speak kindly of your work and may also indicate that you’ve successfully instated a good tenant referral program. 4. Your tenants stay put. They like you, they really like you! As with all business, it costs far less to keep existing tenants than it does to find new ones. If your tenants tend to remain in your units for multiple lease periods, chances are you’re pricing your units right and making tenants feel well cared for. 5. Other property managers contact you for advice. While it’s nice to......
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Property Management Accounting: One or multiple real estate trust accounts?

Property managementA question that we – as a property management firm – are constantly asked by prospective new clients is “How do you reconcile the trust account against all the checks and bills that come in and out of your office each month? How can we be sure that our money is being properly accounted for?”  To us, the answer seems very simple:  each new client is set up with two new trust accounts once they sign a property management agreement:  An Operating and a Reserve account.  Security deposit monies that are collected from residents at move in are deposited into the Reserve account and not touched until that resident moves out again.  Monies that are collected as rent are deposited into the Operating Account and used to pay bills, vendors, owner distributions, etc.  At the end of each month, each account is examined and reconciled.  True, this adds a bit more work for our book keepers, but the reconciliations at the end of each month end up being very precise.  In California it is legal keep every client’s rental and deposit monies in one single trust account – but to me that seems like an accounting nightmare.  One account would save on bank fees and back end set up time, but that seem like a small price for being able to show our clients a bank statement at the end of the month with their specific account and accounting info.  If we employed the single-trust fund method, our clients would never......
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Cash Vs. Accrual Accounting

Although not all property managers have an accounting background, it’s nonetheless important that any landlord handling the books has a firm grasp on basic accounting principles. Perhaps most importantly, it’s essential to have a working knowledge of the differences between cash and accrual accounting. Quite simply, the difference between cash and accrual accounting comes down to when you enter information in your books. Cash Method Accounting With the cash method, information is entered into the books as soon as money changes hands. In other words, as soon as you receive a rent check, it’s entered into the books as income. And as soon as you pay the plumber for the kitchen sink he unclogged, you enter that into the books as an expense. Accrual Method Accounting Accrual method accounting requires that payments and income be recorded as soon as money is due or owed. In this case, even if a tenant is a bit late on rent for July 1, you would still log that rent income into the books despite the fact that you have not yet received a check. Likewise, even if you have not yet cut your property management company’s checks for the week, you will enter the money you owe to the plumber for work completed as an expense immediately upon receipt of the bill. Whether you use cash or accrual accounting is completely up to you, dependent upon which system seems most intuitive and appropriate for your company. While most property managers use the cash ......
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Accounting Resources for Property Managers

Not all property managers are accounting experts, but accurate and organized accounting systems are nonetheless a crucial part of effective property management. Luckily for those of us that don’t have a significant background in accounting, there are many helpful tools available to aid property managers in effectively handling their accounting practices. Software One of the most critical accounting tasks a property manager faces is the struggle to keep different properties’ finances separate from one another. This means that funds allocated for property A are kept separate from funds for properties B, C, and D and from funds meant specifically for the property management company itself. The second biggest accounting concern for property managers is maintaining consistently up-to-date accounting records. With money constantly flowing in and out of each properties’ accounts, it’s essential to remain on top of payments received and made. Property managers must be able to quickly and efficiently respond to property owners’ inquiries regarding payments or bills. Accounting software allows property managers to easily update payments made and received. It also allows you to see all accounts for your various properties, as well as the property management company itself. Property management accounting software also allows complete and organized records to be pulled at a moment’s notice, whether you need to review them yourself or want to send them out for a property owner’s review. Be sure to check out Buildium’s property accounting software, specifically tailored for property managers. Books In addition to having a software-based accounting system, it’s also......
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Failure to Comply With Deposit Notifications Could be Costly

Imagine being forced to write a check to a previous tenant who still owes you money.  This is a very real possibility if you fail to comply with the law after the tenant moves out. With the amounts and occurrences of tenant debt rising, having to pay a previous tenant who still owes you money only adds insult to injury.   In most states, landlords and property managers are required to notify their tenant if they do not intend to refund the tenants deposit after they move out. States vary in the required timeframe and method of notification, but most do require it. This notification is referred to in various terms such as SODA (Statement of Deposit Account), Deposit Disposition, Final Account Statement, etc.  Some states require the notice be sent via certified mail, while others accept First Class mail notification.  I advise landlords to mail this notice via Certified Mail, whether the state requires it or not.  Sending it Certified Mail provides you with a receipt proving you mailed it and complied with the law.   Failing to notify your previous tenant of how you intend to apply the deposit he paid you may end up costing yourself even more money! Regardless of the unpaid rent, damages, eviction legal fees, etc., if you fail to notify the tenant as required by law in most states, the tenant can demand his deposit back.    Let’s say the tenant paid a $1,000 deposit on a twelve-month lease. Six months into the lea......
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Maximizing the Value of Utility Billing Programs

Many apartment communities have adopted utility billing programs as part of their energy management initiatives.  Properties will use these programs to help encourage conservation, share the burden of utility costs, advertise lower rents, and to pass along utility rate increases as they occur instead of waiting for the lease to renew.  These programs can be of value but ONLY if they are done correctly.  Unfortunately, I often find that there is substantial room for improvement.First, let's consider the business model of the billing company.  They get paid based on the number of bills they send out each month to your residents.  They don't get paid based on how effective the program is - meaning they don't have any incentive to ensure the program is meeting the property's goals.  Further, once a property starts a billing program it is hard to stop which means the billing company has a rather secure source of revenue.  These programs are hard to stop because the properties build them into their leases and rent structure.  Also, many of the billing companies try to get management companies to sign long-term contracts with auto renewals - don't do those.Before you begin a utility billing program for any utility type (water, electric, gas, etc.), I strongly suggest that the property take measures to make sure the consumption issues have been addressed prior to starting.  Trying to pass along the cost of utilities when consumption isn't where it should be is going to mean higher bills for your residents which......
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Heating Oil Pricing – What YOU Can Do About It

With crude oil prices hovering around $80 a barrel in recent days following the end of the nationwide cold spell, it is an opportune time to discuss the importance of crude oil prices for multifamily building owners and management. This is especially important to owners in Harlem, the Bronx and the Upper East Side, where older heating systems using oil heat are still prevalent.

After real estate taxes, heating oil (for those who use it) is the greatest expense in a multifamily building. More importantly, oil is an expense that is completely out of your control as a consumer. Major global investment bank energy analysts are predicting short-term prices above $80 per barrel before oil markets tighten in the coming years.

Throughout the New York City area, many residential and multifamily buildings are still heated by oil – but you don’t have to be at the mercy of market price swings, which are affected by any number of factors around the world. It may be possible that switching your heating source from oil to natural gas may decrease your building expenses considerably over the long run. Natural gas is currently selling for less than half that of oil per million BTU and is therefore a less expensive alternative. However, replacing an oil boiler with a gas system (complete with gas lines) can be a costly endeavor. Electing to replace a failing boiler with a natural gas system can be a sensible, cost-saving idea. Alternatively, if your heating system is running well, you should calculate the life-cycle cost of replacing your system, as you may be better off investing your money elsewhere right now.

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