Blog | Operational Efficiency

Investor Experience Platform™️ IXP™️

An Investor Experience Platform™️ (IXP) in property management is a suite of products, services, and benefits offered by property management companies to property investors. Just like a resident benefits package is a way to drive value for residents, investors, and property managers, the IBP™️ is an innovative approach to property management that focuses on driving value for an investor's assets and turning that value into profit for the property management company. In this article, we’ll dig into the different features that an Investor Experience Platform™️ can include, and how those benefit not just investors, but property managers and residents, too. What Is an Investor Experience Platform™️ (IXP)? As stated above, an Investor Experience Platform™️ (IXP™️) is a comprehensive suite of services that offer property investors higher quality property management, stability, and profit. An IBP™️ typically includes concierge-level services beyond basic property management – such as property insurance policies, eviction guarantees, rent guarantees, maintenance plans, asset performance reports, etc. These services are aimed at maximizing the investor’s assets, stability and convenience, profitability, and peace of mind in managing their properties. They're commonly managed through an investor experience platform to securely manage and monitor the performance of these assets online, which we'll discuss later. The first step to outlining an IBP™️ is to define what your basic management fee means and covers. If the answer is, it’s collecting rent, handling maintenance, and general communication – does that include maintenance coordination or is that a separate fee? Does it include asset reporting or is that an additional service? In your management agreement, define what the management fee is, what it covers, and how much it is. An IBP™️ can be an effective tool for articulating the new and differentiated things that an investor wouldn’t be able to do on their own and that you are offering beyond basic property management. Articulate your unique and differentiated services (IBP™️) and use that as a tool for positioning and charging for what it’s worth. What’s Included in An Investor Experience Platform™️? An Investor Experience Platform™️ should include a range of solutions to help deliver consistency, insight, and asset protection to a property owner’s portfolio. After all, professional property managers don’t have to be functional managers of a home – they can be strategic partners in the management of financial assets. You might hear services similar to the IBP™️ called an “owner benefit package,” but at Second Nature, we believe that the “investor” term is useful in encouraging a longer-term mindset, and emphasizes the economic value professional property management can bring. According to Eric Wetherington, VP of Strategic Initiatives at PURE Property Management: “As property managers, we need to think more like asset managers. This client made an investment, and we should be guiding that client through managing that investment, not just collecting rent.” To build and manage a winning IBP™️, property managers need an Investor Experience Platform that unlocks scalable product and service customization, digitized onboarding, accounting policy automation, and more. In addition, Investor Experience Platforms provide transparency and convenience for your investors. Here are some of the most valuable services that property managers can offer through an innovative Investor Experience Platform™️. Property insurance program Similar to offering a renters insurance program through an RBP in the lease agreement, property management companies can offer an insurance plan to investors to cut costs and ensure the safety of their assets. Most management agreements will include the requirement that the investor carries insurance on the property and that the property manager is additionally insured. But what if you as the property manager could help manage that for the investor – at scale? Property Insurance for investors should have dynamic pricing based on individual investors’s property portfolio and needs. The benefit beyond flexibility is the savings they’ll see on their premiums while also getting insurance that’s tailored to the needs of their specific property class. At Second Nature, we work primarily with single-family rental properties and small multi-family residences. Property Insurance Programs can bring scale that will drive economic value for the investor over what they could get retail on their own. They’d still have the option to go get their own insurance that meets requirements, but they can pay you a small fee to manage it for them. Rent guarantee An IBP™️ can include a number of financial guarantees to protect property investors and drive ancillary revenue for PMCs. A rent guarantee, or rent protection, ensures a consistent rental income to investors by protecting them against resident defaults or non-payment of rent. If a resident fails to pay rent, the property management company covers the unpaid amount and takes necessary steps for eviction or collection, providing financial security and minimizing the risk for property owners. Rent guarantees work for professional property management companies that have enough properties to balance the loss of rent if a resident doesn’t pay. The risk is low and the additional profit from fees for this guarantee can have a very high ROI, while driving satisfaction and stability for the investor. Plus, if you’re using services in an RBP to help incentivize on-time rent payments, you’ll rarely find yourself out in the cold. Eviction protection guarantee An eviction protection guarantee also goes beyond the normal scope of property management services and can be used as a secondary source of revenue. Eviction Protection is a service provided by property management companies to property investors that offers additional security and financial protection in the event of an eviction. Under this guarantee, the property management company assumes the costs associated with the eviction process, including legal fees and court expenses. It helps alleviate the financial burden on property investors and provides peace of mind by ensuring that they are safeguarded against potential losses resulting from resident evictions. The eviction guarantee helps protect property owners from the complexities and potential costs associated with evictions, ensuring a smooth and efficient resolution to tenant-related issues. Pet guarantees & other guarantees A pet guarantee is a service offered by property management companies to property investors that aims to address any potential issues related to allowing pets in rental properties. It typically involves implementing policies and procedures to ensure responsible pet ownership, such as thorough pet screening, pet agreements, and collecting additional pet deposits or fees. The pet guarantee may also include services like pet damage insurance or assistance with pet-related issues during the lease term. It provides property investors with a framework to accommodate residents with pets while minimizing risks and maintaining the condition of the property. For many residents, finding a pet-friendly apartment increases retention and profitability. They’re willing to stay longer and pay more for a pet-friendly place. And–get this–pet damage is less likely to happen than damage from kids! It’s not a huge risk to the asset, but can provide a big benefit in terms of satisfied, longer-term residents. Maintenance plan Home warranties are a four-letter word for property managers. They’re a massive headache to deal with, and yet there’s high demand for them among property investors. Because of that, most property managers charge a fee for home warranties, for each they have to file. Imagine if there was a world where home warranties weren’t needed. Here’s the thing: Professional property managers already have the vendor network and the know-how to coordinate maintenance jobs. What they don’t usually have is a product that’s priced to give the investor the experience they want. Let’s say right now an investor is paying $50 a month for a cheap home warranty. The warranty only covers 40% of issues and it creates all these extra people and friction in the middle. For anything moderately significant that goes wrong with a property, PMCs generally must contact the investor for permission to get work done. It’s all a massive hassle and loses time in maintenance requests that leave residents frustrated. What if there was a product that costs, say, $150 to $200 a month but it actually covered everything? Instead of having sudden expenses and emergencies, this maintenance plan smooths out the experience and makes it more predictable for the investor. For PMs, it means taking the initiative on fixes without waiting for approval. Imagine a world where you didn’t have to get owner approvals for 95% of maintenance issues – because they’re already budgeted for and already paid for. For residents, it means better maintenance, and faster. Another Triple Win! Asset performance reports Another piece focuses on property managers as asset managers. Think about any investment app, like Robinhood, Acorns, etc. You can log in to these apps any time, 24/7, and see how your stock and investments are performing. In most investment classes, you can see in real time how your assets are performing. Why shouldn’t property investors have that as well? An IBP™️ can include exactly that: a dashboard or online portal that shows investors regular reports on how their property is doing. They could get updates on the value of their home over time, the home price appreciation, rent price over time, and project rent growth, typically maintenance costs and how they’re doing against that, and more. Resident Benefits Package Another piece to include in your IBP™️ is to highlight the benefits of your resident benefits package to your investors. Explain how features like a filter delivery program protect their assets and reduce HVAC repair costs. Show how a renters insurance program can ensure coverage and protection. Give numbers on how credit reporting incentivizes on-time rental payments and helps ensure financially stable renters. Explain how a movie-in concierge saves both time, headache, and money. Each of the pillars of an RBP is critical to encouraging better resident behavior, increasing renter retention and lease renewal rates, reducing vacancies, and more – all primary goals for a property investor. A note about Rent Advance Programs There’s been due buzz about “Rent Advance” offerings, though many advise caution when approaching this financial product. It works in some ways like cash advance programs, which can satisfy urgent needs, but not be more valuable for anyone long term. The way it works is PMs offer to send a year of rent upfront to the investor in a big chunk, and collect monthly from the resident. The investor typically pays a 5-10% premium on the advance, which can be their entire expected return. So the question becomes, where do they put that cash to get a better return instead? Another thing to think about is who would actually use this product. Investors who don’t have enough cash on hand? How does that benefit anyone in the long run? What happens when there’s a big maintenance bill later? Does this encourage better decisions and practices by the investor? To date, there’s been pretty low adoption of this program, which is another sign it may not be hugely beneficial to everyone involved. But plenty of innovations start that way, evolve, and find traction. One case where it might be a value generator is if an investor is looking to take a cash advance and put it toward a down payment for another house. That would benefit the property manager as well, promising more business, and the PM could offer a lower rate for getting more properties to make the financing more attractive than hard money loans or other alternatives. The jury is still out here, it’s an interesting one to track. How Can Investors and Property Managers Benefit From an Investor Experience Platform™️? Investors and property managers can benefit from an Investor Experience Platform™️ in several ways. They’re also great for residents in the sense they build more stability and quality into the renting process. Here are just some of the benefits of an IBP™️. Enhanced investor attraction An Investor Experience Platform™️ provides incentives and advantages that can attract more investors. Financial guarantees and protections against the risks associated with evictions or late payments can increase stability, while services like a maintenance plan can ensure premium care of their property assets without increasing their workload. By offering attractive perks, property managers can differentiate their offerings and generate greater investor interest. Increased investor retention Both IBP™️s and RBPs help build loyalty with residents and investors. By fostering a strong relationship and demonstrating ongoing value, property managers can build trust and loyalty among investors, and retain them over the long term. IBP™️s help establish the stability, transparency, and asset growth for a real estate investment that an investor hopes to achieve. Improved property performance An Investor Experience Platform™️ can also contribute to improved property performance. For example, by offering discounted property management fees or access to professional services at reduced rates, property managers can help investors optimize their returns and reduce costs. Additionally, incentives such as rent guarantees or eviction protection can mitigate risk for investors and attract more capital to the property. Streamlined communication and transparency A well-designed Investor Experience Platform™️ facilitates effective communication and promotes transparency between property managers and investors. This can involve regular reporting on financial performance, property updates, and the sharing of relevant market insights. Transparent and consistent communication builds trust and confidence among investors, fostering a positive and long-lasting relationship. Competitive advantage A comprehensive Investor Experience Platform™️ can give property managers a competitive edge in the market. When investors have access to exclusive benefits and advantages, they are more likely to choose a property managed by a company that offers a compelling package – and to recommend it to others. Say hello to increased investment inflow and a stronger market position for your PMC. Should You Make an Investor Experience Platform™️ Mandatory? The first thing most property managers ask us when we’re talking about an RBP or an IBP™️ is: Should I make this mandatory for all investors or do I make it a flexible opt-in/opt-out program? Unlike RBPs, where best practices are more proven and established, different PMs are taking different approaches with their IBP™️s. Some have a mandatory level of service set at a flat price. Others may say they’re fine offering a base level of service without these differentiated products, giving investors the choice to simply pay a baseline management fee and opt out of the IBP™️ premium service. Some may offer a baseline to all investors and then give them the chance to opt in for premium IBP™️ services. There are a lot of ways to do it. With the RBP, we’ve found that making it mandatory does not generate nearly as much pushback as people expect – and can be a strong value add overall. Final Thoughts About an Investor Experience Platform™️ The Investor Experience Platform™️ is an innovative way to generate ancillary income and create more value for investors and residents. Similar to Second Nature’s premier Resident Benefits Package, the IBP™️ can deliver high-quality service for investor experience – and help create a triple win for investors, residents, and property management companies. The IBP™️ reinforces the value of a professional property management company for investors and helps differentiate you from the crowd. Stay tuned to learn more about the latest in the IBP™️ space, or learn more about how a resident benefits package can launch a whole new level of value for your PMC.

July 17, 2024

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Property Management Pest Control Gone Wrong: Resident Horror Stories & Nightmares

In the world of property management and real estate investing, maintaining a clean and pest-free environment is central to the well-being of the residents who live in your properties. That being said, effective pest control is not only a best practice, but also a strategic move that enhances your properties’ living experience, making your life as a property manager easier and your residents happier. Pest control is crucial for several reasons: Investing in pest control saves significant potential costs by avoiding large-scale infestations and property damage, enhancing resident satisfaction with a healthier, pest-free environment, and preserving property value. This approach reduces health risks, protects against liability, and maintains a good reputation by demonstrating the property management company’s dedication to providing safe, comfortable living spaces for great tenants. Ultimately, pest control sets professional property management companies apart from DIY and amateur real estate investors by safeguarding both residents' well-being and property assets. By addressing these points, you can foster a positive living environment that benefits both you and your residents. It’s important to note that our goal is not to call out “good tenants” vs. “bad tenants.” Instead, we always aim to foster a constructive dialogue focused on addressing problems and finding solutions. By emphasizing respect and fairness, we can help create a positive environment that benefits all residents, ensuring their rights and dignity are always respected. Also note that even though we here at Second Nature prefer the term "resident" over "tenant" to foster the human element, the word "tenant" may still be used occasionally due to its long-standing legal and real estate context. "House of Horror" Stories Most property managers have encountered their share of resident horror stories – and many, not for the first time. These tales often involve unexpected and severe pest infestations, made worse by residents' behaviors. Indeed, from bedbugs and roaches (the truly bad tenants any property manager is looking to be rid of) to animal issues, the range of pest problems is vast and daunting. Our "House of Horror Stories" video provides a vivid account of these situations, including some landlord horror stories that are too distressing to include here. Maggots falling from the ceiling: A tenant reported maggots falling from the ceiling onto their bed. The pest company discovered that these maggots were larvae of beetles infesting the air ducts in the neighborhood. Pets and extensive damage: Animals in one property caused extensive damage by covering all floors with feces and chewing through doors, door frames, flooring, HVAC systems, and appliances, with clean-up costs exceeding $15,000. Flushable wipes backup: A tenant flushing baby wipes caused a major sewage backup, leading to water damage throughout multiple rooms (including the living room and master bedroom), with clean-up costs close to $5,000. Donkey in the basement: During the purchase inspection, a donkey was found tied to the deck and later moved to the basement to hide it from animal control, calling for its quick removal. Rodents damaging appliances: Rats infested a property, chewing through a new dishwasher, insulation, and electrical wires, requiring repeated pest control visits and extensive repairs. These stories from a range of contributors highlight the unpredictable and often extreme challenges property managers face in maintaining their properties and ensuring the safety and well-being of their residents. How to Control Resident Pest Issues A robust pest control program is often the property manager’s best friend. After all, infestations can be difficult to proactively defend against, given that background checks, references, and tenant screening go only so far in uncovering the pest issues that can befall even the best tenants. Regardless of the challenges residents may present, a comprehensive pest control plan can mitigate potential infestations before they escalate into true horror stories. This includes timely intervention, and educating residents about maintaining cleanliness. Providing residents with clear guidelines on waste disposal and food storage can also significantly mitigate pest problems. Additionally, offering pest control services as part of a Resident Benefits Package can encourage residents to report issues early, allowing for swift action. Planning Ahead When dealing with problematic residents, it's essential to have a clear action plan. Issuing notices to clean the property promptly (e.g., with a 7-day notice period) is a critical first step. Leveraging a notice-to-clean template can streamline the process and ensure that you comply with tenant laws and legal standards. If worst things come to worst, an eviction notice may become necessary. However, this process is governed by various rules and regulations that can differ significantly across federal and state lines. It's important to be well-versed in these laws to avoid legal pitfalls. A detailed “notice to vacate” template can be incredibly helpful for property managers looking to take care of these complex situations. Nipping Things in the Bud In conclusion, maintaining a pest-free environment is integral to property management success. On-Demand Pest Control is a service in Second Nature’s fully managed Resident Benefits Package (RBP). It offers predictable, cost-effective, and fast solutions when a pest issue arises. Instead of expensive scheduled preventive treatments, residents can request service as needed. This approach ensures fast response times, directly addressing the problem at hand and saving costs over recurring treatments Property managers simply select the best pest plan from four tiers of service levels to include in their RBP. When an issue arises, the resident reports it in the On-Demand Pest Control portal, and the pest issue will be resolved. Learn more about On-Demand Pest Control by getting in touch, or read our latest study on the impact of our RBP on the resident experience.

July 3, 2024

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Accidental Landlord? Why You Should Hire a Property Manager (and How)

In the ever-evolving real estate market, the term "accidental landlord" refers to individuals who find themselves managing rental properties unexpectedly. This can happen for various reasons – perhaps you’ve inherited a family home, moved for a job, or decided to rent out your property instead of selling it in a slow housing market. Certainly, today’s interest rate trends are contributing to the rise of the accidental landlord phenomenon by making it less attractive for homeowners to sell their properties. As interest rates increase, prospective buyers face higher borrowing costs, reducing their purchasing power and dampening demand. This often leads homeowners, who might have otherwise sold their property, to rent it out instead, especially if they’ve locked in lower mortgage rates from previous years. Consequently, many individuals find themselves in the role of landlords unintentionally, seeking rental income as a viable alternative to selling in a sluggish market. Regardless of how you got here, stepping into the role of a first-time landlord can be both overwhelming and time-consuming. In this article, we’ll highlight the importance of professional property management for accidental landlords. Effective property management can alleviate many of the stresses associated with being a landlord, allowing you to reap the benefits of rental income without sacrificing your personal or professional life. We’ll also explain how homeowners can avoid headaches by locking in high-quality long-term tenants with a property manager powered by Second Nature's resident benefits package (RBP). Note that even though we here at Second Nature prefer the term "resident" over "tenant" in order to foster the human element, the word "tenant" may still be used occasionally due to its long-standing legal and real estate context. The Challenges Faced by Accidental Landlords Stepping into the landlord role comes with countless challenges. Understanding these obstacles is crucial in recognizing the value of professional property management. Time management issues One of the primary challenges accidental landlords face is time management. Balancing a full-time job with the responsibilities of managing a rental property can be daunting. From advertising vacancies and showing the property to potential renters to handling day-to-day administrative tasks and responding to maintenance requests, the demands on your time can quickly become overwhelming. This often leads to burnout, which can negatively impact both your professional life and the quality of your property management. Legal complexities Navigating the legal complexities of being a landlord is another significant challenge. Understanding tenant laws, lease agreements, and your legal obligations can be intricate and ever-changing. Landlords must stay updated with local, state, and federal regulations to avoid potential legal issues. This includes everything from fair housing laws to health and safety regulations. Without proper legal knowledge, you risk costly fines and legal disputes. Maintenance responsibilities Maintaining a rental property involves regular upkeep and emergency repairs, which can be both time-consuming and costly. From routine maintenance tasks like lawn care and HVAC servicing to unexpected emergencies like plumbing leaks or electrical issues, ensuring your property is well-maintained is crucial to keeping your residents happy and protecting your investment. Tenant management Managing residents is another area where accidental landlords often struggle. Effective tenant management includes everything from screening prospective tenants and handling lease agreements to addressing disputes, ensuring timely rent collection, and dealing with evictions. Poor tenant management can lead to high turnover rates, property damage, and lost rental income. Financial considerations In the current real estate market, navigating financial considerations can be particularly challenging for accidental landlords. Many find themselves dealing with buy-to-let (BTL) mortgages and managing mortgage payments on their primary residence and rental property. By law, landlords must also adhere to specific regulations, including securing landlord insurance and managing security deposits correctly. Additionally, fluctuating mortgage interest rates have prompted many homeowners, especially in states like California, to rent out their current homes rather than sell them. This strategy not only helps cover mortgage payments but also provides an opportunity for generating passive income, turning a potentially burdensome situation into a profitable venture. Benefits of Hiring a Property Manager Hiring a manager for your investment property can alleviate many of the challenges above, providing expertise, efficiency, and peace of mind. Expertise and experience Property management services bring valuable market knowledge and experience to the table. They understand local rental markets, enabling them to set competitive rental prices that maximize your income while attracting high-quality residents. Their expertise in marketing and leasing also helps minimize vacancies and ensure your property is always occupied. Legal protection and compliance Staying updated with the ever-changing landscape of local, state, and federal laws can be overwhelming for any landlord. Property managers have the knowledge and resources to ensure your property complies with all legal requirements, reducing the risk of costly legal disputes. They handle everything from drafting lease agreements to ensuring fair housing practices are followed. Efficient tenant management Effective tenant management is crucial for a successful rental property. Property managers can help with screening tenants, and handling lease agreements, rent collection, and dispute resolution – ensuring your property is well-managed and your residents are satisfied. Their experience in dealing with tenants can help prevent issues before they arise, saving you time and stress. Maintenance and repairs Property managers have access to a reliable network of contractors and service providers, ensuring timely and cost-effective maintenance and repairs. They conduct regular property inspections and coordinate routine maintenance tasks, keeping your property in top condition and preventing costly emergencies. Financial management Property managers provide detailed financial reporting, helping you keep track of your rental income and expenses. They can also assist with tax benefits, ensuring you take advantage of all available deductions. This level of financial oversight can help you maximize your rental income and make informed decisions about your property. Moreover, effective financial management involves navigating complex notions around capital gains, depreciation, and income tax. Property managers can thus help optimize your financial strategy by leveraging depreciation to reduce taxable income, advising on capital gains implications when selling the property, and ensuring compliance with income tax regulations. This comprehensive financial approach not only enhances profitability, but also secures long-term investment growth. Expenses and Other Financial Considerations When considering whether to hire a property manager, it's important to weigh the costs against the potential benefits. Cost vs. benefits analysis Property management fees typically range from 8% to 12% of your monthly rental income. While this may seem like a significant expense, the potential savings in time, stress, and legal issues can far outweigh the cost. Additionally, property managers often help optimize rental prices and reduce vacancies, increasing your overall rental income. Impact on rental income A professional property manager can help reduce vacancy rates by effectively marketing your property and setting competitive rental prices. They can also help ensure timely rent collection and minimize rent arrears, providing a steady stream of rental income. Over time, these benefits can offset the cost of property management fees. Tax deductions Property management fees are considered a deductible expense, reducing your taxable rental income. This can result in significant tax savings, making professional property management even more cost-effective. How to Choose the Right Property Manager Choosing the right property manager is crucial to ensuring your property is well-managed and your residents are satisfied. As a general note, when choosing a property manager, consider their experience with both short-term and long-term rental strategies. A good property manager will have a solid understanding of real estate investing, including knowledge of high vs. low interest rate environments and the implications for homebuyers and investors alike. For instance, they can provide valuable insights into leveraging buy-to-let mortgages to maximize rental income while ensuring compliance with all relevant laws and regulations. Partnering with reputable realtors and lenders, they can also offer guidance on the best financial practices for managing your rental property, ultimately helping you achieve a balanced and profitable real estate portfolio. Here are some best practices for choosing a property manager: Research and referrals Start by seeking referrals from friends, family, and real estate agents. Online reviews and professional associations can also provide valuable insights into the reputation and performance of potential property managers. Be sure to look for a property manager that offers a resident benefits package (RBP), which can enhance the living experience for your residents and increase retention rates. Interviewing potential managers When interviewing potential property managers, ask key questions about their experience, services offered, and fee structure. Understanding their approach to tenant screening, maintenance, and financial reporting can help you determine if they’re the right fit for your property. Checking credentials and references Ensure the property manager is licensed and certified by relevant professional associations. Request client testimonials and references to gauge their performance and reliability. Understanding the contract Carefully review the property management contract, paying attention to the services provided, fee structure, and termination clauses. What to Expect From a Property Manager Hiring a property manager comes with certain expectations. Understanding these can help you maintain a positive and productive relationship. Regular updates and communication Expect regular updates on your property, including monthly financial reports and maintenance updates. Clear and consistent communication is key to ensuring your property is managed well. Transparency and accountability A good property manager will operate with transparency and accountability, providing detailed financial reporting and being responsive to your concerns. An open-book policy and effective conflict resolution strategies are essential. Proactive management Proactive property management includes preventive maintenance and staying ahead of market trends. A property manager who regularly inspects your property and makes recommendations for improvements can help maintain its value and appeal. Case Study: JWB Real Estate Capital Consider the case of JWB Real Estate Capital, which demonstrates the benefits of long-term leases and proactive property management. By focusing on high-quality residents and providing exceptional service, JWB has achieved a "Triple Win" for owners, residents, and the company. Their approach emphasizes the importance of professional property management in maximizing rental income and minimizing vacancies. The Triple Win concept revolves around creating a mutually beneficial environment where everyone involved sees positive outcomes. For owners, this means consistent rental income and well-maintained properties. Residents benefit from high-quality living conditions and responsive management, while the property management company sees increased retention rates and positive reputation growth. This holistic approach ensures long-term success and satisfaction for all parties involved. Taking the Next Step Hiring a property manager can help accidental landlords avoid the headaches of property management, ensuring that real estate investors are well-protected and their residents are satisfied. That’s because a property manager provides expertise, legal protection, efficient tenancy management, reliable maintenance, and detailed financial reporting. These benefits can help maximize your rental income and reduce the stress of being a landlord. To avoid the headaches, lock in high-quality long-term tenants with a property manager powered by Second Nature's RBP. Visit Second Nature's Solutions for Property Owners for more information. Embracing professional property management can transform the experience of being an accidental landlord from a burdensome task into a rewarding venture. Property managers, if you’re reading this, here's how to attract accidental landlords: Second Nature's Solutions for Property Managers.

June 21, 2024

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Best 17 Single-Family Property Management Software in 2024

Property management software is a booming industry with dozens of options for multifamily and single-family property management companies. Today we're going through the best software for single-family property managers, and tips from two experts on how to leverage the software best. What we'll cover Our two experts, Kelli Segretto and Rhianna Campbell, have been through more than their share of tech rollouts. They’ve seen what works and what doesn’t for single-family property management, and they’re here to share with you what a good process for building a tech stack actually looks like. For this article, they walked us through some of the best property management software for single-family homes. These apps and platforms can help with everything from: Rent collection Work orders Credit card payments Online rent payments Tenant Screening Lease management Maintenance management CRM Let's jump right in with the top 17 software solutions for single-family property managers. The first six in our list are software solutions specifically and exclusively designed for property managers. 1. RBP by SecondNature Second Nature pioneered the property management industry’s first-ever fully managed Resident Benefits Package (RBP). The RBP includes critical services that more and more residents are asking for – and are willing to pay for. It's not just a package of services, though. The RBP is a tech platform that helps single-family property managers boost retention by creating a better resident experience and incentivizes better resident behavior with support like resident rewards and credit building for on-time rent payments. Campbell says that she looks for technology that can support both her team and the resident experience: “One of the things I want my clients to think about is the property management software is not just for our benefit," Campbell says. "This is not just to make our lives easier and our jobs easier; it's to really be able to reposition our time so that we're focused on value creation.” RBP by Second Nature generates value through: Attracting and retaining residents Boosting rental rates through improved resident experience Giving PMCs a competitive advantage Driving ancillary revenue opportunities Incentivizing good resident habits like on-time rent payments, property care, etc. The RBP supports PMCs by managing services like credit building, air filter delivery, maintenance requests, renter’s insurance programs, resident rewards, and more. The RBP by SecondNature provides services that residents and investors love, and that support you and your team. 2. Appfolio Appfolio is another cloud-based software that can be used for single-family property management and helps automate tasks and workflows for PMCs. They support real estate and property management professionals in digitizing their business operations, and support every aspect of your workflow with management, training, marketing and leasing, maintenance, accounting, and communications. They're one of the most popular apps for single-family property managers, thanks to the easy-to-use platform, automation, and customizable dashboards and reporting. 3. Buildium Buildium is another all-in-one property management software for both single-family homes and multifamily apartments. They provide management tools for accounting, leasing, maintenance, a mobile app, and integration services. Their platform includes tenant and owner portals and templates for leases, listings, reports, and more. We like their 14-day free trial that helps you really evaluate if the tech is a fit for your team, and get buy-in. Plus, their analytics are some of the best. 4. PropertyWare PropertyWare is a rental property management software for single-family properties. The software helps manage every aspect of a PMC workflow, from listing, leasing, managing payments, ordering and tracking maintenance, accounting, and more. Tenants and owners have a portal with 24/7 access that you can customize. Customers like that the system can easily scale and makes communication easy, but some of the downsides include that the reports are less customizable than other options and glitches sometimes take a while to get fixed. 5. PropertyBoss PropertyBoss is a platform solution that supports property managers for student, multifamily, and single-family rentals. Manage phone calls, work orders, financial statements, and rent payments all in one place. They aim to help property managers automate and run services without needing to scale up their teams. It's fairly customizable with an excellent QuickBooks integration and other financial packages. It's not as intuitive or easy to learn as some of the other options, but great for robust support. 6. YardiBreeze YardiBreeze is another cloud-based property management software for small to medium-sized owners or property managers. They have solutions for both residential properties and commercial. On the residential side, their app allows you to manage all your properties on one device with tasks and activity calendars and tracking, workflow managment, leasing, rent collection, accounting, owner tools, maintenance, and more. It's one of the easiest to use of all the apps on our list, but it does require some workarounds for reports and can be difficult to organize. 7. Rent Manager Rent Manager is another software built specifically for property managers. It's an operations platform solution that combines all the tools you need to run your property management business. Its features include accounting tools; operations support like communication, a call center, a mobile app, and an owner portal; reporting and automation; maintenance management; marketing and leasing; and software customization. Like PropertyBoss, the platform can be difficult to learn, and some features may only be used if your team keeps up to date with training. Now let's move into a group of apps that are focused on serving both property managers and landlords. 8. Innago Innago is a free rental property management software for small to mid-sized landlords and property managers. The software helps with rent collection, leasing, and tenant management all on the cloud. Everything is collected in a straightforward dashboard tracking rent collection, managing late fees, invoice automation, online leasing and document storage, and more. The app has a very high rating among customers and is particularly easy to use with a slick and professional interface for residents. 9. TenantCloud TenantCloud is a cloud-based property management software connecting property managers, owners, landlords, tenants, and service vendors. Its capabilities include posting listings, collecting rent online, and screening applicants. Overall, the interface is fairly intuitive, even from the back-end accounting and maintenance management. The software puts most of the responsibilities of property management in one place and streamlines workflows and communication. On the downside, some of the features, especially related to payments, aren't very customizable, and the software can be slow. 10. DoorLoop DoorLoop is a property management system that provides services like a built-in CRM, tenant portal, owner portal, and rent collection. Like other platform solutions, you can handle most of your workflows and tasks within the app and use their tools to build reports, track payments, and communicate with tenants and owners. The UX is intuitive and user-friendly, with excellent integration capabilities. Some functionalities are still being built, but it is overall an excellent solution for single-family property managers. 11. Hemlane Hemlane is a platform solution for landlords and PMs that supports and automates the day-to-day tasks of managing rental properties. It includes a user-friendly tenant portal for online payments, plus tools for lease management, listings, tenant screening, applicant tracking, maintenance and repairs, and more. Their UX and user-friendly design stand out among competitors, but if you need really robust accounting tools or reporting for single-family property management, you may want to go with a different option. 12. Rentec Direct Rentec Direct is a platform solution with full features for property managers and landlords managing properties. The web-based solution includes general ledger accounting and financial reporting that you can integrate with Quickbooks, and accept online payments from tenants through a tenant portal and app. The platform supports tenant and owner communication, listings, marketing, billing, tenant screening, and more. One unique feature is their US-based customer service team. The app is missing some advanced features that you can find with other solutions supporting single-family property management, but they are adding more regularly. 13. ManageCasa ManageCasa is built for landlords, property managers, and community associations. The platform provides full-service owner and tenant portals, lease management, digital documents, accounting and reporting, online payments, and marketing tools. You can build a marketing website, manage listings and leasings, and automate workflows, all with the support of a 24/7 customer service team. Some of the reporting and banking tools are not as robust as other single-family property management software options, but the marketing and communication portals are a standout. And, finally, let's look at a group of apps focused primarily on serving landlords, though some single-family property managers may find the technology useful. 14. Avail Availa is a landlord software that helps property owners or "DIY landlords" find and screen tenants, sign leases, and collect rent. It's focused on helping landlords be more hands-off and helps manage the onboarding of new tenants, leases, and even maintenance requests or work orders. The platform helps track payments and maintenance costs, too. A few cons are the app is sometimes slow, and the payment portal isn't as easy to use or customizable as some competitors. 15. Stessa Stessa provides real estate investors with single-family and multi-family rentals an easy platform to track, manage, and communicate. Their tools focus on supporting rental applications, tenant screening, rent collection, banking, and accounting. One standout feature is the Stessa Tax Center, which helps guide landlords/owners through the complexities of filing their taxes. One downside is the single-entry accounting system, which doesn't allow for more robust accounting. But for basic tracking all in one place, it's an excellent tool. 16. Landlord Studio Landlord Studio also helps DIY landlords with finding, screening, and placing tenants. Their portal includes online rent collection and tax reporting. Plus, they have a feature for responding to maintenance requests, prioritizing tasks, and easily communicating with tenants. It's very easy to use and relatively inexpensive for what it offers. However, their pricing structure can make it tougher to scale up with charging per unit, and some users find the features difficult to customize. 17. RentRedi RentRedi is a mobile app for landlords to help manage their properties. Landlord features include listing, tenant screening, lease support, rent collection, rental property accounting, and renter's insurance. Their tenant features include a tenant app that supports different forms of rent payment, application tracking, credit building, and more. A few downsides include some glitchiness in the integrations with Zillow and Trulia, and a lack of transparency into all communication sent to tenants. How to choose the right software for your single-family property management business Now it's time to turn to our two property management experts for insight on how to pick the right software from the list above. Meet the Experts: Rhianna Campbell and Kelli Segretto are two property management consultants who combine more than 35 years of property management experience. Kelli Segretto is the founder of K Segretto Consulting and a 20-year veteran of property management. Rhianna Campbell is a property management consultant and speaker with Proper Planning LLC, and former CEO with over 15 years of experience in the industry. Campbell and Segretto walked us through the process of identifying the best software for your property management business. Define the problem you want to solve with software “Start with your issues list,” says Segretto. “Realize what your biggest need is first and choose technology that matches that need. Talk to your fellow PMs, join these mastermind groups, attend Triple Win LIVE events, network on Facebook, and talk to other people to find out what’s working for them.” The biggest mistake PMs make when trying to build a useful tech stack is collecting as many programs as possible and trying to jump directly into a fully functional stack instead of identifying solutions and rolling them out strategically. Instead, says Campbell: “I talk to every single employee and find out what their biggest challenges are,” says Campbell. “And then from there, you can really pull out some of the commonalities that everyone seems to be having.” Below is an example of an issue list template Segretto uses in meetings with her clients. Issues List Template from K Segretto Consulting Vet potential PM software vendors When vetting specific technologies, Segretto suggests asking for a sandbox instead of just a demo. “Ask for a sandbox to where you can actually play with it, manipulate it, break it, find where those weaknesses are in that software before you commit to it,” Segretto says. She also recommends seeking referrals to users who have used the software successfully and who have tried the software and decided against it. Being able to understand those different perspectives will help you see a complete picture of who the software is for, where it excels, and where it may come up short. Get buy-in from your team & track performance “I’ve seen hundreds of businesses launch technology across the nation and helped them implement. Ones that tend to fail are the ones that are not prepared,” says Segretto. “What I mean by not prepared is they don’t have their team’s buy-in. They don’t even know what they really want the technology for. They just feel like they want it, and they want it right now. They’re not willing to dedicate a resource or a person that’s going to own it. Without that ownership, tech stacks fail.” Getting buy-in from your team is critical for any implementation. The people who are using the tech need to believe in and understand it. Nothing guarantees failure more than just throwing a new service at someone. “You’re prepping your team, you’re talking about it, and you’re giving those ‘why statements’ so that everyone is on board before you launch. All of that needs to happen in your pre-implementation,” says Segretto. You also need to identify who on your team is the point person for the new tech rollout. According to Segretto: “You have to pick a designated person who's going to be the owner of that technology. Then, as you implement, they're going to be the expert.” Finally, monitor the tech’s performance. Campbell says you need to conduct regular reviews of your tech’s performance much the same way you would of your team’s performance. “Being able to evaluate whether or not that technology is working is really important,” says Campbell. “I've seen a number of times where people buy into the tech and then don't use it. It’s important to have points in time where you check to see if you're really utilizing that software that you paid a lot of money for, and not just spending money on it every month.” Final Thoughts Tech is a good thing. Don’t let the length of this article about implementation scare you into thinking it’s more complex than it is. As long as you’re willing to manage your tech stack and make sure your team knows how to use it, you’re going to be in good shape. You wouldn’t bring on a new employee for no reason, so don’t add tech for no reason. Tech is a tool, and its power is determined by the person who wields it. If you’re purposeful and thorough, you can vastly improve the efficiency of your business with the ever-growing field of PropTech companies in existence. Learn more about how Second Nature is supporting property managers with leading tech solutions and services that residents pay and stay for.

June 21, 2024

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Property Management Skills Shared by Top Performers: Mastering the Art of Excellence

In the high-stakes world of property management, professionals are constantly juggling a multitude of responsibilities, from resident relations to financial oversight. The pressure is immense, and it's no wonder that over 25% of real estate property managers (PMs) are expected to abandon the industry within the next five years. The burnout is real, and the struggle to find enough time is a common theme among PMs. However, mastering a set of crucial skills can significantly alleviate these pressures and transform careers. These top skills include communication, organizational prowess, financial acumen, relationship building, and adaptability. In today’s post, we’ll examine these "big five" skill sets that truly elevate good property managers to great. Note that even though we here at Second Nature prefer the term "resident" over "tenant" in order to foster the human element, the word "tenant" may still be used occasionally due to its long-standing legal and real estate context. 1. Communication: Building Bridges and Trust Strong communication skills are the cornerstone of successful property management. Clear and concise communication ensures that all parties involved are on the same page, reducing misunderstandings, boosting negotiation skills, and fostering a collaborative environment. Clear and concise communication Effective communication is not just about speaking or writing well; it's about conveying a message in a way that is easily understood by everyone involved. This means avoiding jargon, being direct, and tailoring communication styles to different audiences (for instance, how you’d communicate with a potential tenant about maintenance issues might differ from how you’d interact with a contractor or a rental property owner). Active listening Active listening is equally crucial, particularly when it comes to tenant concerns. It involves fully concentrating, understanding, responding, and then remembering what is being said. This skill helps constructively address the concerns of residents, thereby enhancing their satisfaction and trust in your organization’s brand of management. Multilingual capabilities In today's multicultural society, having multilingual capabilities can be a significant asset. Being able to communicate in multiple languages broadens your reach and improves interactions with a diverse resident base, making you a more inclusive and effective property manager. 2. Organizational Prowess: Keeping the Plates Spinning A top-notch property manager excels in organization. After all, with so many moving parts, a systematic approach to managing the details is essential to keep everything running smoothly. Time management Effective time management is about prioritizing tasks and ensuring that important issues are addressed promptly. Utilizing tools such as calendars, to-do lists, and project management software can help to manage available time more efficiently. Attention to detail Paying close attention to details ensures that nothing falls through the cracks. This could be as simple as ensuring that property building maintenance requests are logged correctly or as complex as meticulously reviewing financial statements for discrepancies. Strong record-keeping Keeping accurate and detailed records is fundamental. From lease agreements to property maintenance logs and financial records, strong record-keeping practices help in staying organized and prepared for any situation, including legal issues. Marketing savvy In addition to operational tasks, being marketing-savvy is a vital organizational skill. This includes knowing how to market properties effectively to attract and retain renters, using traditional methods as well as social media and other digital platforms. 3. Financial Acumen: Keeping the Bottom Line Healthy Financial acumen is about understanding and managing the financial aspects of property management to ensure profitability and sustainability. Financial management: budgeting and forecasting know-how Creating and adhering to a budget is crucial. This involves forecasting future expenses and revenues to ensure that the property remains profitable. Effective budgeting helps in planning for unexpected costs and allocating funds where they are needed most. Rent payments Efficient rent collection processes are essential to maintaining cash flow and ensuring timely payments. This includes implementing automated systems for rent collection and tracking payments to minimize late or missed payments and maintain a steady revenue stream. Financial reporting Generating accurate financial reports is critical for monitoring financial performance, identifying areas for improvement, and making informed decisions. These reports provide insights into rental income, expenses, and profitability, helping property managers to stay on top of their financial health. Understanding rental markets Staying informed about property values and rental market trends allows you to set competitive rental rates, ensuring maximum occupancy and profitability. This involves understanding local market conditions and pricing, vacancy rates, economic factors, and demographic trends. 4. Relationship-Building: The Cornerstone of Trust Building strong relationships is at the heart of property management. This involves fostering trust and ensuring that all stakeholders are satisfied. Excellent interpersonal skills Interpersonal skills are essential in managing relationships with residents, contractors, and property owners. Being approachable, empathetic, and professional helps in building a positive rapport with all parties involved. This helps boost such critical indicators as tenant satisfaction and tenant retention. Conflict resolution Conflicts are inevitable in property management. Whether it's a dispute between residents or an issue with a contractor, having effective conflict resolution skills is key to maintaining harmony and ensuring that problems are resolved swiftly and fairly. Responsiveness and follow-through Being responsive to queries and requests shows that you value and respect others' time and concerns. Following through on commitments builds trust and reliability, which are essential in maintaining strong relationships. Customer service In the context of day-to-day operations, excellent customer service skills are about much more than resolving issues. They’re about creating a positive experience for residents, which can lead to higher retention rates and positive word-of-mouth referrals. 5. Adaptability: Thriving in a Dynamic Industry The property management industry is dynamic and ever-changing. Top performers thrive in this environment by being adaptable and open to change. Problem-solving Effective problem-solving involves identifying issues, evaluating options, and implementing solutions quickly and efficiently. This proactive approach ensures that problems are addressed before they escalate. Staying current with regulations Regulations and laws related to property management are constantly evolving. Staying current with these changes is essential to ensure compliance and avoid legal issues. This involves regular training and keeping abreast of local, state, and federal laws. Embracing technology Technology is transforming property management. Embracing new technologies such as property management software, smart home devices, and digital marketing tools can streamline operations and improve efficiency. Final Thoughts Elevating a property management career can rest in large part on mastering the skills of communication, organizational prowess, financial acumen, relationship-building, and adaptability. These skills not only help in managing day-to-day challenges, but also pave the way for long-term success and job satisfaction. Of course, obtaining relevant real estate industry certifications is a clear demonstration of a property manager's expertise and professional development. Certifications such as the Certified Property Manager (CPM), Residential Management Professional (RMP), or the Certified Apartment Leasing Professional (NALP) provide recognition of specialized knowledge and skills, enhancing credibility and career advancement opportunities. But in the end, the ideal job description is often about finding the sweet spot that lies at the intersection of what you love to do, what you’re good at, what the world needs, and what you can be paid well for. By focusing on the essential skills we’ve highlighted here, property managers can find greater fulfillment in their work, knowing that they are making a difference while doing something they excel at and enjoy. Learn more about property management company best practices, marketing, and more in our Second Nature Community.

June 21, 2024

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Property manager filling out rental inspection check list

SFR Property Management Problems and Solutions

In recent years, the single-family residence (SFR) rental market has seen significant growth as more property owners recognize the potential for steady income and long-term appreciation. With this rise in popularity comes a unique set of challenges for the rental property managers (PMs) who are tasked with overseeing these properties. Unlike multi-family units, managing single-family homes can present a range of issues that require tailored solutions. Scattered-site properties also present a logistical challenge, as they are by nature harder to service and manage. From finding quality residents to handling unexpected maintenance emergencies, a strategic and proactive approach is required to ensure a smooth and profitable rental experience. Note that even though we here at Second Nature prefer the term "resident" over "tenant" in order to foster the human element, the word "tenant" may still be used occasionally due to its long-standing legal and real estate context. What Are the Most Common Property Management Challenges? The most common problems faced by SFR property managers generally fall into three buckets: finding quality residents; maintenance and repairs; and time management and communication. Let's explore each. #1 Finding Quality Residents One of the most critical aspects of managing SFRs is resident placement. Indeed, inadequate resident screening processes can significantly impact resident retention as well as profitability. That’s because poor screening can lead to high turnover rates (including evictions), increased property wear and tear, and ultimately, financial strain. Additionally, attracting responsible residents who will treat the property with care and adhere to lease agreements can be particularly challenging in competitive rental markets. #2 Maintenance and Repairs Unexpected maintenance issues are a common hassle for SFR property managers. From plumbing leaks to HVAC failures, emergencies can arise without warning, leading to unplanned expenses and logistical challenges. Finding reliable and responsive contractors who are able to address repairs promptly adds yet another layer of complexity. The inability to swiftly manage these issues can result in resident dissatisfaction as well as potential property damage. #3 Time Management and Communication Managing multiple single-family homes requires excellent time management skills. Balancing the diverse needs of residents, coordinating with vendors, and ensuring regular property inspections can be overwhelming. That’s why it’s essential to establish clear and timely communication channels to maintain good resident relationships and efficient operations. However, juggling these responsibilities can lead to lapses in communication, resulting in time-consuming misunderstandings and unresolved issues. Solutions for a Smoother SFR Rental Experience While the challenges of managing SFR rentals are significant, there are effective strategies and tools available to streamline operations and enhance resident satisfaction. Here are some solutions to common property management business problems. Strategic Resident Screening Implementing a robust resident screening process is crucial for minimizing vacancy rates and securing responsible residents. To this end, utilizing professional screening services can help identify prospective tenants by thoroughly evaluating their rental history, credit scores, and background checks. Clear lease terms and expectations should be established from the outset to ensure residents understand the responsibilities and obligations that occupancy brings. Learn more: Tenant Screening Tips for PMs 10 Steps to Onboard New Tenants Proactive Maintenance Proactive maintenance is key to preventing costly emergencies and maintaining the property’s condition. Scheduling regular preventative maintenance inspections allows property managers to identify and address potential issues before they escalate. Building relationships with reputable and responsive repair professionals ensures that maintenance tasks and requests are handled promptly. Consider leveraging technology that allows residents to conduct their own regular inspections to provide early detection of problems and streamline the property maintenance process (learn more). Vendor and Supplier Selection Choosing the right property management service providers and vendors is crucial to successful property management. Establishing relationships with reliable and responsive contractors ensures that maintenance and repair issues are addressed promptly, reducing downtime and inconvenience for renters. It’s essential to vet vendors thoroughly, checking their credentials, references, and reviews to ensure they meet the necessary quality and reliability standards. Building a network of trusted professionals can lead to better service rates, priority scheduling, and consistent adherence to due dates as well as work quality standards. Additionally, negotiating long-term contracts with preferred vendors can offer cost savings and a more streamlined management process. By prioritizing quality vendor and supplier selection, property managers can enhance the overall efficiency of their operations and maintain high tenant satisfaction. Technology and Automation Incorporating technology and automation into property management can significantly enhance efficiency and communication. For instance, online portals for collecting rent payments and addressing maintenance requests simplify transactions and ensure transparency. They can also facilitate incentives for prompt rent payment, follow up on late payments, and generally optimize rent collection with an eye to optimizing cash flow. Property management software can also streamline vendor and tenant communication, track maintenance schedules, and provide detailed financial reporting. These tools not only save time but also build trust and improve resident satisfaction by ensuring quick and effective responses to their needs. Naturally, you will need to conduct a due diligence process of technology selection and provider assessment that addresses pricing, customer support, and support for the features that are mission-critical for your organization. Second Nature’s Outlook Effective property management is essential for maximizing the profitability and longevity of single-family home rentals. By addressing common challenges with strategic solutions, property managers can enhance resident satisfaction, reduce vacancy rates, and maintain the property’s value. Embracing technology and proactive management practices are critical components of any successful SFR business strategy. Property managers are encouraged to explore these solutions and adopt the approaches that best suit their specific needs. Learn more about property management company best practices, marketing, and more in our Second Nature Community.

June 7, 2024

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Kristin Johnson Founder & CEO of TripleTie

15 Best Property Management Accounting Software in 2024

Property management accounting is a specialized branch of accounting that deals specifically with the financial management of rental properties. Property management accounting includes tracking rental income, managing expenses, handling tenant deposits, and producing financial reports. It helps property managers maintain accurate and comprehensive financial records for each property they manage. In today's complex real estate landscape, managing single-family rental properties can be a daunting task, especially when it comes to accounting and finance management. Understanding property management accounting, as well as the best property management accounting software to support it, can make this task significantly easier. In this article, we're talking to a property management accounting expert. We’ll delve into the best property management accounting software available in 2023, and we’ll help you choose the right software that fits your property management needs. We'll also address frequently asked questions about property management accounting software, including aspects like ease of use, integrations, pricing, and support. In general, property management accounting software serves to alleviate the time and effort that might be required to manage finances manually. It can also help plan for expenses, foresee any cash flow issues, and make better-informed financial issues. And perhaps most importantly, it helps property managers stay in compliance with requirements around tax calculations and reporting. Note that there are two key components of property management accounting: corporate and trust accounting. Corporate accounting involves the financial transactions and record keeping of the property management company itself and is generally the same kind of accounting you’d do with any business or corporation. This might include the company's operational expenses, income, taxes, payroll, etc. Trust accounting, on the other hand, is unique. It concerns the financial management of clients' funds held by the property management company. This can include tenant rents, security deposits, and funds reserved for property maintenance or repairs. It's crucial to keep these funds separate and accurately tracked to comply with legal requirements and maintain transparency with property owners. Because of the unique nature of bookkeeping with trust accounting – and its relevance for property managers – we’re mostly focusing today on trust accounting, or software that can manage both corporate and trust accounting. So, whether you're new to property management or an experienced professional looking to upgrade your software, this article has something for everyone. Let's get started! Meet the Expert: Kristin Johnson, Founder & CEO of TripleTie Kristin Johnson founded and leads the property management accounting solution TripleTie, which is designed to help property management companies manage and conduct accurate trust accounting. Related: Best Single Family Property Management Software Best Property Management Accounting Software Let’s go over some of the best property management accounting software solutions in 2023. After that, we’ll also share an extensive FAQ that we had with Johnson about the ins and outs of property management accounting. Before diving into our list, we asked Johnson what good property management software should include. “Having the ability to work within one system is huge,” she says. “Rather than having to parse out, for example, I do my screening over here, and I do my maintenance over here. Instead, you have it all integrated and built-in, and the system talks well with itself. You’re not having to import and export so much data. That’s crucial.” She gives an example of a time when she was using a platform that didn’t have that capability. “When we were working in New Mexico, we had to charge sales tax on services. So our management fees, our RBP, all of those things had to have sales tax added onto them. Our software at the time didn't have a function built where I could say, ‘This item is taxable, and this is the tax rate.’ I had to manually create recurring bills on every single one of those fees. And then, every year, when the state updated the sales tax rate, I had to go and update thousands of recurring bills. It was a nightmare!” So, as we go through the list, keep in mind that different software has various degrees of customization, open APIs, etc. Cost is a big consideration, but looking for an all-in-one is also important. 1. Rentvine Johnson’s top recommendation for accounting software is Rentvine. “Rentvine is really dialed in on trust accounting,” Johnson says. “There’s no need for a lot of the workarounds that we see in some of the other trust accounting providers. At its core, it’s a true trust accounting platform, and then the beauty and usability are built on top of that piece.” Rentvine is deeply customizable for property management tools and needs, with the ability to build your unique owner statements, custom management fees, custom late fees, etc. “The other thing I love about Rentvine is that it does have an open API,” Johnson says. “So if you did want to integrate with an external maintenance company, for example, you can get a seamless integration through the API.” Pros: User-friendly design with an intuitive dashboard that simplifies property management and accounting tasks. RentVine's accounting system is robust and includes automatic rent collection, workflows, real-time expense tracking, and detailed financial reporting. Features like online tenant portals, CRM, maintenance request management, and built-in messaging make tenant communication more streamlined. Cons: Some users have noted that the mobile app lacks some of the desktop version's features. While RentVine offers excellent features, the platform may be more expensive compared to other options, especially for smaller property portfolios. 2. AppFolio AppFolio is an extremely popular property management platform that works well for both residential and commercial property management. It has a modern and intuitive interface but can be pricey with add-ons and complex to use. What we like about AppFolio is the reporting ability, automation (late fees, smart bill entry, etc.), utility management features, etc. The drawbacks include the price and, as Johnson points out, it’s not as customizable as she would want for an accounting piece. “It is not a super strong accounting platform and does require a lot of workarounds,” Johnson says. However, if you’re willing to use a few workarounds and you like AppFolio for the other key features, it does have a solid accounting platform. Pros: AppFolio provides a comprehensive suite of accounting tools that include automated invoicing, ACH and online payments, financial reporting, and bank reconciliation. It offers a CRM with excellent resident and owner portals for transparent communication, metrics, and easy access to financial data. AppFolio supports both corporate and trust accounting, which is important for regulatory compliance. Cons: AppFolio is not as customizable as other software options and may require workarounds. While AppFolio is feature-rich, it has a steeper learning curve which may be challenging for less tech-savvy users. Pricing is based on a per-unit model, which could make it expensive for managers with a smaller number of properties. 3. Buildium Buildium is a comprehensive property management software designed to simplify all facets of property management, including robust accounting features. It provides seamless handling of all property-related transactions, from tracking rent payments and vendor bills to handling maintenance costs and fees. The software also supports both corporate and trust accounting, ensuring legal compliance and transparency. Pros: User-friendly interface with a strong emphasis on accounting. Automatic bank reconciliation, making it easy to manage multiple accounts. Robust reporting, including balance sheets, cash flow, and income statements. Cons: The learning curve can be steep for those new to property management software. Advanced key features may require premium plans, which could be costly for small businesses. 4. Yardi Breeze Yardi Breeze is a cloud-based property management software ideal for smaller-scale PMCs. The platform offers a robust suite of tools, including strong property management accounting capabilities. Pros: Yardi Breeze provides in-depth financial reporting and accounting features, from tracking rent collection and expenses to generating financial statements. It has a user-friendly interface and offers automated invoice processing and bank reconciliation, simplifying accounting tasks. It supports both corporate and trust accounting, crucial for legal compliance and transparency. Cons: The software is feature-rich, which may result in a steep learning curve for those unfamiliar with property management software. Some users have reported that customer service response times can be slow. Its comprehensive features come at a higher price point compared to other options in the market, which may be a barrier for smaller businesses. 5. Hemlane Hemlane is a cloud-based property management solution designed for small to midsize businesses, with a focus on facilitating the relationship between property owners and managers, residents, and service professionals. Pros: Hemlane's accounting features are comprehensive, providing the ability to track income and expenses, automate rent collection, and generate financial reports. It supports both corporate and trust accounting, helping property managers maintain compliance and transparency. User-friendly and intuitive interface, which is a big plus for those new to property management software. Cons: While it has a good range of features, some users report that it lacks the depth of more comprehensive management systems. Some users have reported occasional system slowdowns and bugs. Limited customer support hours can make it challenging for businesses that operate outside of these times. 6. TenantCloud TenantCloud is a cloud-based property management software solution suitable for landlords and property managers of all sizes. It offers a wide array of features, including a dedicated accounting module. Pros: TenantCloud’s accounting features allow users to track income and expenses, send invoices, collect online payments, and generate financial reports. Its intuitive interface and ease of use are especially appealing for those new to property management software. TenantCloud supports both corporate and trust accounting, facilitating legal compliance and transparency. Cons: Some users report that the system can be slow and occasionally glitchy. While its basic features are on a free plan, advanced accounting functionalities come with paid plans, which might be a drawback for small businesses. Some users have reported that the customer service could be more responsive and supportive. 7. Rent Manager Rent Manager is a versatile property management software solution that provides a wealth of features tailored to property managers, including accounting. Pros: Rent Manager's accounting features are comprehensive, enabling users to track income and expenses, automate invoicing, and payment processing, and produce detailed financial reports. The software offers both corporate and trust accounting, ensuring compliance and providing transparent financial management. Rent Manager's open API allows for integration with numerous other software solutions, making it a flexible choice. Cons: Some users find Rent Manager's extensive features a bit overwhelming, leading to a steeper learning curve. The cost can be high for small businesses or those with fewer units, as pricing is based on the number of units managed. While Rent Manager offers comprehensive support, there are some reports of slower response times. 8. Propertyware Propertyware is a cloud-based, end-to-end property management software that offers a range of features, including a strong accounting suite. They offer custom fields and automation for PMs, real estate investors, and residents. Pros: Propertyware’s accounting module is quite comprehensive, allowing users to track income and expenses, handle online payments, and generate detailed and customized financial reports. It supports both corporate and trust accounting, important for maintaining transparency and legal compliance. It includes an “owner portal” and maintenance request management features. Cons: The initial setup can be complex to get right, and there can be a steep learning curve for those new to property management software. The pricing is not ideal for smaller PMCs with fewer than 250 rental properties. 9. Rentec Direct Rentec Direct is a web-based property management software designed for “landlords” and property managers, offering a wide variety of features, including an extensive accounting system. Pros: Rentec Direct's accounting tools provide capabilities for tracking income and expenses, automating rent collection, and producing in-depth financial reports. It supports both corporate and trust accounting, helping ensure legal compliance and transparency. Features like owner portals, work order management, tenant screening, and SMSM services. Cons: The product and interface are older and less intuitive than others on the market. The reporting feature, while robust, may require some time to understand and use effectively. Some users have reported that the system can be slow at times, particularly during peak usage hours. 10. DoorLoop DoorLoop is a property management software designed to streamline the management process for property managers with all sizes of portfolios. It comes with a robust accounting suite, among other features. Pros: DoorLoop's accounting features are extensive, allowing for the tracking of income and expenses, rent collection, and generation of financial reports. It supports both corporate and trust accounting, ensuring legal compliance and providing transparent financial management. The software has a user-friendly interface, making it an attractive choice for users with varying levels of tech proficiency. Cons: While DoorLoop offers many features, it may take some time to get used to all of its capabilities, and it is less customizable than other options. Some users have reported occasional system slowdowns and bugs. The cost could be high for those managing a smaller number of properties as the pricing is based on the number of units managed. Honorable Mentions The list above is not intended to be exhaustive, but we did want to make a brief mention of a few other software applications for property managers that incorporate some accounting features: RealPage RealPage provides a technology platform rather than a software application per se, with the aim of enabling “real estate owners and managers to change how people experience and use rental space." ResMan Tagline: “ResMan’s industry-leading property management platform helps multifamily and affordable housing managers operate more efficiently and deliver higher rates of return to investors.” Entrata Tagline: “The operating system built to help you focus on residents, not technology.” A Note on Other Accounting Software While this article focuses on software tailored to property management accounting, it's worth mentioning general accounting solutions like QuickBooks online. QuickBooks, a well-known accounting software, is versatile and can be effectively used in a variety of industries, including the real estate business. It offers robust features like tracking income and expenses, invoicing, and generating detailed financial reports. However, because it's not specifically designed for property management, it may lack specialized features like tenant and lease tracking or lease management, maintenance requests, or property-specific reporting. That's why it didn't make our main list, but for some property managers, especially those managing a small number of units, it might serve their needs adequately. FAQ: Property Management Accounting At Second Nature, we’ve been in the SFR property management space for a long time. We gathered up some of the most burning questions property managers ask about property management accounting. Kristin Johnson helped us answer them. What accounting should I use for property management business? Kristin Johnson: The type of account property managers need is a true trust account – which very few banks actually offer. Many local banks or even big ones like Chase and Wells Fargo will give you a checking account and then label it a trust account. That is NOT a trust account. In normal bank accounts, you have $250K of FDIC insurance. A trust account has FDIC insurance per owner that has funds in the account. So they each have $250K of FDIC insurance. The only bank that I’m positive offers true trust accounts is Enterprise. How should you report rent in property management accounting? Kristin Johnson: If a tenant pays early, it's considered prepaid rent. It needs to stay booked as prepaid rent until it gets actually booked against the rent charge, and only then should the funds be made available to the owner. I know that some property managers use it to pay bills. But technically, it’s a liability until it's actually earned, so it should not be used to pay bills, and it should not be distributed to the owner. Those are funds that belong to the renters until there's an actual rent charge booked against them. That's piece number one to understand. Then, getting to the end-of-year side of it, the IRS does lay out that prepaid rent is taxable in the year that it is collected. So it should be reported as part of the 1099 income. What is the purpose of clearing accounts in property management? Kristin Johnson: The clearing account really serves as an intermediary while the security deposit funds are essentially in transit. When we're getting ready to move out a tenant, those funds get released from the holding account, and it goes into the clearing account where we are booking, say, cleaning against it or whatever move-out charges need to go against it before we do a final distribution to the tenant. So it's just kind of a quick intermediary place where it sits very temporarily before the security deposit gets released and then distributed. Who is responsible for sales tax in property management? Kristin Johnson: Well, it depends on the function of the sales tax. There are a couple of different instances where sales tax comes into place. For example, New Mexico is a sales-tax-on-services state. Everybody is responsible for sales tax, meaning if it's a management fee, the owner is responsible for the sales tax. If it's a tenant fee, the tenant is responsible for paying the sales tax. Ultimately, the PM is responsible for gathering that sales tax and remitting it to the state. There are some states where rent is taxable. Similarly, in those states, the owner is ultimately responsible for the sales tax. But many times, the PM will collect the sales tax from the tenant and pay it to the state on the owner's behalf. A lot of times, what we'll see is, for example, the rent may be a thousand dollars, and the state says we need 7% of that. So you would tack an additional 7% onto the rent. The tenant would pay the thousand dollars plus the 7%, which would come into a liability or holding account on the ledger. Then a lot of times, the PM would pay that to the state on behalf of the owner. What should be the frequency of record keeping in property management? Kristin Johnson: “Money in should be accounted for immediately as received. States will usually dictate how quickly receipts have to be deposited, but our recommendation is that they always get deposited same day with the bank or as soon as practical thereafter. As far as record-keeping to the owner goes, most states actually mandate that at least monthly reporting happens to the owner. Certainly, in trust accounting, record keeping should be looked at daily, weekly, and monthly to make sure that it's staying in line. Soft reconciliation should be happening at least weekly, if not daily, to ensure that all of the money is fully accounted for and that you're not going to have any issues when you're closing out the end of the month. Why would a property management firm use classes in accounting software? Kristin Johnson: Classes could be done by various categorizations: single family, multifamily, commercial – in other words, the type of property that you're managing if you wanted to keep records that way. We always used classes in our company because we were in seven markets, and so we would use classes per market. If I wanted to track my Farmington location or my Denver location, or my Charlotte location, I had all of my income and expenses broken down in classes by location. It could be location, it could be property class type, really whatever kind of granular level you want to dive down and break out could be done by classes. Do PMs set up owners as vendors in accounting software? Kristin Johnson: If you're working in a true property management software, owners will be set up as owners, and you would do owner distributions to them as owners. It's possible that if someone's not using a trust accounting platform – if they're using something like QuickBooks – then probably yes, you would have them set up as vendors. But if you're managing a true trust accounting software, I don't ever recommend setting up owners as vendors. It kind of convolutes end-of-year reporting. You have to issue 1099s to your owners, and you have to issue 1099s to vendors. If you have them set up both as an owner and as a vendor, you're theoretically sending out two different 1099s – which wouldn’t necessarily be proper. How much should a property management company spend on accounting? Kristin Johnson: Accounting is one thing in property management that you don't want to skimp on. The most important function of a property manager is to be a good steward of other people's money. I don't know that there's a range, but I will say that it very well may end up being your largest expense. But worth the money. Conclusion The software you choose for property management accounting can significantly streamline your operations and contribute to the growth and success of your business. Each option has its strengths and potential drawbacks, so it's vital to select a solution that fits your unique needs and portfolio size. By equipping yourself with the right tools, you can streamline your accounting processes, ensure accuracy and compliance, and ultimately, drive your property management business toward greater success. If you want to get more input on your property management software, check out our Triple Win PM Community on Facebook. Or, see more of our studies on property management best practices and services like our Resident Benefits Package.

May 21, 2024

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Property Management Agreement Guide + Free Template

With a renewed focus on rental income as an investment trend, the popularity of property management is on the rise. Busy professionals and out-of-town real estate investors increasingly rely on property managers to handle the day-to-day operations of their rental properties. When they come to you for the first time, one approach to establishing clear differentiation with respect to your competitors is through the clarity and comprehensiveness of your property management agreement. In today’s guide we’ll cover the essentials of a property management agreement that provides a foundation for transparency throughout this critical relationship, as well as peace of mind for the investors relying on you to manage their investment. What is a property management agreement? A property management agreement is a legally binding contract between a property owner and a property management company or individual. This document outlines the specific responsibilities and duties of the property manager, the expectations of the property owner, the terms of service, and the compensation structure. The agreement serves as a guideline for both parties to understand their roles, rights, and obligations in managing the rental property, ensuring a clear and professional relationship. Why do you need a property management agreement? A property management agreement is essential for multiple reasons: Clarity and expectation management: It clearly defines the roles and responsibilities of both the property manager and the property owner, avoiding misunderstandings and conflicts. Legal protection: The agreement provides legal protection for both parties, specifying the terms under which services are rendered and the consequences of breach of contract. Financial management: It outlines the financial aspects of the relationship, including management fees, rent collection, and maintenance costs, ensuring transparency in financial transactions. Maintenance and repairs: The agreement specifies the procedures for handling maintenance and repairs, ensuring the property is well-maintained and any issues are promptly addressed. Dispute resolution: The agreement includes provisions for resolving disputes, which can help prevent conflicts from escalating and provide a clear path for resolution. What should a property management agreement include? Crafting a solid property management agreement doesn't have to be daunting. Here's a breakdown of the key components: Parties Involved Property owner: Clearly identify the legal name and contact information of the property owner(s). Property manager: Do the same for the property management company or individual. Property Details Address: Include the full address of the property being managed. Legal description (optional): For added clarity, consider including the legal description, particularly for complex property ownership structures. Property type: Specify whether it's a single-family home, multi-unit building, or commercial property. Unique features/limitations: Mention any unique features (e.g., pool, historic designation) or limitations (e.g., zoning restrictions, HOA rules). Term and Termination Effective date: Define the start date of the agreement. Termination clauses: Outline the grounds for termination by either party (e.g., breach of contract, property sale). Notice period: Specify the required notice period for each party if they wish to terminate the agreement (e.g., 30 days, 60 days). Termination mechanisms: Explain how the date of termination should be communicated (written notice, specific format [e.g., certified mail]), along with any applicable indemnification measures. Manager Responsibilities Resident screening: Detail the process for resident screening, including applications, background checks, and credit checks. Rent payments and security deposit collection: Outline procedures for security deposit collection, rent collection, late fees, and eviction processes. Maintenance oversight: Specify the property manager duties and roles in overseeing maintenance requests, repairs, and independent contractor/vendor selection (approval thresholds, cost limitations). Financial reporting: Define the frequency and format of financial reports provided by the property manager (monthly statements, annual reports). Communication protocols: Establish communication protocols regarding occupant inquiries, maintenance emergencies, and routine updates. Availability: Consider outlining the property manager's availability for emergencies (24/7 hotline, designated contact person). Owner Responsibilities Repairs: Specify the owner's responsibility for major repairs beyond normal wear and tear. Providing access: Outline the owner's role in providing access to the property for maintenance or showings when residents are not present. Major decisions: Define how major decisions regarding the property (e.g., renovations, capital improvements) will be made (joint agreement, owner approval). Property inspections: Address expectations regarding the frequency and purpose of property inspections conducted by the owner. Insurance coverage: Clarify the owner's responsibility to maintain appropriate liability insurance policy coverage for the property. Fees and Compensation Management fee: Detail the structure of the property management fee (percentage of rent collected, flat fee). Additional fees (optional): Address any additional disbursements for specific services, such as resident placement or lease renewals. Dispute Resolution Process: Explain the process for resolving disagreements between the owner and the property manager (mediation, arbitration, legal action). Governing laws: Specify the governing laws that apply to the agreement in case of disputes. Free Property Management Agreement Template (Basic) This contract template is for informational purposes only and should not be considered a substitute for legal advice. Please consult with an attorney to tailor the agreement to your specific needs and to ensure that the provisions of this agreement comply with local and state laws. Property Management Agreement This Property Management Agreement ("Agreement") is made and entered into as of [DATE] by and between: [Property Owner Name] residing at [Property Owner Address] ("Owner"), and [Property Management Company Name] located at [Property Management Company Address] ("Manager"). WITNESSETH WHEREAS, Owner is the legal owner of the property located at [Property Address] (the "Property"); and WHEREAS, Manager desires to provide property management services for the Property; and WHEREAS, Owner desires to engage Manager to provide such services for the Property NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties agree as follows: 1. Services Manager agrees to perform the following services for the Property (Services may be added or removed based on specific needs. Consult with a lawyer.): Resident screening and resident selection (application processing, background checks) Collection of rent and late fee enforcement Maintenance oversight and coordination (up to $[AMOUNT] per repair) Move-in/move-out inspections Monthly financial reporting related to management of the property 2. Term and Termination This Agreement shall commence on [DATE] (the "Effective Date") and shall continue for a period of [NUMBER] year(s), unless earlier terminated as provided herein. This termination of this Agreement may be effected by either party upon [NUMBER] days' written notice to the other party. 3. Management Fee Owner shall pay Manager a monthly management fee equal to [PERCENTAGE]% of the gross monthly rent collected. 4. Legal Proceedings In the event of a legal proceeding arising out of this Agreement or the management of the Property, the following provisions shall apply: Authority: The Property Manager is hereby authorized to initiate and prosecute any legal action deemed necessary to collect rent, enforce the terms of tenant leases, or protect the Owner's property interests. Owner Approval: Prior written approval from the Owner shall be required for any legal action exceeding $[Dollar Amount] or involving potential litigation. Costs and Reimbursement: The Property Manager shall keep detailed records of all legal expenses and attorney’s fees incurred. The Owner shall reimburse the Property Manager for all reasonable and documented legal expenditures associated with authorized proceedings. Representation: The Owner shall have the right to be represented by their own counsel in any legal proceeding. However, the Property Manager shall have the right to participate in the proceedings and may retain separate counsel at the Owner's expense if a conflict of interest arises. Communication: The parties agree to cooperate fully and share all relevant information in a timely manner throughout any legal proceedings. 5. Dispute Resolution (Optional - Replace with preferred method if applicable) Any dispute arising out of or relating to this Agreement shall be settled by [METHOD OF DISPUTE RESOLUTION, e.g., mediation] in accordance with the rules of [NAME OF MEDIATION PROVIDER] (the "Rules"). The decision of the mediator shall be final and binding on the parties. 6. Waivers The Owner acknowledges and waives any and all claims, demands, or causes of action against the Property Manager arising from the following, unless such claims arise from the Property Manager's gross negligence or intentional misconduct: Acts or omissions of any resident of the Property. Loss or Property damage caused by reasons outside the Property Manager's reasonable control, including natural disasters, acts of war, or civil unrest. Unexpected repairs or maintenance issues beyond the scope of normal wear and tear. The Owner further agrees to indemnify and hold harmless the Property Manager from any and all claims, liabilities, damages, losses, or expenses (including attorney's fees) arising from the Owner's violation of this Agreement or any applicable laws or regulations. 7. Entire Agreement and Governing Law This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written. The terms of this Agreement shall be governed by and construed in accordance with the laws of the State of [STATE]. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. [Property Owner Signature] [Property Owner Name (Printed)] [Property Management Company Signature] [Property Management Company Name (Printed)] Optional addendums For specific situations, consider adding supplementary documents like: Bed bug addendum Pool addendum Pet lease addendum These addendums can address unique requirements and regulations related to these aspects of the property. Considering everything explained above, here is our free example template: Best practices when using property management agreement templates Using property management agreement templates can streamline the creation of your contracts, but it’s important to adapt them carefully to meet your specific needs and legal requirements. Here are some best practices to ensure your agreement is both comprehensive and effective. Personalize the agreement Every property is unique, and so are the needs of the property owners and managers. Personalize your agreement by: Incorporating specific property details: Include unique features or limitations of the property, such as historical designations, HOA rules, or special amenities. Tailoring financial terms: Adjust the management fee structure and additional fee details to match your specific financial arrangements. Regularly update and review Property management agreements should not be static documents. Regularly review and update them to reflect changes in: Legal requirements: Stay informed about changes in local, state, and federal laws that might affect your agreement. Market conditions: Adjust terms to reflect current market conditions, such as changes in rental rates or maintenance costs. Establish effective communication channels Establishing effective communication channels within the agreement ensures smooth operations and quick resolution of issues. Include: Defined points of contact: Specify the primary contacts for both parties and their preferred methods of communication. Communication protocols: Set clear guidelines for reporting maintenance issues, handling resident inquiries, and providing updates. Plan for contingencies Anticipate potential issues and include contingency plans in your agreement to handle unexpected situations: Emergency procedures: Outline steps for handling emergencies, including contact information for emergency services and protocols for urgent repairs. Dispute resolution: Provide a clear process for resolving disputes, including mediation or arbitration clauses to avoid costly legal battles. Cover legal considerations Consulting with a lawyer is crucial to ensure your property management agreement is legally sound and reflects your specific circumstances. An attorney can help you with: Specifying maintenance coverage: Clearly define which maintenance issues are the responsibility of the property manager and which fall to the owner. Pet policy details: Outline a comprehensive pet policy including pet restrictions, fees, and deposit requirements. Local legal compliance: Ensure your agreement adheres to all relevant laws and regulations in your area, such as resident rights and fair housing regulations. FAQs: Helping Potential Investors Demystify Your Property Management Agreement Q: Is a property management agreement legally required? A: While not always mandatory, a property management agreement is highly advisable. It protects both the owner and the manager by outlining expectations and responsibilities. Q: Can I use your template for any property management situation? A: The provided template is a basic framework. It's best to consult with a lawyer to customize it for your specific property type, location, and desired services. Q: Do I need a lawyer to draft the agreement? A: While not mandatory, legal guidance is highly recommended. An attorney can ensure the agreement is legally sound, protects your interests, and complies with local laws. Q: Can I use this template for agreements outside of property management, e.g., for lease agreements or rental agreements? A: No, this template is specific to property management agreements. For other types of agreements, consult with a lawyer or use appropriate templates designed for those purposes. Q: What should I do after finalizing the agreement? A: Once both parties have signed the agreement, keep a copy for your records and provide one to the property manager. Familiarize yourself with the terms and communicate openly to ensure a smooth and successful working relationship. Conclusion A well-drafted property management agreement is the cornerstone of a successful relationship between owner and property manager. By using the provided template as a foundation and consulting with a lawyer for customization, you can establish a clear and comprehensive agreement that provides full transparency and fosters a smooth rental property experience. On top of your agreement, consider rolling out a resident benefits package (RBP). It’s a powerful way for property managers to create a Triple Win – for residents, investors, and themselves. An RBP like Second Nature’s is designed to be simple to use and easy to implement. All the services included within it are managed externally by Second Nature, meaning there is no day-to-day upkeep required from the manager. You plug it in and Second Nature keeps it running. The value creation an RBP generates – with such little work required from the PM – is an incredibly easy way to grow your business and create great experiences that residents will pay and stay for. Don't get left behind in the evolving world of resident experience. Learn more about our fully-managed Resident Benefits Package and how we can build ease for you, your investors, and your residents.

May 14, 2024

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Best Tenant Onboarding Software in 2024

The tenant onboarding process is an opportunity for property management companies to establish positive expectations and create an excellent resident experience. It’s one of the most opportune moments for resident education – in other words, to help them understand key responsibilities and the information they’ll need to take care of the home and their side of the lease, in tandem with investor and property manager responsibilities. It’s also a process with a number of different steps – many of which have traditionally involved cumbersome, manual processes. In today’s post, we’ll examine tools that alleviate these processes, and identify some of the top performers on the market. Note on language: "Tenant onboarding” is an industry term used from time to time. But we here at Second Nature are trying to evolve the word "tenant." We’ve seen the incredible work property managers do day in and day out to make renters feel like they’re so much more than just tenants – they’re residents. Making renters feel like residents isn’t just philosophical, it also encourages them to invest in care for their home and add value to the property. This is why, at Second Nature, we prefer to call tenants “residents.” Like you, we think of them as people first – making your property their home. What is tenant onboarding software? It’s important to dispel the notion that “tenant onboarding software” is a monolithic category of software applications. There really is no such category, as no single rental property management software will cover everything you need to address. Instead, property management companies are using disparate software tools to solve different pain points during the onboarding process. Indeed, the tenant onboarding process can present a multitude of pains for both property managers and tenants. Below are just a few examples. Cumbersome, time-consuming paperwork Filling out paper applications, manually processing documents, and chasing signatures can eat up valuable time. Communication challenges Back-and-forth messaging, calls, and emails regarding lease agreement details and payments are inefficient and can lead to misunderstandings. Data security concerns Traditional methods that use physical documents pose a risk of data insecurity or outright data breaches. Process inefficiency risks Accurately tracking onboarding tasks such as key handover, utility activation, or maintenance checks can be difficult without proper tools. Lack of transparency Uncertainty about application status or lease details can be frustrating for new tenants. Tenant onboarding software tools alleviate challenges such as these by offering features that translate into a smoother experience for everyone involved, saving time, reducing errors, and fostering better communication. Key features expected of tenant onboarding software There are several attributes that you should expect to find across tenant onboarding software tools, regardless of the specific platform or category. Here are some of the key features: User-friendly interface Clear instructions and intuitive functionality should enable property managers, potential tenants, and tenants (as well as property owners, in some cases) to use the software easily. Mobile accessibility In today's mobile-first world, the ability to access the software and complete tasks like online applications, payments, or maintenance requests on smartphones or tablets is crucial. Secure data management tools The software should ensure that all sensitive applicant and tenant PII (personally identifiable information) is stored securely with encryption and suitable access controls. This is particularly important for SaaS-based applications. Workflow automation Features like automated application processing can significantly streamline the onboarding process. Integration capabilities The ability to integrate with other onboarding tools, accounting software, or background check/tenant screening services in real time can create a more unified workflow. Reporting and analytics Property managers should be able to generate reports on application trends, rent collection rates, or tenant feedback to gain valuable insights. Customer support The onboarding software provider should offer comprehensive resources to support property managers in their usage of the software. This may include tutorials, webinars, or dedicated customer support representatives. Top Tools for Tenant Onboarding From the initial applicant screening stages through to move-in and the tenancy period, we’ll take a look at each step of the tenant onboarding process and popular tools in each category. 1. Applicant screening Property managers often use tenant screening services such as Plaid, Finicity, Pinwheel, and others to conduct rental screening and replace manual document upload and review. As identity fraud becomes more prevalent, identity verification tools are also becoming more sophisticated. Note that Second Nature’s Resident Benefits Package includes a $1 million identity protection program and credit building for tenants. These programs protect your tenants and help draw people who want to build responsible financial security. 2. Lease management Property management software solutions like AppFolio or Buildium often include features for lease creation, storage, and e-signing within their suite. Platforms such as DocuSign, PandaDoc, or Dropbox Sign enable property managers to then send lease agreements electronically for secure online signatures. Pay attention to the differing pricing models between these platforms, as they can vary substantially. 3. Rent collection and payment processing For rent collection, PMs typically require certified funds and will accept ACH/debit, or leverage a service like PayNearMe, where residents can pay cash at a local Walmart or convenience store location (while on the PM side, the process remains completely digital). Payment processing is typically handled by property management accounting software, although third-party tools like Zego are used in the SFH space. In addition, tools like EliseAI (a chatbot-type tool for use cases such as leasing, among others) are innovating in this space. 4. Move-in communication and coordination Platforms like AppFolio, Buildium, Propertyware, or Rent Manager provide a central tenant portal to access lease documents, pay rent, submit maintenance requests, and communicate with property managers. As for task management, Tools like Leadsimple, Aptly, or Monday.com can be used by property managers to track and assign move-in tasks, ensuring a smooth transition for new residents. For instance, the onboarding process may include tasks such as orientation calls and/or enrollment of the resident into ancillary products and services such as Second Nature’s Resident Benefits Package (RBP). Second Nature also includes a move-in concierge as part of its RBP. 5. Feedback/reputation management tools Tools like Grade.us, opiniion, and Birdeye can be used to gather feedback from tenants after move-in, helping property managers identify areas for improvement. The specific tools you use will depend on your requirements and processes. However, by and large, any of them can be used to transform the tenant onboarding process from a paper-heavy slog into an efficient digital experience. Final thoughts Remember, the onboarding process is the ideal mechanism for enhancing communication, establishing expectations, and creating a positive resident experience. Our top recommendation for ensuring a world-class onboarding and resident experience is to build a resident benefits program. Second Nature has pioneered the only fully managed Resident Benefits Package for single-family property managers. Learn more about resident experience management in our State of Resident Experience Report.

April 25, 2024

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Why offer a tenant benefits package?

A tenant benefits package is an increasingly important part of the equation today. That’s because today’s residents want their needs proactively anticipated. It’s something they're willing to pay (and stay) for. This makes complete sense: like everywhere else, residents and property investors alike are getting younger in the residential real estate sector – and with this generational shift comes expectations for a certain level of convenience and support. In this article, we’ll explore what a tenant benefit package is, how it improves the experience for both property managers and tenants, and crucial mistakes to avoid. Before we get into the details, we want to give a shoutout to our very own “Resident Benefits Package” – which is how we refer to the benefits comprised in the “tenant benefits package.” “Tenant” is not yet a legacy term, but we here at Second Nature are trying to evolve it. That’s because, in our experience, property managers work hard to make renters feel like they’re not just parties to a contract – they’re residents. On one hand, this is just humans being humans, but on the other hand, it also encourages them to invest in care for their new home and add value to the property. Ready to get started now? Build your Resident Benefits Package today. What is a tenant benefits package? A tenant benefits package is typically a bundle of services, conveniences, and provisions offered by a property manager on top of the basic lease agreement. They represent a triple-win situation for property managers, residents, and property owners, as they enhance the overall rental experience, generate additional income, and protect the real estate investment. It might include conveniences such as online monthly rent payment options, or portals for submitting maintenance requests and tracking their status. It could also include various financial perks, such as credit rating improvements that are contingent on on-time rental payments, or discounts on nearby services such as fitness centers. It might also include amenities ranging from move-in concierge or utility set-up services, to identity protection services, to HVAC filter delivery. The cost for resident benefits packages is typically included in the lease and added as a monthly fee, with the fee being dependent on the specific benefits. Indeed, the benefits contained in a tenant benefits package will vary depending on the property manager and the type of rental property. The overall goal is to provide tenants with an enhanced quality of life while simplifying the experience of renting. At Second Nature, we pioneered the only fully managed resident benefits package, in response to PMs who wanted to make their business stand out. Our RBP includes an array of services and supports for residents, from filter delivery to credit building to maintenance. Why should property managers offer a tenant benefits package? Beyond the triple-win considerations mentioned just above, there are compelling and concrete reasons why property managers should offer tenant benefit packages. We'll turn to these now. Ancillary revenue Some tenant benefit packages include optional services or add-ons that can generate additional revenue streams for the property manager. This might include things like renter insurance or HVAC filter delivery. Resident experience Tenant benefit packages deliver numerous savings and value to tenants, beyond the value they would get if they were obtaining the same benefits "à la carte." Additionally, by offering additional services and conveniences, benefit packages can make tenants feel valued and more satisfied with their living experience. For instance, maintenance hotline requests, tenant portals, and air filter replacements all make life easier. Add-on services like identity theft protection can offer a sense of security. And discounted renters insurance coverage, utility concierge services, or other perks can save tenants money. Decrease tenant turnover and vacancy rates In a competitive rental market, tenant benefit packages can be a major differentiator toward boosting retention rates and reducing vacancy rates. Properties that offer these packages can also attract a wider pool of qualified tenants, and potentially command higher rents. Note that certain benefits in the package, like online rent payments and maintenance requests, can automate tasks and free up the property manager's time. This allows them to focus on more value-added initiatives. How does the tenant benefits package improve the tenant experience? Tenant benefit packages can significantly improve tenant satisfaction in several ways, by making life easier, more convenient, and potentially more affordable. For instance, if an online portal (a baseline feature for most property management software) is included for rent payments and maintenance issues and requests, this eliminates the hassle of writing checks or waiting on hold to speak with someone about a clogged drain. In other words, tenants have the peace of mind of knowing they can manage their tenancy 24/7 from the comfort of their own devices. Some packages might include features like filter delivery services or regularly scheduled HVAC maintenance. This frees tenants from having to remember these tasks – and ensures their home is well-maintained. Certain packages might also offer "verified vendor" services – in other words, a vetted vendor network that can help provide a more secure feeling to residents when service providers are on-site. On the financial side of things, a benefits package might offer discounts with local suppliers for various goods and services, or on a renters insurance policy obtained through the property manager (with applicable waivers for residents who have their own insurance). This can save tenants money on a necessary expense. Some packages also help residents with their credit scores via credit reporting and credit building services, so they can transition from renting to home buying when the time is right. The idea is that the credit reporting program reports on-time rent payments automatically to all credit bureaus, helping residents build their credit simply by paying their rent on time. Some benefit packages include resident rewards programs that represent a powerful and positive incentive for on-time rent payments, including gift cards or cash. Packages can include security deposit alternatives that serve to provide a means for residents to be financially liable for damages without having to pay a significant lump sum upfront, such as pure insurance, surety bonds, and ACH authorization programs. Ultimately, tenant benefit packages create a more professional and responsive image for the property management company, which helps tenants feel valued and allows them to experience a smoother, more stress-free rental experience. What are the mistakes to avoid when offering tenant benefits packages? Property management companies should take care to avoid certain pitfalls when implementing tenant benefit packages to ensure they are providing true value to tenants as well as delivering profitability to the PM company itself. For instance, it's important to ensure that the services you're offering are actually relevant to your target renters. For example, young professionals might appreciate discounts on gym memberships, while families might prefer pet-sitting services. You should also take care to clearly communicate what's included and not included in the package to new residents. Don't oversell the benefits – focus on how they genuinely improve the living experience. It's also very important to set realistic expectations for response times on standard maintenance requests, emergency maintenance requests, or virtual concierge services. Likewise, be clear on all available payment methods, as well as rent due dates, late fee structures, and any associated payment processing fees. If your package includes services from third-party vendors, ensure that these vendors are reputable and reliable. Research their customer service record and responsiveness to ensure a smooth partnership and a positive experience for tenants. Above all, regularly monitor the usage of different benefits within your benefits package. This can help you refine your offerings and ensure you're not spending where spending is not required. Looking for a Resident Benefits Package? If you’re looking for a “plug and play” resident benefits package, Second Nature’s RBP is the way to go. Designed to be easy to implement and simple to use, all the services it includes are managed by Second Nature – which means there’s no day-to-day upkeep required from the property manager: Second Nature keeps it running. It’s a simple way to grow your business and create great experiences that residents will pay and stay for. Learn more about our fully-managed Resident Benefits Package.

April 2, 2024

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Property manager marking startup checklist

How to Start a Property Management Company in 13 Steps [Startup Checklist]

From the Second Nature perspective, focusing on a high-quality resident experience is the secret sauce to standing out in a crowded property management industry. That’s because happy residents lead to higher retention rates, more on-time payments, better care for the property, and shorter vacancies. Our property management checklist can help ensure you build that strategy into the DNA of your company from the beginning. This property management startup checklist is intended to help you orient your company toward a resident focus from the get-go. In the absence of a checklist, it’s all too easy to get caught up in real estate and rental property considerations that do not reflect long-term winning conditions for all stakeholders. 1. Write a Property Management Business Plan In some ways, a property management business plan is a document intended for potential clients and investors. And certainly, it can help you concretize start-up costs and get funding for the business (learn more on what’s needed to get SBA financing). But in many more important respects, it’s a structured foundation for you to gain insights into what residents are looking for, which in turn will help crystalize the type of clients you want, what types of property you’ll manage, and what kind of property management company you are. You’ll find a property management business plan template here, but in broad terms, here is a framework of the distinct components: Executive Summary Company Overview Market Analysis (Industry, Customer, and Competitive Analysis) Services Marketing Plan & Sales Strategy Operations Management Management Team Financial Plan Growth Opportunities Each component will lay the foundation for your future resident-focused success. Related: Property Management Business Plan Template 2. File Your Property Management Business In order to correctly file and pay your business taxes, you’ll need to register your property management business and choose a type of legal entity. This step is important, as it can also impact the protection/exposure of any personal assets, associated paperwork, or even the way in which you raise funds for your business. Note that it is certainly possible to change your business structure once it's established, but this can be a convoluted and high-stakes process. For property management businesses, different legal entity options are possible. Common legal structures include Limited Liability Company (LLC), S-Corporation (S-Corp), and C-Corporation (C-Corp). An LLC offers personal asset protection, while S-Corps and C-Corps provide additional legal safeguards. The choice involves considerations such as pass-through taxation for LLCs (where business income passes directly to the business owner's personal tax return) or potential double taxation for C-Corps, which can be mitigated via accounting measures. Other options include sole proprietorships as well as partnerships, where taxes and business liabilities are the responsibilities of the individual owners. Once you’ve identified your new business for tax purposes, you can get a free Employer Identification Number from the IRS. Which type of legal entity you select ultimately depends on your appetite for control, flexibility, and complexity. Learn more about how to structure your property management company. 3. Setup Bank Account for Your Property Management Business Opening a business bank account will help you build credit for your own property management company, maintain separation between your personal and business finances, and streamline tax accounting. It may also be required by law, depending on state laws applicable to your business structure. Some banks offer account features, flat fee or zero fee structures, and services that are particularly beneficial for new businesses and small businesses, so it is worth taking the time to shop around rather than defaulting to the same bank you use for your personal accounts. 4. Setup Accounting for Your Property Management Business With the help of OnSightPROS, we've developed a rental inspection checklist template for single-family rental property management companies. Use this template to build out your checklist. Not all accounting is equal. Property management accounting deals specifically with the financial management of rental properties. It helps property managers track rental income, manage expenses, handle tenant deposits, and produce financial reports. Essentially, property management accounting helps you maintain accurate and comprehensive financial records for each property you manage. Property management accounting consists of two components. The first is corporate accounting, which is similar to the kind of accounting done at any company. The second is trust accounting, which is specific to property management. This kind of accounting relates to the client funds that you hold, including security deposits, rent, and funds intended for property upkeep and repairs. Managing rental properties can be daunting when it comes to accounting and finance management, but that certainly doesn’t make it a show-stopper. Learn more about property management accounting, as well as accounting software and single family property management software that can make it significantly easier. 5. Obtain Required Licenses and Permits for Your Property Management Business The licenses and permits required for property management businesses vary depending on your location, but common requirements can include a real estate broker license (which often involves an exam-based accreditation as well as potential background checks), a property management license, a leasing agent license, and a business license, as well as any other locally required permits. 6. Secure Liability Insurance Liability insurance is important to keep your business running on solid foundations. In fact, it’s essential, as it protects not just you but your investor’s assets and your resident’s safety. At Second Nature, insurance is so important to us that we incorporate an insurance product into our resident benefits package. General liability insurance for property managers safeguards against potential financial liabilities arising from physical risks. It typically covers expenses related to repairs, replacements, legal fees, and medical bills, and is applicable to both residential and commercial properties. Coverage can include bodily injury, medical payments, physical damage, reputational harm, and even copyright infringement in relation to marketing efforts. Note that Second Nature's renter insurance program ensures 100% compliance and liability coverage protecting you, your property investors, and your residents. 7. Hire Your Team Hiring the right team has a huge impact on your ability to achieve the business targets you’ve established in your business plan. Note that “right” doesn’t simply mean “qualified.” That’s because who your employees are is fundamentally more important than what they’ve achieved. After all, you’re setting the stage for them to deliver the best work they’ve ever done in their careers to date. The hiring process begins by understanding what characteristics you’re looking for. For any given candidate, how do they build the new skills required to address new situations? How do they handle challenges when things get tough? And perhaps most importantly, what is their response to failure? Insights into these questions will help galvanize a people-focused approach that is truly a value-driven team. After all, at Second Nature, we want to generate value for ourselves, our investors, and our residents—and we want people who buy into that approach. Get more Second Nature hiring tips on building a people-focused team. 8. Create Solid Pricing Structure and Property Management Contracts Once you hire a team. establishing a good pricing structure for your business and creating all the legal documents required to run the business should be the priority. That's because the right approach can generate value beyond management fees for property managers, their investors, and their residents, which reflects Second Nature’s “triple win” focus. General rental property management fees include collecting the month’s rent, following up on arrears, organizing property maintenance and repairs, and keeping up-to-date on legal issues. Much of the profit in property management comes from driving better value for investors and residents, and pricing for that value. After all, people are willing to pay for better quality experiences in their homes. Additional fees, which will help drive company growth, should be communicated during the onboarding process and lease agreement. In other words, they are never about hidden markups. They’re about charging for value and driving great habits. Fees can be applied on the resident side (for instance, paper lease setup fees, lease renewal fees, late fees, or special programs fee) as well as on the investor side for a number of property management services (inspection fees, vendor screening fees, rent protection or eviction fees). Again, fees help you drive value for both your investors and your residents, and support your business at the same time. Note that because regulations vary across regions, it may not always be possible to charge fees for certain types of services. That's why it's important to discuss any fee and contract proposals with an attorney before implementing them. 9. Execute the Marketing Plan Set Out in Your Business Plan While it’s true that businesses thrive on referrals and word of mouth, it’s executing on your marketing plan that will help drive more consistent revenue — and help you capitalize on the market research you conducted to assemble your business plan. As with so many other things, the marketing landscape has changed enormously in just a short time. We’re now living in an era when an active, well managed online presence is critical. This means that a robust marketing strategy is more than simply managing a social media account (although this too is important). It also includes investing in search engine optimization for your website, executing on content creation and distribution strategies, conducting networking events, and advertising online. For optimal property management marketing, where work often stays within specific regional areas, it’s also important to maintain a presence in local business listings. 10. Network with Fellow Property Managers and Owners to Expand Your Business We touched on networking in the context of a marketing plan, but for new business owners in particular, networking can be a valuable source for those first few clients. There’s certainly no shortage of opportunities for establishing your business name, ranging from local vendor fairs to national property management conferences and events with thousands of attendees. In addition, there are numerous property management associations that provide opportunities for networking, education, and advocacy for property management professionals. The business and personal development opportunities available through such options present great avenues to expand and optimize your property management business. 11. Write a Resident Retention Strategy - and How You Can Improve the Resident Experience You should be thinking about the resident experience from the very start. After all, in an industry where churn is the norm, an effective retention strategy pays its own way. To be truly effective, however, it’s key to recognize that “resident retention” is not simply a one-dimensional number at the bottom of a spreadsheet. The “triple win” approach to resident retention asks the question: “How do we create experiences so good that residents never want to leave?” Answering that question maximizes residential property owner ROI and boosts property manager success. In other words: A win for residents is a win for investors is a win for property managers. In the same vein, we often hear from professional property managers that a Resident Benefits Package (RBP) is a powerful way to retain residents over the long term. RBPs can help with resident satisfaction and resident retention rates. After all, a proactive, differentiating approach to resident retention means building experiences that people will pay and stay for. This is a useful lens with which to examine the full property manager/resident journey, from move-in to collecting rent payments to move-out, for opportunities to generate resident retention ideas—and deliver those wins. 12. Create SOPs to Handle Complaints, Disputes, and Requests Once you have the first few properties under your management, it’ll be important to ensure processes and procedures are in place to handle complaints, disputes, excessive maintenance requests, rent collection issues, and tenant problems. In such cases, rather than automatically assuming the resident is the problem, some property managers approach resident issues as behaviors that can be changed. That’s because the root cause is often addressable and the behavior changeable. This emphasis on the people element pays off — and lets you focus on how to adjust “bad” behavior through benefits and rewards, rather than just being transactional. This reframing aside, one of the best ways to deal with complaints and disputes is to avoid them in the first place, which often comes down to non-discriminatory tenant screening processes and background checks. Other standard operating processes include documenting all incidents and updates thoroughly, calling law enforcement in the case of illegal activity, implementing eviction processes if necessary, and staying current and compliant with local laws and regulations. 13. Create and Execute a Strategy to Improve the Resident Experience Once again, improving the resident experience goes a long way in retaining the residents and creating ancillary revenue streams. From the get-go, you can actively ensure great first impressions with services such as move-in concierges or coordinators. After all, a resident who's had a positive move-in experience is a happier one. Happier residents stay longer, pay on time, take care of the property, and make positive recommendations. Throughout the residential journey, other strategies for improving the resident experience include pest control for property management, credit reporting, and resident rewards. Above all, one of the cornerstones of a great resident experience is responsiveness. This responsiveness is a two-way street! It covers improved maintenance service and response times, as well as opportunities for residents to provide feedback through resident surveys. By setting up this kind of feedback loop, you demonstrate to your residents that their voices matter, which instills a sense of ownership and care that often lead to better property care and longer tenancies. Property Management Startup Checklist It’s famously said that property managers are in the business of helping many different people with many different things. And sometimes, this can feel like a lot to tackle, especially at the startup phase. That’s why we’ve assembled this property management startup checklist to help you begin: Write a Property Management Business Plan File Your Property Management Business Set Up a Bank Account for Your Property Management Business Set Up Accounting for Your Property Management Business Obtain Required Licenses and Permits for Your Property Management Business Secure Liability Insurance Obtain Required Licenses and Permits for Your Property Management Business Hire Your Team Create Solid Pricing Structure and Property Management Contracts Execute the Marketing Plan Set Out in Your Business Plan Network with Fellow Property Managers and Owners to Expand Your Business Write a Resident Retention Strategy — and How You Can Improve the Resident Experience Create SOPs to Handle Complaints, Disputes, and Requests Create and Execute a Strategy to Improve the Resident Experience How Second Nature Helps Run a Property Management Company Profitably At Second Nature, we focus on creating “triple win” experiences for residents, property managers, and investors. This helps property management companies go beyond transactional basics and create new, professional, and holistic experiences that generate growth all around. We didn’t invent this stuff, and we’re certainly not rowing against the tide! Companies like Google, Uber, and Amazon have already changed how consumers think. A convenient experience is no longer a luxury—it’s an expectation. Accordingly, for property management profitability and growth, experience is the winning strategy. That’s the insight that led us to create the Second Nature resident benefits package (RBP). It’s a foundational tool to create unforgettable resident experiences and keep your property management company on a growth path. Learn more now.

February 13, 2024

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Property Management Insurance Guide for PMs

A recent study by Orchid on property manager insurance found that while 80-90% of property managers require residents to carry insurance, only about 41% of residents actually have or retain that required coverage. Kind of crazy, right? Especially when you consider that that gap represents a huge exposure to risk for both the property manager and their investor. Insurance for property managers is a must – it protects not just you but your investor’s assets and your resident’s safety. At Second Nature, insurance is so important to us that we wrap an insurance product into our resident benefits package. So, today, we’re looking at property manager insurance and why it’s so important to get into the nitty-gritty details. ‍ Key Learning Objectives: What is property management insurance? Why do property managers need insurance (risks and liabilities)? What types of insurance are important for property management companies? Should property managers require residents to have insurance? How do you choose the best property manager insurance? How much does property management insurance cost? Examples of property management insurance coverage claims What our tenant liability insurance product can cover What is Property Management Insurance? Property management insurance is protection for property managers against the risk of damages or claims against you from residents or clients. In other words, insurance for property managers ensures that you, as the professional property manager, are covered in the case of liability claims, legal proceedings, or losses from perils like fire, vandalism, or burglary. Property manager insurance can also include tenant liability insurance, or your leases may require that renters are insured in some form. We’ll talk more about tenant liability insurance below. Why Property Managers Need Insurance Property managers are responsible for a lot. Managing people’s homes means that property managers take on considerable risks. Claims of injury or property damage can lead to serious financial losses if you aren’t protected. Property management insurance coverage reduces that risk exposure and keeps you from paying out the cost of wrongful eviction claims, injuries, property damage, etc. In a perfect world, you wouldn’t need insurance. We talk a lot about the Triple Win and how property managers should aim to build services and products that delight residents, protect investors, and retain talent on their teams. But even with the best service, everyone inevitably hits some speed bumps. Maybe a resident isn’t happy with an eviction notice, a maintenance item slipped through the cracks, or a property simply got unavoidable damage. Property management company insurance ensures you’re not liable for the costs of these inevitable parts of life. What are the Types of Insurance Property Managers Should Buy? At Second Nature, we’ve worked with professional property managers across the country and seen several different approaches to insurance. But no matter where you manage property, there are some standard types of insurance that property managers should buy or require. Here are some of the basics. General Liability Insurance General liability insurance for property managers covers physical risks for which you might become financially liable. It will typically help cover repairs, replacements, legal fees, and medical bills. You can get it for residential or commercial property. General liability coverage can include coverage for claims like like: Bodily injury: If a resident decides to sue for an injury they sustained on the property. Medical payments: If someone gets hurt on your property and holds the property manager responsible for the injury, the PM could be liable for covering their medical costs. Property damage: If you or one of your employees caused damage to the property. Reputational harm: This helps cover you financially if someone sues you for libel, slander, wrongful eviction, privacy violations, etc. Advertising injury or copyright infringement: This typically refers to coverage if you ever faced a lawsuit for copyright infringement in your marketing. Errors and Omissions Insurance or Professional Liability Insurance Known as both professional liability insurance or E&O insurance, this type of property management insurance protects Property Management companies (PMCs) from claims about mistakes in their professional services. Errors and omissions insurance willy typically cover legal fees if there was a mistake in a contract or if there were any – well – damaging errors or omissions in any communication. It may also cover errors in service, omissions in information, negligence, or even inaccurate advice. Like with any insurance, ideally, you’ll never need this! However, it is best to protect your company from such financial risks if any of your clients decide to make a case against you. Cyber Liability Insurance Cyber liability insurance helps protect you from financial losses due to cyberattacks or data breaches. Cybersecurity is a top focus of business leaders for 2023 and should also be a strong consideration for property management leaders. PMCs handle sensitive personal data from both residents and clients. Should your company ever experience a data breach, fraud, or other cybersecurity threats, this insurance will help recoup your losses. Worker’s Compensation Insurance Every business with employees – whether it’s one or many – needs worker’s compensation insurance. Worker’s comp covers the costs of employee injury while at work. It also can protect business owners from employee injury lawsuits. Even sole proprietors may use worker’s comp insurance to cover work injury costs that health insurance might not cover. In most states, businesses without worker’s compensation insurance will be fined. Be sure to know your state’s laws. Deposits and Damage Coverage Deposits and damage coverage is a payment the resident submits up-front to be given back at the end of a lease, assuming they haven’t damaged the property. There’s a lot of innovation in this space, with new products and services providing security deposit alternatives. Many of these are pure insurance, covering damages for a monthly fee. Vacation Rentals Owners’ Insurance Vacation rental owners’ insurance covers the investor for any vacation rental property they own. This coverage protects against losses in case of robbery, fire, vandalization, or other damages, whether the building is vacant or occupied. While property owners should have their own policy, sometimes property managers can extend coverage for some losses as part of their license. Tenant Discrimination Insurance While we don’t know any property managers in our network who would intentionally discriminate against residents, it’s smart to have this type of insurance as well. Discrimination based on sex, race, religion, ethnicity, age, sexual orientation, disability, etc., is illegal. But that doesn’t mean you’re automatically protected from a discrimination suit. This type of insurance can protect you in case a disgruntled former resident attempts to sue, no matter how baseless the allegations are. Tenant discrimination claims can lead to serious financial risk and expensive lawsuits. Coverage for such claims are generally excluded from General Liability policies. Be sure to review your existing policy to determine your exposure and add additional coverage as needed. ‍Renter’s Insurance Renter’s insurance – or H04 insurance – is essentially a financial safety net for residents and their belongings. Renter’s insurance should include three distinct types of coverage: Property Damage/Liability Insurance: Plans typically provide around $100K in coverage, though different properties may require different coverage (pools, for example, increase coverage) Contents and Belongings Coverage: For any damaged or stolen belongings they would like covered. Usually, this will be around $10K of coverage, but residents can opt for higher coverage. Loss of Use/Additional Living Expenses: For any costs a resident incurs for living expenses in the vent the residence is uninhabitable. We recommend residents seek contents and belongings coverage that provides replacement cost value (RCV) rather than actual cash value (ACV), as ACV may not offer sufficient coverage. For example, if you have a 10-year-old laptop that gets damaged, ACV would only cover the value of your 10-year-old laptop at the time of the damage. RCV would cover the value of replacing it with a new laptop of a similar kind and quality. Should Property Managers Require Renter’s Insurance? Do property managers need to require their residents to carry renter’s insurance, or in the least, tenant liability insurance? Most professional PMs would say absolutely yes. Remember, 80-90% say they require their residents to carry insurance coverage. So, why do only 41% of residents retain that coverage? Often it’s simply a matter of insurance lapsing without anyone noticing. Or a resident might submit paperwork that’s out of date or decide to end their policy without thinking they need to let you know. Whatever the reason, it’s important to have a backup plan. If a resident’s insurance lapses, you could be liable for damage during that time. At Second Nature, we provide tenant liability insurance as part of our Resident Benefits Package (RBP). This feature allows property managers to offer price-competitive insurance coverage that applies to all residents with one basic group rate. We’ve seen 100% insurance compliance among property managers using our RBP. How to Choose the Best Property Management Insurance Plan As you choose your property managers' insurance plan, it’s important to consider the risks you want covered and any liabilities you might face. Here are a few best practices for selecting a property management business insurance plan. 1. Consider your niche and your needs. What is your property management business niche? What kind of properties do you manage? What is their value? What risks or liabilities are you most concerned about? Do you have employees, or are you a sole proprietor? It’s also important to consider your goals and how your business services and objectives might change over the coming year. If you need a new type of insurance soon, include that consideration in your search. 2. Establish your budget and review prices Get a good idea of what’s on the market and how much it costs. Consider the level of coverage you need vs. what you feel you can afford. Make sure you’re building those insurance fees and deductibles into your pricing structure. 3. Compare vendor specialties Some insurance companies focus on offering several types of insurance, while others dial down into a specialty. Often, just like with property management, going with the specialist vendor will ensure better coverage and service, however, it may also cost more. 4. Use your network This is where your network really becomes useful. The SFR property management community is an open, generous group of folks. Most will be more than willing to share their insurance experiences, what has worked, what hasn’t, and their favorite vendors. Ask around within your network for advice. Also, make sure to read reviews of any potential insurance companies and see if they have property management clients. 5. Always talk to your attorney Of course, this is probably the most important practice. Never make any insurance decisions without discussing them with your attorney! They will be best able to help you navigate legal requirements, your greatest risks and liabilities, and what type of coverage makes the most sense for your PMC. How Much Does Property Management Insurance Cost? The cost of property management insurance will fluctuate based on what you decide you need. Your level of risk also affects the cost of insurance. Insureon gives several estimates of standard costs for property management and real estate insurance. The following average prices are based on Insureon’s customers’ policies, subject to change at any time: General Liability insurance costs, on average, about $30/month for a $1 million per-occurrence limit and a $2 million aggregate limit. Errors and Omissions insurance can cost, on average, around $55/month with a $1 million per-occurrence limit and a $1 million aggregate limit. Worker’s Compensation insurance can cost, on average, about $50/month or $600-$620/year. Cyber Liability insurance can cost, on average, a median of $140/month, depending on the sensitivity of the information. The average prices listed above will vary based on the PMC, properties covered, and the type of coverage and limits requested. Again, property managers should consider which type of coverage they need and then build those costs into their pricing structure. Examples of Property Management Insurance Coverage Claims Let’s look at a few examples of common property manager insurance coverage claims. How does insurance help when you face a crisis like damage, injury, or a lawsuit? Here are a few examples of common types of claims. Wrongful Eviction That’s one no property manager wants to see! But it takes just one disgruntled former resident to bring a wrongful eviction suit against a PMC – even if the claim is unreasonable. An example of this could be a resident approved with excellent references, but after move-in, begins disturbing the peace in the neighborhood. Maybe they get noise complaints late into the night or transgress community guidelines. Another example would be a resident who is not making rent payments on time. In those cases, the property manager would then deliver formal notice of the problem and take the proper steps to legally evict the resident if necessary and allowed by law. It’s still possible that the resident could sue for wrongful eviction. However, as long as you document your process clearly with your attorney, and follow all legal requirements, your insurance should cover the costs that may result from the lawsuit if such coverage is included within your policy. Loss of Rental Income Here’s a good example of coverage for loss of rental income: Our built-in tenant liability insurance plan provides coverage to a PMC in the event one of their properties is unrentable due to a covered loss caused by a resident. For example, if a property that is covered by our plan is damaged due to a fire caused by the resident and the PMC is unable to rent that property out for a few weeks, they can file a claim under the Loss of Use endorsement and receive up to $1k. Property Damage Property damage could be covered differently based on the type of coverage – either by the renter’s insurance, the PMC’s, or the investors’ general liability insurance. So, here’s a real-life example from one of Second Nature’s partners: A resident went out of town, and when he returned after two days, he found that the back sliding door with two glass panels was cracked on one side. It’s tempered glass, so the PM didn’t know if it was from heat, intentional damage, or something else. In this case, if the damage were caused by a covered peril (fire, smoke, water, explosion, collapse, etc.) or resident negligence, the PM’s master insurance obtained through our offering would help cover the cost. An investor’s property insurance should also cover property damage for the same causes. Pet Damage or Dog Bites Pet liability insurance helps cover any damage done by pets to the property – or injury caused by the pet to anyone else. Under our tenant liability insurance benefit, pet damages and dog bites are covered up to $25k. We have one of the only insurance policies that cover any dog breed as long as the property manager approves the dog. Animal liability covers the cost of any suits filed and medical expenses up to the policy’s limit. How Second Nature Helps with Your Resident’s Insurance Coverage At Second Nature, we know how valuable your investors’ assets are – and how much risk you take on as a property manager. While insurance can sometimes feel like a zero-sum game, we aim to make every opportunity a win for everyone involved. That’s where our tenant liability insurance product comes in. We offer PMCs a fully managed tenant liability insurance plan that helps ensure compliance and that you, your investor, and your residents can rest easy knowing you’re covered for damage or harm. With our tenant’s liability insurance, we’ve seen our partner PMCs go from: Only 41% of residents covered → 100% of residents covered Portal administration → Fully managed for you Leasing team tracking certifications → 100% certificate management Higher premiums → lower premiums Implementation and vendor management → 1 RBP, 1 Invoice Derrick Scott, from IMG put it this way: “I don’t know if people grasp just how important the ‘fully managed’ part of that is. We’ve seen property managers whose residents’ insurance lapsed, but no one knew about it. Unfortunately, the resident had a claim during the three-month period they didn’t have insurance. So the property manager took on that liability. “Being fully managed means transferring some of that liability to get that done – and ensuring you have coverage. I see that as a massive benefit.” Every property manager knows insurance matters, but that doesn’t make it any less of a headache. If you want to learn more about how we can partner with you to make that part of your life simpler, check out the details on our Resident Benefits Package.

January 5, 2024

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6 Reasons Property Managers Should Choose Clients Carefully and Why

Finding the right property management clients can make or break your business. Experienced property managers often declare this with vigor: “Be very specific and selective about who your customers are.” A simple idea, yet one that can feel tricky to execute. And like many things, there is no one-perfect-strategy-fits-all here. The right action plan likely depends on your situation. So here are six next-layer ideas that might help. 1. Push up or push out toxic property management clients Ok, let’s say you’ve made that grit-your-teeth, pain-in-the-keester client list. What’s next? Sure, you could just politely fire them. And if nothing is stopping you, then nothing is stopping you. But there’s another approach that doesn’t torpedo all your revenue all at once: raise prices. Some will leave. Great. Some will stay and pay. This makes it easier to afford resources that mitigate the distraction. You can keep doing this until the premium is worth it or they’ve parted ways. 2. When the exact opposite advice might work best (for a stage) Let’s say you haven’t been at this for years. You’re newer, just starting out. Being super specific about a customer this early could work. But it also could be the right advice at the wrong time. Yes, you could say you’re only working with class-A, single-family rentals with intentional investors who have 2-20 units and don’t live in your market. Yet, while you have a specific idea, the reality is that it usually takes time and hard work to hone your business to actually deliver a service distinctly for this customer. And after getting some reps in, you may learn that you have strengths and competencies naturally built for a different investor profile, a different asset type, etc. Or, you discover a new market opportunity you didn’t see before. I heard an analogy once that early on, you try a wider net. The net pulls up all kinds of fish. Grouper, tuna, mahi, probably seaweed too. Then you start to realize which one you’re really a match for. And you start adjusting your net and where you fish, just for tuna. Or, you realize you want a different net tailor-made for shrimp or crab. Doing this for months can be a good way of learning through doing what’s good and bad. What complexities do you want to take on, and which do you want to avoid? But be sure you do start tightening the net eventually. The suffering comes from not monitoring and tightening when you’re ready. This wide net approach not being time- or stage-bound turns a thoughtful trade-off into the drag weight everyone warns against. 3. Powerful team incentives Maybe you’re in the owner's seat, less involved in the day-to-day. It’s your team that’s bringing new clients on, and they’re responsible for handling good and bad-fit customers. So, let’s say you want to drop bad clients because they’re keeping you from the next level, but you’ve invested in staff and need to replace the revenue. Raising prices is one way. But here’s another: For every 2-4 good-fit clients the team adds, they get to drop one bad-fit client. It may feel good to fire bad clients all at once, right away. But if the business is in the investment or break-even stage, tying it to replacement clients can be a responsible way to mitigate risk to cash flow. This approach motivates the team to not just find any new client or just the ”easy” client. It focuses them on the most valuable clients. And as more are brought in, you can responsibly filter out the worst fits. Empowering employees to improve their own experience at work by putting clear guardrails in place can be a powerful motivator for change. They now have a productive path that gives them agency, as opposed to feeling hopelessly stuck with a bad client until one of them leaves. Perhaps commission changes for better-fit clients are a worthy consideration. A great incentive structure is usually marked by whether or not people “game it.” And your business still wins. That’s a good segue to… 4. Shift your marketing and sales You can address the existing client base, but if your acquisition strategy never changes, they will keep coming in. So, how do you get upstream of the problem in your sales and marketing? Great marketing attracts who you are for and repels who you are not. Help your team understand both the ideal profile AND the anti-profile. Green flags and red flags. And it’s not just about what you’re messaging, it also can tie to where you find clients and invest in acquisition channels. Ask yourself: Do your best-fit customers come from realtor referrals? Client referrals? Which realtors or clients? Do they come inbound from your content marketing? Instead of spreading your budget all around, focus resources on places and programs that attract your best customers and tighten up less reliable channels. This doesn’t have the immediacy of other approaches, but the impact over time can be significant. The same applies to sales. Great sales processes quickly qualify out vs. wasting time with poor-fit prospects. And they prioritize the Glen Garry leads. Even a simple A-B-C grading with entry and exit criteria is a great place to start. When tracking marketing and sales KPIs as blended, it treats all activity as equal. Reality is different. Some leads are 20%-1000% more valuable. Putting policies and processes in place to prioritize and treat them appropriately is a win. 5. Is it possible to be too specific? Most property managers say they once worried about being too specific with ideal client profiles but then were surprised that the problem was almost always in not being more specific. Well, it’s a balance. Here’s an example description: “We work with rental property owners who want a more passive experience in real estate.” That’s very broad. This sounds like a sea of other companies trying to win the same customer. That makes it harder to pick you. How about his: “We work with Cincinnati SFR owners who are full-time OB/GYNs and want to hold for at least a full market cycle.” Ok, this is much more specific. Probably in ways that don’t really matter. For example: Why OBs vs. doctors in general? Or doctors vs. busy, high-income professionals? Do they really have different problems that would materially change your offering or go-to-market? But let’s stick with it, for example’s sake. Your messaging could definitely sound like nobody else. Let’s say it did work more efficiently, and you win 40% of leads instead of 25% with this targeting. I asked Perplexity AI (replacing Google search for me) how many OB/GYNs there are in Cincy. It’s 322 or 478, depending on the source. Let’s say 200 own or would invest in real estate. Some number less for just single-family rentals. Some already have a PM and are happy. How many are willing and want to hold for a full market cycle? This is likely not a viable business strategy for a dedicated PM business. It’s too specific a pool, and growth will likely be too slow even if you close 50% of leads. 50% of 100 is a lot less than 25% of 10,000. So, it helps to think about the tension between the size of the prize (market opportunity) and the opportunity to design and earn a distinct position in it (differentiation strategy). Thinking about both sides can help you find a sweet spot to commit to and focus on organizing around. If you map your market, you can ask and answer: What’s the smallest niche of the market that supports your business goals and model? What’s the biggest opportunity you can credibly develop and win in the near term? How might you expand as you win to keep growing toward your ultimate vision? You can see how a couple of years later, you can expand or add an adjacent customer profile (accidental landlords, new location, new property type, etc.) or adjacent new services (RBP, brokerage, in-house maintenance, etc.) to add dollars to the same customer base to grow. 6. Focus on wallet-share vs. market share Ok, so what if you want to remove problem clients but don’t want to raise prices, risk cash burn, wait until the team can add better replacement property management clients first, or test changes in your funnel or team’s comp? You might feel stuck, but there’s another way to add the revenue and profit you need to confidently pull the trigger without investing more in acquisition or relying on efficiency improvements to justify it. That’s adding more revenue per unit in a way that increases your customer lifetime value. If your ancillary revenue and profit per unit go up, you can afford to let clients go without risking churn. Second Nature helps property managers do this through a fully managed resident benefits package. Industry benchmarking studies show the average PMC profits $10-17/mo per unit. Every lease with an RBP can replace the profits at risk or more. And RBP isn’t the only ancillary revenue opportunity. Pet rent is another good example if you haven’t implemented it yet, amongst others. What are your thoughts? The goal of this article is not to be prescriptive; it’s to spark thinking about key considerations and paths to get there. To that end, did you find this content useful? Anything you can add that’s missing? Connect with us in our Facebook group or get in touch! We’d love to hear your input.

January 4, 2024

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Security Deposit Alternatives for Property Managers and Residents

A security deposit is a one-time, refundable payment made by a tenant before moving into your single-family rental home. It acts as financial insurance against potential damages, unpaid rent, or cleaning fees incurred during their tenancy. Security deposits are large sums of money, and constantly change hands in the single-family rental (SFR) community. Traditional security deposits are standard in the industry but aren’t ideal for everyone. They can typically cost over the first month’s rent for residents and can be a hassle to manage for property managers and investors. If you’re familiar with our Triple Win approach and resident benefits, you won’t be surprised to learn there’s a different way. Security deposit alternatives typically allow tenants to pay their security deposit in installment payments instead of a lump sum before their occupancy of a rental property. Continue reading to find out more about the different types of security deposit alternatives, their cost, and their pros and cons to help you choose the one that works best for you. Types of Security Deposit Alternatives Security deposit alternatives can be achieved through pure insurance, surety bonds, ACH authorization, or an in-house program. Property managers may choose these types of alternatives because they aim to lower the barrier to rental for residents. As a result, this lower barrier increases the ROI for the owner and boosts the PMC’s bottom line. These options, however, are not a one-size strategy. They can vary based on the business size, strategy, and state and local laws. In addition, there are several different ways to apply. For example, insurance, surety bonds through a bond company, and ACH authorization are all available through third-party vendors, which are increasing in popularity. Next, we’ll walk through each of these security deposit alternatives. Pure insurance This is exactly what it sounds like. Instead of a deposit covering potential damages, the resident takes out a policy with an insurance company to cover any damages. The resident pays a small premium, and on move-out, the policy covers any damage to the property up to a certain amount. Pure insurance is great for the resident, who pays a premium and then bears no financial responsibility for damages after move-out. Inherent in that approach, however, is a flaw that makes the pure insurance play tough to buy into as the industry's future. It doesn't incentivize the resident to take care of the property, as they won't owe any additional money for any damage they cause. This flaw leads to higher premiums, leaving insurance as a less effective way to keep costs down. Surety bond The surety bond business model is not new. Still, it's become more popular as vendors have modernized the enrollment experience thanks to over $150M of VC investment into the category. Surety bonds are agreements between two parties managed by a third party, known as the surety. In the case of property management, the contract is between you as the property manager and the resident. It states that the resident agrees not to damage the property and agrees to cover damages should they be responsible. In case of a contract breach at the end of the lease, the surety pays out the sum required to the property manager, then bills the resident the cost of the damages. Surety bonds attempt to incentivize the resident to take care of the property, which is more than a pure insurance program will do, but there's not a definitive set of evidence yet that this is highly effective. It's still a challenge to educate some residents that this isn't an installment plan or insurance product. In many cases, that falls on the property management team. Another concern with the surety bond model is the post-move-out collection results. The majority of damages due from the resident never get collected, which leaves the model with potential recourse ahead: Vendors figure out how to collect a higher percentage Vendors increase monthly pricing Vendors expand into other, more profitable products Less reliable claims payouts Layoffs or other financial controls More investment was requested for more runway The jury is still out on whether surety bonds have the unit economics to win the category. ACH authorization The ACH (Automatic Clearing House) authorization is a popular alternative. It mirrors the method hotels have used for years to compensate for incidentals and applies it to long-term rentals. Residents permit a financial institution to directly draft money up to a certain amount to cover damages and draw from your bank account. The ACH authorization does check the box of incentivizing proper treatment of the home, and the vast majority of money due from claims is collected. So far, this method seems to be getting the best results in post-move-out collections. A fair critique is not 100% of residents qualify for this, and the ones that don't must pay a traditional deposit, so it isn’t a complete solution in some people’s minds. In-house program Todd Ortscheid, CEO of Revolution Rental Management, built his alternative program in-house. Ortscheid spoke on this topic in an episode of Triple Win LIVE in February. “We offer the resident two different options. You can either pay the security deposit amount based on your [application] score, or the alternative is you can pay a monthly security deposit waiver fee,” says Ortscheid. “What the waiver fee is doing is buying you the privilege of not having to pay a security deposit upfront.” Ortscheid clarifies that his implementation of this program is neither insurance nor a refundable installment towards a security deposit. However, there is debate among other PMs and their attorneys about what compliance risks there could be here. Some property managers also struggle to get comfortable with the financial liability. When deciding to outsource or DIY, we recommend considering three things: How much of a difference can scale make now? Over time? How large is the skill or expertise gap here? Over time? Is this the best investment of my time? Will it be later? Security Deposit Alternative Companies and What They Offer The traditional security deposit is the OG of rental insurance, a reliable one-time payment typically equal to one month's rent. It works like a financial handshake between the resident and property manager/owner, acting as a safety net for unpaid rent or damages beyond normal wear and tear. While it carries no monthly cost for residents and offers full refunds for responsible renters, it also doesn't offer revenue sharing for investors or the flexibility of newer alternatives. Here's what to expect from a traditional security deposit product, and the baseline we'll be comparing alternatives to: Model: Traditional Up-front cost to resident: Equal to established cash deposit Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? N/A Payments refundable to resident? Yes Resident held accountable for funds? N/A We reached out to Peter Lohmann, co-founder and CEO of RL Property Management, to get the rundown on security dispositive alternative products. Here are some of the most popular security deposit alternative services, the type of product they offer, and the pros and cons of each. Note: The major downside for most of these security deposit alternative products is that they focus on multi-family rental (MFR) communities rather than single-family rentals (SFR). Most also have nonrefundable fees. 1. LeaseLock LeaseLock is a popular security deposit alternative program. Here’s how they stack up: Model: Lease Insurance Up-front cost to resident: None Monthly cost to resident: $29 for standard plan Unpaid rent & damage coverage: $5,000 for standard plan Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes but Lease Lock says they don’t pursue 2. Obligo Obligo is a billing authorization alternative to security deposits. Here’s how they stack up: Model: Bill Authorization Up-front cost to resident: First year’s total fee (variable) Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes 3. Rhino Rhino offers the surety bond model for security deposit alternatives. Here’s how they stack up: Model: Surety Bond (non-pooled) Up-front cost to resident: None Monthly cost to resident: Variable Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? Yes, if over 10K units Payments refundable to resident? No Resident held accountable for funds? Yes, but Rhino says they don’t always pursue 4. TheGuarantors, Jetty, and SureDeposit These three companies – The Guarantors, Jetty, and SureDeposit – all offer an alternative to security deposits in the form of a surety bond. Here’s how they stack up: Model: Surety Bond (pooled) Up-front cost to resident: 17.5% of month’s rent Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes The Cost of a Security Deposit Alternative Security deposit alternatives costs don’t necessarily save money for the resident, but they offer a choice that many residents prefer – not giving up a big chunk of cash right at the start. In general, the cost structure for security deposit alternative companies is either a low monthly fee or an annual fee. For most PMs, you can include the cost in a Resident Benefits Package, or it’s billed directly to them by a vendor. The cost can depend on the property's value, the rent and deposit amount, the resident’s credit, etc. Fees are calculated based on the amount of rent, amount of deposit, credit score of the renter, and the value of the client. Security deposit alternative fees can often be as low as 5% of rent. So, for a rent of $1500 a month, a resident might pay: $75 per month (5%). In some larger apartment communities, residents may pay even less – typically $8-$30 per month. Advantages of Security Deposit Alternatives The concept of a security deposit alternative is that it helps lower the barrier of entry for residents who may not want to put down a massive one-time chunk of cash – and it helps protect the investor by filling vacancies more quickly, and incentivizing good care of the property. Here’s a breakdown of more specific advantages. 1. Avoid large deposits for residents Ortscheid says: “When I first started doing this, my assumption was the only people who will take this are the people with the worst scores. “What we actually found was our very first person who signed up for it was someone with an 800+ credit score. He was the CEO of a publicly traded company and had millions in the bank. So I asked why he took the waiver option, and he said, ‘I would rather pay monthly than give you a big chunk of my money.'” 2. Get more options All of these programs can be relatively simple to administer and offer choice to the resident. They can choose options and payment methods like credit cards, ACH, etc. According to Ortscheid: “About 70% of the people we rent to now select the security deposit waiver option.” Giving residents more options helps them feel more secure and in control and boosts their satisfaction overall. 3. Reduce vacancies Perhaps the investor sees the most significant win from security deposit alternatives. And, given the PM’s fiduciary responsibility to the investor, an investor win is usually a win for you. The biggest thing here is the attractiveness of the program to the resident. A security deposit alternative is something you can and should advertise in your listings. It adds a differentiating factor to your listing that moves the needle for many prospective residents, which helps keep your days-on-market low. Revolution Rental Management has been sitting at an average of about ten days on the market over the last year. And as we all know, minimal vacancy equals increased ROI for investors. 4. Get fewer damage claims at move-out Additionally, some property managers claim the lack of a deposit drives fewer damage claims at move-out. This reduction in claims helps to protect the investor’s assets more than a deposit does. Again, this may seem counterintuitive, but Birdy Properties reports this scenario playing out since they moved away from security deposits two and a half years ago. “There is this philosophy out there from residents. Most people believe ‘you’re not going to give me my money back. And since I’m not getting my money back, I’m not going to clean up too well because if I do all that work, you’ll still keep my money anyway. Well, now, you were nice enough to let me move in and not have to give you all this money. Everything has gone well, and now it’s time for me to leave and I can recognize that if I don’t leave the property in good shape, I’m going to have to pay for it.’” “We’ve watched the numbers,” continued Birdy. “We have seen a reduction in overall move-out claims. What it’s costing to turn a property over has gone dramatically down, and we have almost eliminated the turnover cost to the owner. That is the most vulnerable time for us as property managers because that’s when the investor decides if they want to keep this asset any longer.” The speed with which Birdy Properties can roll in another resident with minimal costs keeps the property investors happy, which prevents the PM from losing inventory while maintaining great service and relationships with the client. This great relationship comes from a service residents love, so it all works together to benefit every party. Best practices are developing that will drive triple-win experiences. Disadvantages of Security Deposit Alternatives Of course, there are also disadvantages to security deposit alternative services. These issues may affect your residents' overall experience or your investor's satisfaction with their margins. Before signing up for any alternative security deposit product, you need to be sure you know what you’re getting into. Do your research and ask questions to evaluate things like: what happens if a resident ends their lease early; what damages are owed after move-out and who pays them; how to dispute charges; monthly or yearly fee obligations; etc. Here are a few disadvantages to keep in mind. 1. Payments are not refundable While the advantage to residents is that they don't have to pay it all right away, the disadvantage is that they won't be refunded for their payments. 2. Disputes may be more difficult to resolve Since security deposit alternative programs involve a third party, you must involve another agreement with the lease and contracting stage. If there is an eventual dispute, it may be tough to get it resolved. Residents may not be held accountable in the way you and your investor need. Or, from the resident side, they may not get the service they want. 3. Security deposit alternatives don't save money Some products may seem like they're advertising dollars saved. But ultimately, these alternatives aren't intended to save money. They simply help residents keep money in their savings for a longer period of time, rather than making one big deposit all at once. Despite these disadvantages, we've seen security deposit alternatives pick up in popularity recently. As long as residents, investors, and PMCs know exactly what is and isn't promised, it can be a benefit to everyone involved. ‍ How 1,000+ Professional Management Companies Create Triple Win Experiences Security deposit alternatives are an innovative solution that solves problems for residents, investors, and property managers. For residents: A quality alternative lowers the barrier for residents and gives them more choice and agency in the rental process. For investors: A quality alternative can boost your listings’ marketability and reduce vacancy costs. For property managers: A quality alternative with more relevance for residents and investors – creates new value with an opportunity to monetize and eliminate the administrative pains of traditional deposits. That’s what we call a triple win! Learn more about how we create resident experiences that people pay and stay for – and share your trips and tricks in our Facebook Group!

December 1, 2023

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10 Best Property Management Maintenance Software

In the property management world, tech solutions abound. There are so many different players on the market, but sometimes, that wealth can be tough to navigate. When it comes to property management maintenance software, single-family property managers have to identify, first, how they approach maintenance and, second, what tech solution will best support their team, workflows, and operational structure. It’s a daunting task! That’s why Second Nature builds integrated solutions to support residents in preventing issues from ever developing. These solutions reduce maintenance needs through preventive maintenance strategies and take work off the property manager’s plate. But no matter how much prevention you build in with tools like our Resident Benefits Package, you’re always going to need some maintenance management. So, today, we’re going to look at some of the best approaches you can take and the best software available to you for property management maintenance. Property management maintenance software solutions come in two basic categories: Platform Solutions: Property management operations platforms or accounting software that include maintenance support, among other full-service property management solutions. Dedicated Point Solutions: Property management software designed to tackle one specific problem – in this case, maintenance. We’ll explore solutions that fit into both of these categories and how to weigh the pros and cons of each. Related: Best Single Family Property Management Software 1. Property Meld Property Meld is a leader in the small to medium-sized property management business space. It’s a maintenance point solution to optimize work order management, response time tracking, vendor and resident communication, scheduling, and analytics. Its built-in “Owner Hub” helps provide the right amount of transparency to your clients. Perhaps the best feature is the Insights Tool, which helps you track metrics like the median speed of repair, average resident satisfaction, vendor health score, total spend per unit, and more. Pros: The user interface is intuitive for PMs and residents Opening repair tickets takes just minutes Tracking repairs and resident satisfaction is easy and transparent Powerful analytics help you see your success at a glance Cons: If you’re looking for a full-service operations platform, Meld won’t be the solution for you. 2. Lula Lula is another dedicated point solution focused on property maintenance technology. They leverage a network of vetted contractors to make finding the best technicians easy. Lula’s team becomes an outsourced extension of your property management company, troubleshooting, coordinating, and managing maintenance tasks. They operate in over 30 markets in the US and boast results like 80% one-trip resolutions and a net promoter score of 80. Pros: They do the work to vet and provide the vendors You can bring your own vendors in if you want to Integrates with any software Customizable plans for self-service or full-service Cons: May not yet be available in your market Only focuses on maintenance 3. Buildium Buildium is a popular all-in-one solutions platform and property accounting software with excellent management features. The web-based solution and app provide support in accounting and invoicing, communications, leasing, and maintenance activities. Their portals provide tenant support, maintenance management, and templates to make every part of property management easier. Pros: A near-complete solution for property management Excellent tenant and owner portals and communication hubs Analytics and tracking to streamline operations and results A 14-day trial helps you evaluate if it’s a fit Customizable packages Cons: Lack of transparency for owners The listing process isn’t as comprehensive as some users want Can be pricey 4. Mezo Mezo is an AI-driven, cloud-based property maintenance management software. The aim of the app is to take work off your plate by automating maintenance ticket responses, resolutions, and insights. Mezo takes requests directly from residents and uses conversational AI to ask questions in real-time, identify problems, and diagnose the issue. It will support residents in resolving the issue on their own or integrate with your management system to get work orders quickly sent. Pros: Residents can get help immediately when they have issues and potentially resolve themselves with Mezo’s chatbot support Technicians arrive with Mezo’s analysis and diagnosis, allowing them to come prepared and resolve issues quicker Integrates with most PMS options Cons: Doesn’t integrate with all other PM tech solutions As a newer technology, still has some bugs and gaps 5. Lessen Lessen, formerly SMS Assist, is an enterprise-level solution providing tech-powered renovations and maintenance at scale. It’s an end-to-end platform for maintenance operations with a vetted vendor network and provides everything you need for maintenance or turning projects. PMs simply use the app to request projects, deploy Lessen network pros, track progress and checklists, check for quality control remotely, and process payments – all in one slick tech solution. Pros: Excellent, seamless tech that’s easy to use and deploy A fully vetted vendor network takes that work off your plate An established brand that has worked out the “kinks” in service Cons: More ideal for more enterprise companies who need scale (rather than smaller SFR PMs) 6. AppFolio AppFolio is a full-service rental property management platform solution that is very popular with single-family property management companies. The web-based app streamlines and automates every stage of real estate management, including management, training, marketing and leasing, maintenance, accounting, reporting, and communications. For maintenance, AppFolio includes workflow automation, work order managemen toolst, online maintenance request, mobile inspections, and more. Pros: Easy-to-use technology with great UX Fully mobile and automated Customizable dashboards and advanced reporting Cons: An expensive platform if all you need is a maintenance point solution Customer service is not always available for maintenance line 7. Rentvine Rentvine is a full-service property management platform that focuses on communication support between PMCs, residents, and clients. The platform streamlines application and tenant screening, inventory management, accounting with a manager’s ledger and client money tracked separately, marketing, leasing, and – of course – maintenance. The app tracks all your work orders from start to finish and supports communication between residents, property managers, and vendors throughout. Pros: Easy to use with excellent customer support Owner and tenant portals work seamlessly Excellent accounting process Cons: Has fewer features than some competitors but is continuously improving 8. DoorLoop DoorLoop is another full-service property management software that provides all the features a property manager needs to manage their portfolio. You can handle accounting, maintenance, listings, marketing, client success, and more, all from the app. For property management maintenance, their software helps manage work orders, handle vendor payments, and track the process from start to finish. Pros: Intuitive, streamlined UX that’s user-friendly Great customer service Excellent integrations Cons: Expensive if all you need is a maintenance point solution rather than a full platform Some functionalities are still being developed 9. FTMaintenance FTMaintenance is a computerized maintenance management system (CMMS) point solution platform designed for maintenance managers, executives, and technicians. While it’s not specifically designed for property management, the software streamlines work order management, vendor payments, tracking, and more. For some PMs, this could be the added solution they need to focus simply on complex maintenance jobs. Pros: Robust work order tracking Excellent mobile app for vendors and maintenance managers Analytics and organization Cons: Not designed specifically for property managers, focused more on commercial properties Complex if you are not tech-savvy 10. Latchel Latchel is a property maintenance point solution that helps automate maintenance communication, scheduling, work orders, etc. Your residents message the Latchel team directly on the Latchel platform and get an immediate response to begin troubleshooting the issue. If the problem requires a maintenance visit, the Latchel team will deploy that and follow up with the resident. Pros: Fast response times Easy to use for maintenance communication Cons: Many reviews say the issues didn't get fixed correctly App is great for communication but sometimes requires the PM to step in and manage How Second Nature Helps with Property Management Maintenance When it comes to maintenance, at Second Nature, we’re always looking to empower the resident. Our Resident Benefits Package provides solutions that minimize maintenance needs and costs in the first place. From HVAC/air filter delivery to on-demand property management pest control to rental rewards, we aim to incentivize residents to care for their property and take work off the property manager’s plate. We also work closely with other property management software providers to ensure you have everything you need for success in your SFR property management business. Learn more about the Second Nature RBP and how it can bring ease to your work.

November 17, 2023

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Property Management Rental Inspection Checklist [Free Template]

In single-family property management, there's a hero tool that stands between you and potential disputes, wear and tear issues, and even costly oversights. It's not a fancy gadget or software for single-family property management – it's a Property Management Rental Inspection Checklist. Now, someone who isn't in property management might think, "It's just a checklist, right?" But professional property managers know that without it, everything can kind of fall apart. Throughout this article, we'll dive deep into what rental inspections are, their undeniable importance, the key items you shouldn't overlook, and – because we love making your life easier – we're gifting you a comprehensive checklist template. Stick around to have all your pressing questions answered in our FAQ section and discover how Second Nature can be your partner in acing rental inspections. What is a Rental Inspection? A rental inspection is a systematic evaluation of a rental property's condition carried out by the property manager, landlord, or a dedicated inspector. It’s not just a casual walkthrough of the premises. The inspector will thoroughly assess, every nook and cranny of the property – from the foundation to the roof, from the plumbing to the electrical fittings – is thoroughly assessed. The primary goal? To ensure that the property meets all safety and maintenance standards, that the residents are complying with their lease agreements, and that potential issues are identified and addressed before they escalate into major, costly problems. Think of it as a health check-up, but for properties. It provides an objective snapshot of the property's current state and offers insights into areas that might need attention or repair. Here's an example of what a checklist might look like: Why Are Rental Inspections Important? Rental inspections play a crucial role in the property management world, and here’s why: Resident Experience: A well-maintained property is a happy home for residents. When renters see that the property management company is proactive about upkeep, it fosters a sense of value and respect. This can translate to longer tenancies, on-time rent payments, and even positive word-of-mouth referrals. (Learn more about this in our State of Resident Experience Report.) Protection of Assets: Your rental property is a significant investment on the part of your client. Regular inspections ensure it remains in top condition, preventing minor issues from escalating into costly repairs, and protecting your clients’ real estate investments. Safety Assurance: By checking everything from electrical fittings to potential structural issues, inspections make certain the property is safe for habitation. No landlord wants to be on the receiving end of lawsuits or liabilities. Lease Compliance: Regular inspections ensure that tenants are adhering to the terms of their lease, such as not making unauthorized alterations or keeping pets when they aren’t allowed. Predictive Maintenance: Rather than always being in a reactive mode, inspections help in predicting potential issues. This way, you can schedule maintenance tasks before problems arise, which can be more cost-effective in the long run. Property Value Preservation: A well-inspected and maintained property not only attracts and retains quality tenants but can also help maintain or even increase its market value over time. In essence, rental inspections aren’t just a formality; they're a pivotal tool in ensuring the long-term success of your property management endeavors and in enhancing the overall resident experience. What to Include in a Rental Inspection When you're planning a rental inspection, your approach should be methodical and thorough. As Janet Sprissler, Broker/Owner at Rent 805, puts it: “There are no optional parts of the checklist. That’s why it’s a checklist; you have to check everything off. I don’t have any nice-to-haves on my checklist because everyone is treated the same. We don’t do for one resident what we won’t do for the other.” Organizing your checklist by room or space is a practical way to ensure no corner is overlooked. For each item listed within these spaces, always include a status, such as "Good," "Requires Maintenance," or "Replaced." This helps in keeping track of the condition and any changes over time. You should also consider what type of inspection you’re conducting and may want to tweak what you include depending on where the property is in its rental cycle. Different types of inspections include: Move-In Rental Inspection: Conducted right before a resident moves in, the move-in inspection serves as a benchmark for the property's condition at the start of a lease. It helps to document the existing state of the property, from the functionality of appliances to the appearance of the interior and exterior. This documentation can be invaluable in resolving potential disputes over damages when the resident eventually moves out. Move-Out Rental Inspection: Carried out once the resident vacates, this inspection compares the property’s condition to its state during the move-in inspection. It identifies any damages or changes that have occurred during the tenancy. Based on this, you can decide what portion of the security deposit needs to be returned. Routine Rental Inspections: These are regular checks conducted during a resident’s lease period. Typically done every six to twelve months, routine inspections monitor the ongoing condition of the property. They're also a great way to catch and address issues early, as well as to ensure lease compliance. “Drive-By” Rental Inspections: These are less invasive checks where property managers drive by the property to ensure its exterior is in good shape and being maintained appropriately. This type of inspection is less about detailed checks and more about getting a general sense of the property's outward appearance and ensuring no major lease violations are visible. For single-family property managers, these inspects may be less frequent since properties are often spread out from each other geographically. As you create your rental inspection report, remember that every property is unique. While categorizing by room ensures thoroughness, it's essential to adjust and add specific items tailored to each property’s unique features and needs. And always remember, communication is key. Ensure that residents are aware of inspections, their purpose, and the schedule to foster a transparent relationship. Property Management Rental Inspection Checklist With the help of OnSightPROS, we've developed a rental inspection checklist template for single-family rental property management companies. Use this template to build out your checklist. General Overview Date of Inspection: Inspector Name: Tenant Name: Address: Previous Inspection Date: Front Exterior Status: [Good / Needs Maintenance / Poor] Mailbox: Functional door and flag, no damage Lawn and garden: Well-maintained landscaping free of debris, no bald grass spots Driveway and walkways: No cracks or obstacles Fencing: In good condition, no damage Exterior lighting: All bulbs functioning Windows/Screens: Clean, no cracks, seals intact, screens intact Walls/Siding: No damage or cracked/peeling paint or caulking, no insect damage Downspout/Splash Blocks: Attached properly Light Fixtures: No missing bulbs or broken fixtures Roof/Trim/Gutter: No visible damage or leaks, discoloration, holes, clogged or loose gutters Rear Exterior Status: [Good / Needs Maintenance / Poor] Lawn and garden: Well-maintained, free of debris, no bald grass spots Patio/Walkways: No cracks or obstacles BBQ Grill: Set away from house, not under awnings Rear Door: Weather stripping intact, locks installed as needed Possible Hazards: Trampoline, open fire pit, swing set Pool: Clean, clear water, no damage, fence and lock in place Fencing: In good condition, no damage Exterior lighting: All bulbs functioning Windows/Screens: Clean, no cracks, seals intact, screens intact Walls/Siding: No damage or cracked/peeling paint or caulking, no insect damage Downspout/Splash Blocks: Attached properly Light Fixtures: No missing bulbs or broken fixtures Roof/Trim/Gutter: No visible damage or leaks, discoloration, holes, clogged or loose gutters Entry Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Patio/Porch: No cracks in concrete, railing, stair intact Front door exterior: No scratches, chipping, stains Locks/Keyless Deadbolts: Check for installation, functioning correctly Front door interior: No gaps in weather stripping, clean Walls and ceiling: Clean, no signs of mold or damage Closets: Shelves stable, no stains or damage to walls Flooring: No damage, carpets clean Lighting fixtures: Operational Electrical outlets: All functioning, no visible damage Blinds/Drapes: Fully functional and clean Windows: Open and close easily, locks work Living Room Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Door/Door stops: Fully functional Walls and ceiling: Clean, no signs of mold or damage Ceiling fans: Working properly Closets: Shelves stable, no stains or damage to walls Flooring: No damage, carpets clean Lighting fixtures: Operational Electrical outlets: All functioning, no visible damage Blinds/Drapes: Fully functional and clean Windows: Open and close easily, locks work Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Kitchen Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Door/Door stops: Fully functional Flooring: No damage, carpets clean Walls and ceiling: Clean, no signs of mold or damage Lighting fixtures: Operational Cabinet under sink: No leaks with running water, no standing water Countertops/Backsplash: Clean, no damage, caulking intact Cabinets: Doors/drawers work, no damage Sink/Faucet: No leaks, drains well, spray hose works Pantry: Shelves intact, walls clean, lights functioning Appliances (oven, fridge, dishwasher, microwave, etc.): Clean, functional Exhaust fan: Functional, no excessive noise Electrical outlets: Functioning, GFCI where required Windows: Open and close easily, locks work Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Hallway/Stairway Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Door/Door stops: Fully functional Railings: No loose or missing spindles Walls and ceiling: Clean, no signs of mold or damage Closets: Shelves stable, no stains or damage to walls Flooring: No damage, carpets clean Lighting fixtures: Operational Electrical outlets: All functioning, no visible damage Blinds/Drapes: Fully functional and clean Windows: Open and close easily, locks work Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Bedrooms (repeat for each bedroom) Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Walls and ceiling: Clean, no damage or mold Ceiling fans: Working properly Flooring: No damage, carpets clean Closets: Shelves stable, no stains or damage to walls Lighting fixtures: Working Door/Door stops: Fully functional Electrical outlets: All functioning Blinds/Drapes: Fully functional and clean Windows: Open and close easily, locks work Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Bathrooms (repeat for each bathroom) Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Door/Door stops: Fully functional Flooring: No damage, no sagging floorboards or discoloration Walls and ceiling: Clean, no damage or mold Exhaust fan: Working properly Closets: Shelves stable, no stains or damage to walls Lighting fixtures: Working Toilet: Flushes correctly, no leaks Sink/Faucet: Drains well, no leaks Cabinet under sink: No leaks with running water, no standing water Shower/bathtub: Drains well, faucets work, no mold Towel bars: Present and functional Mirrors: Clean, no damage Electrical outlets: Functioning, GFCI installed Blinds/Drapes: Fully functional and clean Windows: Open and close easily, locks work Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Utility Spaces (if applicable) Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Door/Door stops: Fully functional Flooring: No oil stains or cracks Electrical outlets: Functioning, GFCI installed Lighting fixtures: Working Walls and ceiling: Clean, no damage or mold Closets: Shelves stable, no stains or damage to walls Blinds/Drapes: Fully functional and clean Cabinet under sink: No leaks with running water, no standing water Windows: Open and close easily, locks work Washer/dryer: Functional, no leaks Water heater: No visible damage, no leaks HVAC system: Operational, air conditioning filters clean, no moisture issues around drip pan Satellite dish: Attached to house correctly Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Garage (if applicable) Status: [Good / Needs Maintenance / Poor] Smell test: No odors from animals, smoke, waste, must Interior door/Door stops: Fully functional Garage door opener: Functions correctly Flooring: No oil stains or cracks Walls and ceiling: Clean, no damage or mold Lighting: Functional Electrical outlets: Functioning, GFCI installed Windows: No damage, hardware intact, no evidence of moisture Storage areas: Organized, no damage Smoke alarm/Carbon monoxide alarm: Up to code, batteries good, working order Additional Notes: Space for the inspector to make any additional comments or observations. Signature: Inspector’s signature, date. FAQs Here are a few frequently asked questions about rental inspections. Q: How often should you conduct rental inspections? A: The frequency of rental inspections can vary based on several factors, including local regulations, lease agreements, and the specific needs of the property. Generally, here's a recommended guideline: Move-In Inspection: Once, right before a new resident moves in. Move-Out Inspection: Once, immediately after the resident vacates. Routine Rental Inspections: Typically, every six to twelve months. It's a balance between ensuring the property is being maintained without being overly intrusive to your residents. Drive-By Rental Inspections: These can be conducted more frequently, perhaps quarterly, since they are less invasive and don’t require entering the property. However, always consult your local laws and regulations, as some areas might have stipulations on how often you can inspect a rented property. Also, it's crucial to provide residents with proper notice before any inspection, respecting their privacy and rights. Q: Can a tenant refuse a rental property inspection? A: While rental inspections are essential for property managers, tenants have rights, and their privacy must be respected. Generally, a resident cannot outright refuse a rental property inspection if: It's Stipulated in the Lease: Most rental agreements or leases have clauses that allow for periodic inspections by the property manager or landlord, given proper notice. Adequate Notice is Given: Many jurisdictions require landlords to provide a specific amount of notice (usually 24-48 hours) before entering the property unless there's an emergency. The Inspection is Conducted at a Reasonable Time: Inspections should be scheduled during reasonable hours, avoiding early mornings, late nights, or any time that might intrude on the tenant's reasonable expectation of quiet enjoyment. However, if a resident has a valid reason like health concerns, religious reasons, or personal issues, it might be possible to reschedule the inspection to a more convenient time. Always be sure to check local laws and regulations as tenant rights can vary by jurisdiction. Open communication and understanding between both parties can help mitigate any concerns or conflicts. Make Property Management Easier with Second Nature At Second Nature, our goal is to make property management easier for professional property managers. We built our Resident Benefits Package to support property management companies in delivering the best resident experience on the market. From a move-in concierge to air filter subscriptions to rent reporting, we deliver the services that residents will pay for – and stay for. Learn more about our RBP today!

November 6, 2023

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Property manager meeting with future tenants

10 Strategies to Become a Successful Single-Family Property Management Business

Navigating the world of Single-Family Property Management requires a blend of industry know-how, proactive strategies, and a keen understanding of both investors and residents. What is a single-family property management business? At its core, the business revolves around managing standalone properties for individual property investors, ensuring the rental property is maintained, tenanted, and profitable. But how do you optimize for success in this space? In this post, we'll uncover 10 pivotal strategies to elevate your single-family property management business, from staying updated on industry trends to streamlining your operations for maximum efficiency. 1. Keep up with the trends in Single-Family Property Management The dynamic landscape of single-family property management is constantly innovating and growing in response to various economic, technological, and societal factors. Property managers in the single-family space (vs. multifamily properties or even commercial real estate) also tend to be entrepreneurial, innovative, and adaptive. It’s what we love about this community! But some "trends" have staying power, and the key to long-term success is identifying those and adapting your services to the modern consumer. Over the past decade or so, the way we do commerce and services has been upended by technology and the convenience economy. The same is true in property management. In the words of Jonathan Cook at Revolution Rental Management: “I think ten years ago, property managers were only concerned with collecting rent and keeping tenants from doing damage to properties. It was a much more adversarial relationship than it is today. Today, the best PMs know that resident experience is vital to minimizing vacancy and creating a resident that strives to be a higher quality tenant.” So, let’s look at several trends that have emerged that are shaping the industry’s direction. The Convenience Economy: Sometimes we call this "the Amazon effect." Consumers and residents alike are looking for the easy button. They're looking for everything from online rental listings they can scroll from their couch to online rent payment services that make paying as easy as the click of a button. Technological Advancements: Today, property managers are leveraging technology more than ever. From smart home systems that enhance resident experience to advanced, AI property management software that streamlines operations, staying abreast with technological trends is crucial. The key to staying on top of these transformations is to ask the right questions. Pay attention to general business trends. What are consumers demanding? What is new in technology that you could adapt to your business strategy? Running a property management business is just that: a business endeavor. Keep your eyes sharp on trends in commerce and get involved in the conversation of how that affects good property management. (Check out our Triple Win Podcast for regular interviews, updates, and tips from experts in the SFR property management industry!) 2. Understand your ideal investors in single-family property management When diving into professional property management, just like any other business, it's essential to identify your ideal customer profile (ICP) early on. You will get so much further by "niche-ing down" than spreading your company too thin. What kind of property and client are you ideally set up for or prepared to work with? Once you define your target audience, you can then be ruthless in saying no to anyone who falls outside that definition. Here are a few ways to explore the various dimensions of property investor clients: Level of Experience: Property investors are not all created equal. Individuals get into property ownership for different reasons. You can see experiences ranging from an accidental landlord who never intended to be an investor all the way to a sophisticated or institutional investor, and every shade of the spectrum in between. It's very difficult to build a business that serves all customers across all levels of sophistication. They'll have different needs for how much education they need, how they want you to handle things, and how they want pricing to work. Property Types: You should also define what type of property you want to manage, which will help you assess if a new investor is a fit or not. We're assuming since you're reading this that you're interested in single-family rentals. But within that category, there is still so much variation. Are you looking to manage luxury homes with higher rent, lower demand, and longer vacancies? Are you more interested in workforce housing with more demand and lower rents? Or maybe you're a specialist in Section 8 housing. Whether Class A, B, or C housing, it's very hard to specialize in all property types. Sure, all SFR homes are unique, but it's key to identify the general characteristics of the homes you'd like to manage (or already excel in managing). Then, you and your team are dealing with more consistent situations. Compatibility Fit: You also need to make sure the investor as an investor fits with your approach. And we don't just mean personalities. Have a list of questions that help define what type of investor you can work with. In his podcast Owner Occupied, Peter Lohmann (co-founder & CEO of RL Property Management) talks to Marc Cunningham (President and Owner of Grace Property Management & Real Estate) about their lists, which include questions like: 1) Is the investor financially stable? 2) Is the investor emotionally stable? 3) Are they realistic in expectations? 4) Are they willing to trust us as the expert? Cunningham says his company can manage any property if the owner is right. Define what's important to you and stick to your guns. As Lohmann says in the podcast, "The easiest way to deal with a horrible owner client is to never onboard them in the first place." The goal is to filter out the people who are not a fit before you get into a contract with them. "When you're first starting out in this business, you chase everything," Cunningham says. "But as you grow and become successful, you need to slide that bar on your 'yes' and 'no' and start saying no." In short, nailing the definition of what type of investor and property you want to work with will help you find the right clients and ultimately succeed with them. You're not saying yes to every person who is looking for property management; you're looking for a specific type of customer. 3. Make sure your rental application requirements are clear Are you getting applicants who don't end up being a fit for your properties? It's possible the requirements are not clear on the listing or application. Is your advertising penetrating where it's going to reach qualified residents? Do potential applicants know what credit score they need, income requirements, and more? Of course, how you advertise and where varies widely by the market in your area. Some property managers say they would never use Craigslist, and others swear by it. Understand the market in your area and make it clear from your listings what is required to be accepted as a renter. You'll save everyone frustration with transparency and clarity. 4. Simplify rent collection and accounting processes You know the old saying, "Time is money.” It's particularly true in the rental property management game. Think about it: Every hour you spend chasing down a rent check or struggling with complex accounting software is an hour taken away from growing your business, networking, or improving other operational aspects. Simplifying your rent collection means introducing online payments, setting up auto-pay options, and even mobile payment methods. Modern residents love the ease of digital transactions. Making their lives easier often equates to faster, on-time payments and a heightened sense of trust. One way to simplify rent collection is to incentivize on-time rent payments. Second Nature’s Resident Benefits Package does just that by offering credit reporting and rental rewards to ensure that residents receive value for paying on time. As the property manager, it’s work off your plate! It's also a good idea to standardize your rent collection and use tools to support your team. New tech services like Colleen.ai and EliseAI can fully automate your rent collection communications. As for accounting, streamlined property management software solutions can auto-generate reports, offer real-time financial insights, and make tax season a breeze. By embracing these upgrades, you’re not just benefiting internally by saving time and resources – you’re showing current and potential residents that you value efficiency and are in tune with modern conveniences. The result? Higher resident satisfaction, a more enticing pitch to potential property investors, and an overall smoother business operation poised for growth. 5. Prevent vacancies with effective resident communication and engagement activities Remember when you first fell in love with your favorite coffee shop or that little bookstore around the corner? It wasn't just about the coffee or the books—it was the overall experience, the atmosphere, and the feeling of being recognized and valued. The same principle applies to a residential property management company. Resident communication isn't just about sending rent reminders or maintenance updates. It's about cultivating a relationship. Providing resident benefits, gifts, support services, and timely communication go a long way to showing residents you care about their home. Engagement programs like loyalty rewards or recognizing special occasions can also be game-changers. Looking for more inspiration on resident retention? Dive deeper into our resident retention ideas article to explore various strategies that will help keep your properties filled and your community thriving. 6. Automate single-family property management workflows Ever find yourself drowning in spreadsheets, buried under a to-do list a mile long, or juggling multiple software platforms? Surely we all have! The solution? Breathe easier with automation. The beauty of running a full-service property management firm in the 2020s is that there's likely a tool or system for nearly every task in property management, from rent collection to resident communication. Our best single family property management software article is a treasure trove of tools and platforms designed specifically for property managers. By implementing these solutions, you can automate repetitive tasks, reduce human errors, and free up time to focus on more value-driven aspects of your business. Think about it: a streamlined application and screening process, automated rent reminders, and digital maintenance requests—all working like clockwork without your constant intervention. Beyond the tools themselves, consider the integration possibilities. When your property management company software talks seamlessly with your accounting system or marketing platform, the result is a cohesive and efficient workflow. Need more insights into the power of automation? Dive into our in-depth automation-related articles to discover how you can revolutionize your day-to-day operations. 7. Invest in regular rental inspections Investing in regular rental property inspections isn't just about ensuring your property is in good shape—it's also a strategic move to bolster the relationship with your residents and maintain the value of your client’s investment. Here's the deal: Consistent inspections offer a proactive approach to property maintenance. They can catch small maintenance issues before they balloon into costly repairs. Got a minor leak? Catch it early, and you're saving both money and potential damage to a resident's belongings. But it's not all about damage control. Regular check-ins also send a clear message to your residents: you care about their well-being and the condition of the property they call home. It's an opportunity to foster open communication, showing residents that their feedback is valued. Moreover, well-maintained properties tend to attract and retain quality residents. Those who know their property manager is on top of things will likely stay longer and treat the property with respect. Plus, when it's time to find a new resident, you've got a spotless track record of upkeep to show off. In short, consider inspections as a small investment now that can yield big returns in resident satisfaction, property value, and overall peace of mind. 8. Create a referral program to increase your portfolio Word of mouth? It's powerful. And in the property management game, it's gold. Imagine this: your current clients, satisfied with your stellar services, singing your praises to friends, family, and colleagues. Now, what if you could incentivize that process? Enter the referral program. Happy real estate investors are your best brand ambassadors. They've experienced firsthand the quality of your management, and their endorsement carries weight. So, why not reward them for bringing in new business? A referral program can do just that. Start by offering incentives. For your investor clients, perhaps it's a discounted management fee for a month. The point is to offer something tangible that'll get folks talking and referring. But there's more to it than just the direct business benefits. A referral program demonstrates that you value the relationships you've built. It tells your clients that their trust and loyalty don't go unnoticed. Lastly, an added bonus: with every successful referral, you not only grow your portfolio but also create a network of investors who are invested in your success. It's a win-win, driving growth for your business while strengthening the bond with your current clientele. 9. Find new investment properties and pitch them to your current clients You're already managing a portfolio of properties for your investors, ensuring they get solid returns and have few hassles. But here's the question: What if you could amplify those returns for them and simultaneously grow your business? Actively seeking out new investment properties is more than just scouting real estate; it's an art of opportunity. By identifying lucrative properties that align with your investors' strategies, you're essentially providing them with golden opportunities on a platter. And guess who they'll want managing these new assets? That's right, you. When you present these potential investments to your current clients, it accomplishes a few things. Firstly, it reinforces your role as a trusted partner in their financial journey, showing them that you're proactive and always on the lookout for ways to amplify their wealth and boost their cash flow. It's not just about maintaining what they have; it's about growing it. Secondly, every new property they acquire based on your pitch naturally expands your management portfolio. This approach helps scale your business, fostering client trust and loyalty along the way. Remember, in the property management world, being static isn't an option. By constantly seeking growth opportunities for your clients, you're also carving out a pathway for your own business's expansion. 10. Invest in marketing activities for short vacancy cycles Imagine a prime property in a stellar location, decked out with all the bells and whistles...sitting vacant. The eerie silence echoing in those empty halls isn't just the sound of missed opportunities – it's also the sound of revenue trickling away. Maybe that was a little dramatic. But the real estate game is as much about visibility and appeal as it is about bricks and mortar. The quicker you can get a property off the market and into the hands of a reliable resident, the better for everyone involved. This is where strategic marketing steps in. Investing in a robust property management marketing strategy does more than just showcase a property; it strategically positions it in front of the right eyes. With targeted campaigns, engaging visuals, and compelling copy, you can ensure your property doesn’t get lost in the sea of listings. Use social media, virtual tours, and local advertising to create a buzz. Moreover, effective marketing helps paint a lifestyle. When potential residents can visualize themselves in a space, they're more likely to take the leap. By consistently shortening vacancy cycles through effective marketing, you not only ensure a steady revenue stream but also enhance your reputation as a go-to property manager who gets results. In essence, marketing isn't an expense; it's a pivotal investment. It's the bridge that connects empty properties with eager residents, ensuring your business always stays on the move. Increase revenue from your SFR property management business with Second Nature Optimizing your single-family property management business is not a one-size-fits-all solution. From engaging with the right investors to fine-tuning marketing endeavors, the path to success is paved with multifaceted, dynamic approaches. But the key to it all is creating a better experience: for residents, investors, and your property management team. That’s why, at Second Nature, we’ve built a Resident Benefits Package that supports SFR property management businesses. Each benefit is designed to meet resident needs and investor priorities while taking work off your team’s plate. In the dynamic world of SFR property management, adaptability and efficiency are kings. With Second Nature by your side, you’re not just keeping pace with the industry; you’re setting the benchmark. So, as you work towards crafting a business that stands tall and resonates in the market, remember: Your success is our second nature.

October 31, 2023

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How Resident Benefits Packages Benefit Owners and Investors

In today's competitive property market, ensuring a standout resident experience isn't just a nicety—it's a necessity. Enter the Resident Benefits Package, an innovative tool embraced by savvy property management companies to elevate the living experience for residents. But the advantages aren't limited to just happy residents. For property owners and investors, these packages can translate into tangible, profitable outcomes. From reducing overall costs to bolstering a property's reputation and value on the market, the strategic deployment of a Resident Benefits Package can directly contribute to a stronger return on investment for owners. In this article, we'll delve into the top ways that a Resident Benefits Program not only benefits residents but also significantly boosts the bottom line for property owners. Why Focusing on Resident Experience is the Key to Success At Second Nature, we’ve seen that when residents win, investors also win. Here’s why: Resident retention is key to winning in real estate investing. And the cost of resident turnover is increasing. In rental management, expenses are up, and the cost of turning a property has almost doubled in four years. Hard materials and labor costs have gone up precipitously. With rent also increasing, it means greater lost revenue while a home sits vacant. At the same time, the market from the owner’s side is getting more competitive. The pandemic days of properties getting snapped up within hours are no longer. The demand has cooled, and it's taking longer to fill properties, and it’s more expensive with each turnover. What does all this mean? Resident retention is increasingly important. Studies continue to show that resident retention and lease renewal is influenced by renter satisfaction. But creating an excellent resident experience is HARD. There are hundreds of experience-critical moments happening over the course of a long-term customer journey, and each of them poses its own unique challenges and opportunities. That’s where the Resident Benefits Package comes in. An RBP is a collection of innovative solutions to some of the most persistent problems in resident experience. A Resident Benefits Package is an answer to the question: How do we make an experience so good that residents never want to leave? By packaging solutions that improve resident satisfaction, the RBP also drives results for investors. The Second Nature RBP includes the following services: Filter Delivery Service Identity Protection Resident Credit Building Renters Insurance Resident Rewards Move-in Concierge On-Demand Pest Control Let’s dive into how each of these services leads to better outcomes for property owners. The Value of a Resident Benefits Package for Property Owners While the Resident Benefits Package is a resident-facing product, the benefits extend beyond residents to generate value for property managers and property owners, too. It’s a Triple Win. Here are six of the top benefits to owners of implementing an RBP. 1. Drives Resident Retention A Resident Benefits Package (RBP) isn’t just a set of perks—it's a holistic approach to improving the living experience of residents, ensuring they stay longer in your property. By focusing on resident experience, property managers can earn better returns on investment for their investor clients – because of resident retention. Here's how each feature of your RBP impacts retention: Air Filter Delivery Service: The National Rental Home Council (NRHC) found that a filter delivery subscription reduced HVAC-related work orders by 38%. Reducing 38% of no-air calls in hot summers and cold winters means reducing 38% of negative experiences that could make residents want to move. Also, average savings of $177 per year on energy bills alone more than pays for the program cost. Clean air being as easy as opening the front door helps residents breathe easy and stay healthy. Happier, healthier residents make for healthy investments, too. Resident Identity Protection: Identity theft actually passed home burglary in 2021 and continues to rise. In an age where identity theft is a pressing concern, offering residents an identity protection service is a critical way to keep them safe. Advanced AI technology actually monitors the dark web and helps prevent issues before they occur. A $1M policy and a team of restoration specialists are there to keep good residents protected from a bad situation turning into delinquency or even eviction. In short, it protects residents’ ability to pay rent and support a long-term lease. Resident Credit Building: This service actively helps residents improve their financial health. Our credit building program is shown to save residents hundreds to thousands per year on car payments and credit cards. Plus, renewing residents can get back reporting up to 24 months at no extra cost, which puts even more incentive on renewing. Renters Insurance Program: OK, so there’s insurance, then there’s triple win-surance. Our purpose-built master policy covers property damage and legal liability but also coverage for residents' personal belongings. There are even unique coverages not often found in retail policies, like rental income loss in the event a covered peril leads to rent concession. And residents get the benefit of bulk pricing, saving a few dollars off the average premium. If residents want to get their own policy, our program monitors any 3rd party policies so there are no lapses in coverage. Closing that compliance gap means eliminating risk and exposure for you and your property. Resident Rewards Program: Second Nature’s rewards program incentivizes positive behavior like timely rent payments. Just by paying rent on time, residents avoid late fees and earn $150+ in gift cards and rewards points. Instead of feeling like rent is a drain, now they are building and earning. Move-In Concierge: Property managers know an important insight: Within the first 60 days of renting, barring a life event, many residents have already decided whether they will renew or not. That’s why move-in and the first few weeks are so critical to retention. By offering a move-in concierge service, you're easing this transition. This service can assist with utilities, internet, TV, and more, making the move smoother and setting a positive tone right from the start. On-Demand Pest Control: A comfortable living space is one free of pests. But preventive sprays are really a luxury, not an ROI. On-Demand Pest Control eliminates disruptive, big expenses – and brings fast, quality service to stop infestations at one-third the cost of preventive sprays. This high-value approach ensures responsibilities are transparent and accounted for so owners don’t get stuck with bills that shouldn’t be their responsibility. In essence, every feature of the RBP is carefully chosen to add value to the resident's experience. When residents perceive value, feel protected, and benefit financially, they're much more likely to renew their lease, underscoring the importance of a comprehensive RBP in property management. 2. Reduces Costs Yep, you heard us correctly! Integrating a resident benefits program is an effective way to reduce investor costs over the long run. For residents, the benefits of the RBP save them money over their alternatives. Here's how it works in terms of cost reduction: Lower turnover costs: With added benefits that cater to residents, turnovers become less frequent. The cost of finding new tenants – think advertising, showings, and screening – can quickly add up, not to mention potential lost revenue from vacant units. An RBP can keep existing residents happy and more likely to renew, thereby minimizing these costs. Maintenance savings: One of the most cost-saving pillars of the Second Nature RBP? Our Filter Delivery Service. The average cost of HVAC repairs has increased by nearly 50% year over year. Preventing emergency maintenance issues has never been more important. An HVAC filter delivery subscription can cut costs up to $300 per property per year and reduce HVAC maintenance requests by nearly 40%. Emergency expense savings: Services like on-demand pest control ensure residents get transparency and cover their lease responsibility, so owners don’t get stuck with a bill they aren’t supposed to. Reduced premiums: With a renters insurance program that ensures 100% compliance, many investors are able to get a discounted rate because there’s less risk of expenses falling on their policy. 3. Increases On-Time Payments On-time and early rent payments are critical to the overall success of your financial investment in property. A Resident Benefits Package is a tool to increase the resident behavior you want to see – starting with consistent, timely payments. For example, by implementing a rewards program for early or on-time rent payments, property managers tap into a powerful motivational tool. While late fees provide an important incentive, a carrot approach helps drive the best outcome for everyone. Everyone appreciates acknowledgment for their timely actions, and residents are no exception. The prospect of earning rewards serves as a tangible incentive for current residents to ensure each month’s rent is paid promptly. Rent day becomes rewards day. Of course, on-time rent payments don't just benefit property investors, they can also bolster the credit profiles of residents. With a credit building program built into an RBP, each punctual payment is reported to credit bureaus, allowing residents to progressively build or enhance their credit scores. Knowing that their timely payments contribute to their financial well-being provides residents with another compelling reason to always pay on schedule. The savings residents get on rewards, auto loans, credit card interest, etc., makes it easier for them to be able to afford rental payments – and increases – over time. Credit reporting protects both the residents and property owners. 4. Protects Your Assets Let’s jump into a story for a minute. A landlord we know onboarded a new resident last year and asked that resident to show proof of insurance before they moved in. All good to go, they signed the lease and moved in. The problem? The policy later lapsed. After that date, there was a house fire. Fortunately, no one was injured, but the home was a total loss. A triple-lose situation of the biggest proportions – for the resident, the property manager, and the property owner. Maybe you know people who have been through similar situations. Or maybe you have yourself. That’s why the Second Nature Benefits Package includes a renters insurance program that ensures 100% compliance. We specifically designed it to generate triple-win protection. The program includes a master policy that residents can opt into or requires them to carry their own insurance policy. 96.3% of Second Nature residents are enrolled in a master policy or the custom HO4 we offer in our program. 3.7% of residents bring their own approved policy. In addition, our renter’s insurance includes protections for the property owner, like Rental Income Loss protection. Another benefit is that you can generally get a discount on your own property insurance if this kind of program is in place. Wins all around. 5. Improves Financial Value Real estate is obviously an asset. But consider this, too: The asset to a rental property owner is your revenue from the property. Sure, real estate itself can appreciate, but you can also look at it a different way – your residents’ income and ability to pay rent is also an asset you want to protect. That’s where identity protection comes in. In 2021, cybersecurity threats passed home burglary in the level of risk it poses to Americans. In 2021, one in eight Americans were victims of identity fraud, equaling up to $52 billion in losses. Identity theft has a massive impact on people’s financial security and their ability to pay rent. Our $1 million identity protection, with proactive dark web monitoring, is there to protect your residents and keep you from having to penalize or even evict a resident who is affected at no fault of their own. Another bonus: Residents at your properties have peace of mind. 6. Increases ROI A Resident Benefits Package focuses on the most streamlined ways to get residents products and services that make leasing rewarding, effortless, and predictable. Bundling services together in a benefits package results in substantial cost and time savings compared to procuring each service individually. A bundled approach minimizes administrative burdens and streamlines processes, further reducing operational costs. The savings generated from this efficient approach can be passed on to the residents, thus boosting the property's value and, consequently, the investor's ROI. An example of this is on-demand pest control. Pest control is often buried in lease agreements and is unclear. Some agreements cover preventive sprays (which are expensive!), but less than 20% of issues are dealt with through those services. It’s a luxury cost that some people will want to pay for, but it’s certainly not an ROI proposition. An RBP with on-demand pest control, on the other hand, protects the investor for 50-70% lower cost. Residents get the kind of pest control they really need – on-demand – so when they have an actual issue, they can immediately file a claim. This prevents issues from escalating into bigger issues and infestations – situations where the cost too often falls on the investor. Costs are lower, residents are happier, and your properties and financials are safer. These services also manage compliance for you. Different states have different laws regarding who is responsible for pests, the resident or the investor. Pest control services through an RBP will ensure you are always in compliance. Why RBPs are Essential to Triple Win Rental Experiences A Resident Benefits Package isn't just a compilation of services – it's a holistic approach to property management services that replaces negative resident experiences with positive ones. For property investors, the advantages are clear: cost savings, increased retention, timely payments, protected assets, and an elevated return on investment. Beyond the numbers, it’s about cultivating a relationship where residents feel valued, supported, and eager to stay. As the landscape of property management evolves, those who prioritize resident experience are looking at long-term returns on those investments. A peek into the future: An innovative and parallel service that property managers can provide is an Investor Benefits Package (IBP)™️. The IBP should provide an investor experience platform™️ that unlocks scalable product and service customization, digitized onboarding, accounting policy automation, and more. Learn more at the link.

October 10, 2023

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Property Management Profitability: FAQs on Profit Margin

Property Management profitability is, of course, how much money a property management company keeps of their revenue after their expenses. But Daniel Craig, the CEO of ProfitCoach, wants PMCs to think of profitability far more expansively. “We recommend that you think about profit as the opportunity to reinvest in the business,” Daniel says. “Your business isn’t just a machine that makes a profit; it's a machine that turns profit reinvested into more profit.” In other words, profit is a virtuous cycle that, once started, can deliver increasing ROI, better value, and better business. The big question is: How do property management companies increase profitability? That’s what we connected with Daniel to talk about. We’re sharing some of Daniel’s insights on property management profits and experiences we’ve gathered over years of working with property management companies across the country. Key Learning Objectives: How property management companies increase profit How long it usually takes to become profitable Common mistakes property management companies make when trying to build profit How to optimize operating costs How to find the right residents and property investors Tools for helping to increase profitability Meet the Expert: Daniel Craig Daniel Craig is the CEO of ProfitCoach, which provides property management entrepreneurs with financial knowledge, tools, and strategies to drive greater profits. How do Property Management Companies Make Money? In the most basic terms, property management companies make money through real estate investors paying for the services they offer. The more value a PMC can drive for its property investors and residents, the more revenue they generate. The profit, of course, is how much is left over after paying all your expenses. “We've worked with hundreds of residential property management companies and seen a wide variety of profitability levels,” Daniel says. ProfitCoach and NARPM started benchmarking profits with the NARPM Financial Performance Guide and Daniel says they’ve seen a significant shift in the past few years. In 2017, the average profitability in the property management space was 6%, and the top 25% of performers’ profitability was 25%. In 2021, the average profitability was 11%, and the top performers were 32%. The important nugget in these benchmarks? Seeing what’s possible. Many rental property managers may not realize they could strive for anywhere from 25% to 32% profitability. But if the target is that high, how do you get there with your business? At ProfitCoach, Daniel and his team have outlined the “Three Steps to 3X Profitability.” 3 Steps to 3X Profitability Here’s what Daniel has to say about the three steps to 3X your profitability. 1. Get Clear PMs need to get clear on where they are, where they want to be, and what they can achieve. It’s important to know: What’s possible across the industry Trends in your local market How you compare If you're not clear on the potential, then you're not going to be clear on what you should strive towards. If you're not clear on where you are today, you're not going to be clear on whether you need to change. 2. Define Your Target Compare your performance to the latest NARPM numbers and benchmarks and determine your target for each of the six Do-or-Die metrics. Maybe the benchmark isn't your target, and that's fine, but you need to know what's possible. Many people go through their business lives without engaging the possibilities. They operate within certain boxes, and those boxes need to be compared to what other people are doing. Then you can adjust your perspective of what's possible and set realistic targets. Next, build a realistic financial forecast that helps you chart the course from where you are to where you want to go based on your financial goals. 3. Stay on track Now it’s time to bring the team into the conversation and basically say, “Here’s our roadmap. What specific tactics and strategies will we enact to accomplish the financial shift we need in each of these six areas of our business?” And once you have those defined, measure your progress against your goals monthly or quarterly. Engage your whole team in the conversation and engage a coach to help you define a financial performance improvement action plan and hold you accountable. How Long Does it Take for a PMC to Increase Profitability? According to Daniel, businesses should give themselves between one to three years. “We've seen companies make massive changes in 12 months, and we've seen companies make massive changes across several years,” Daniel says. “But generally speaking, I would say to give yourself one to three years to make a major shift – if you want to go from an average company to a benchmark company.” How to Set Up a Property Management Business For Profitability Setting up your business for profitability is often about avoiding the most common mistakes other businesses make. We asked Daniel about where he sees professional property managers most often go wrong. Daniel says three major mistakes affect how profitable your business is. 1. Financial Fog Daniel defines financial fog as “Not having clarity on where you are, where you want to go, or what's possible in the industry.” “One of the cool things about this industry is that it's such a unique opportunity,” Daniel says. “I don't think that many property management owners realize the extent to which they can drive profit in this industry. They often don’t have a clear sense of what the real opportunity is.” 2. Financial Isolation “At ProfitCoach, we believe that finance should be done in community,” Daniel says. “We are advocates of what we call community-driven finance, which is essentially engaging with community-based benchmarks, community-based best practices, and community-based scoring.” Community-driven finance helps individual rental property managers and businesses know how they’re stacking up against top performers. It also helps generate value for everyone, where each PMC can benefit from best practices from those top performers. “One of the wonderful things about the property management space is that it truly is a community space in which there is a lot of idea sharing,” says Daniel. “We think that when you bring that idea sharing into a conversation that is also numbers-based, you can begin to see the strategies and tactics that will be most effective as indicated by the data.” “Staying in financial isolation is a huge mistake,” he says. 3. Not Being Mission-Driven Being mission-driven is all about thinking in terms of customer lifetime value. Sure, it’s possible to get a quick win on pricing, but it may cost you in the long run if you’re not thinking about lifetime value. Rather, Daniel says, “you want to make sure that your approach to pricing, marketing, everything in your business is values- and mission-driven.” “What is your mission as it relates to your employees? What is your mission as it relates to your stakeholders? What is your mission as it relates to your owners/investors? What is your mission as it relates to your tenants/residents?” How to Reduce Operating Costs to Increase Profitability So, once you’ve considered the three steps to 3X your profit and evaluated the pitfalls of profitability – what next? How do you actually optimize your operating costs and increase profitability? Daniel advises every PMC to adopt the NARPM Accounting Standards Chart of Accounts for their bookkeeping. He says the best part of using the NARPM Chart of Accounts to optimize your profit is the six “Do-or-Die” metrics. These property management KPIs are critical to business success: Profitability Direct Labor Efficiency Ratio Revenue Per Unit Unit Acquisition Costs Churn Expenses as a Percent of Revenue “It’s critical that property managers get a clear line of sight on how they stack up in terms of specific rental property management metrics that have an operational connection.” For example, an income statement will tell you how much revenue you have but won’t tell you how much revenue per unit you have. By building off your income statement with the PM-specific metrics, you’ll be able to tie it to a more operational connection. For example: From profitability to profit per unit From revenue to revenue per unit From sales and marketing spend to unit acquisition costs In this way, you can understand on a per-unit basis how your business is performing operationally. Daniel says: “The problem with the standard income statement is that it doesn't often give property management owners and entrepreneurs a lot of clarity on specific operational shifts that they need to make in your business. When you implement the NARPM Chart of Accounts, you can then implement a whole suite of metrics that does give you that operational clarity and insight to drive action and improvement in your business.” How to Increase Profitability in Property Management Increasing profitability takes time and should be done in a few different steps across your business model. These steps are the same whether you are a large or small business. Daniel breaks down the work between developing your pricing, labor, expense, and growth models. Look at Your Pricing Model Your pricing model is a significant driver of profitability. Getting your pricing right is one of the pillars of profitability. A few things to consider as you are managing properties: How does your pricing compare to the local market in your area? Are you offering any property management services that you should charge management fees for? What are you doing beyond rent collection that you should charge a flat fee for? Are there more services you could offer and charge for their value? How is your cash flow? Daniel cautions that it can take time. “If you roll out a new pricing model to tenants and owners, it takes time to implement. You should give yourself about a year to get that fully implemented.” Look at Your Labor Model Your labor model is the next big thing, as labor is your biggest expense and could also be a driver of inefficiency if you don’t have it right. Daniel recommends asking: Do we have all the right people in the right seats on the bus? Do we have the right mix of U.S. talent versus global talent? Do we have retention strategies in place? Do we have the right systems in place to enable each team member to be maximizing their productivity and their effectiveness in the organization? Again, these questions may lead to significant strategic shifts that you should give yourself time to implement. Look at Your Expense Model This one is a little bit easier but just as important. You can trim expenses fairly quickly once you identify where to cut back. Are you spending too much on overhead? Could you engage property management software to help with bandwidth? In some cases, changing your expense model may take some time – for example, if you need to renegotiate a long-term lease. Look at Your Growth Model Evaluating and updating your growth model is another opportunity for maximizing profitability. Once you’ve identified and set your targets, here are some potential next steps for growth: Finding and hiring a high-performing business development manager Get a new sales process in line Dial in your lead generation strategies so that you have enough leads for that BDM Etc. Again, this shift may take several months or years to integrate into your business processes fully. Launch a Residents Benefit Package Ultimately, one of the best ways to increase profit and influence your bottom line is by considering where you can add more value for your residents and residential property investors. Daniel recommends starting small tweaks to your Revenue Per Unit. “We have seen repeatedly that a 10% improvement to revenue per unit can easily result in a 100% increase in profit per unit. So, look for ways to get small wins on value creation, value communication, and value realization.” Daniel says one of the quickest and most practical ways to adjust Revenue Per Unit is to implement a Resident Benefits Package. (And we didn’t even put him up to it!) “A resident benefits package alone can result in that 10% bump to revenue per unit, which can result in that 100% increase to profit per unit. This profitability can result in more fuel to your freedom, more fuel to your mission, and realizing all the things you went into business for in the first place.” How to Find Profitable Residents & Investors and Keep Them Happy Daniel says they’ve seen significant profitability gains when a company identifies the right-fit and wrong-fit clients. “We have seen significant profitability gains come about for those who are looking through the client list, finding the misfits accelerating, and then getting those misfits out of their portfolio so that they can bring in the right-fit clients who are going to be a better fit from a value proposition perspective. Getting rid of low-performing clients and then backfilling those with the right kind of clients is a great way to improve profitability.” Daniel says that this goes back to being mission-driven. By identifying your point of view on your industry, your values, etc., you can build a “why” for your company that can help you define the right new clients for your business. Daniel uses his own company as an example: “At ProfitCoach, we believe in community-driven finance. If we come into contact with a potential client who's all about financial isolation – they don't want to share their numbers with anybody, they don't want to engage in a community conversation, they don't wanna learn from the best practices in the industry – that's not a good fit for us.” So, the two questions to define are: What is your point of view? What is the value proposition that comes out of that? Based on that value proposition, there will be a certain set of criteria that will define what a right-fit client is and what a wrong-fit client is. Learn more about SecondNature’s Resident Benefits Package, which is designed to generate revenue and “Triple Win” conditions that benefit residents, investors, and property managers alike.

June 28, 2023

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