How do you know if you are secretly being financially taken advantage of at your apartment properties? Read on for insider tips to help protect your assets.
You’ve worked hard to acquire your properties and build your apartment portfolio. Your apartment properties seem to be making money but some months, one property just continually seems flat. Another community has increasing make-ready expenses but consistently fewer new leases? What‘s up?
In any industry that has access to cash flow, you will find employees who find the temptation to siphon, dip, shave or skim a bit off the top just too tempting too pass up.
In today’s moneycentric world, we see skimming happen in simple school fundraising efforts all the way up to elaborate ponzi schemes on Wall Street. The apartment industry is not immune to lure of the mighty buck.
A seasoned property management company continually focused on loyalty development and skills training can help spot operating problems before they develop a giant sucking sound that affects your bottom line.
The top three things that help prevent theft when managing apartments:
1. Be proactive
Check your financial statement carefully every month. This would seem elementary, but many owners and operators are overwhelmed with daily operations. They figure if money is coming in, it’s all good, right? Wrong. Check your financials carefully every month or make sure your property management company is carefully checking your financial statements every month.
2. Background Check with Credit History
PEO’s (Professional Employment Organizations) can be helpful in conducting thorough background checks. This is one place not to skimp on third party services. A $39 online background check from a random website is a waste of $39 bucks. A professional background check includes a check of social security number, driving record, and sometimes civil history to see if you have been involved in lawsuits or court cases that may be conflicts of interest. A background check also includes a credit check. A credit history tells a lot about one’s ability to manage funds. Simply put: if one can’t manage their personal finances in a prudent and timely manner, how can you expect them to handle your apartment property’s finances in a timely and prudent manner?
3. Criminal Background Check
It doesn’t matter if the job candidate is at the corporate, regional or property level or if they are your pastor’s great aunt’s daughter who was a Girl Scout and Mensa scholar, everyone must be checked thoroughly for a criminal history. Violent offenses, sex crimes, fraud or embezzlement, arrest warrants and other felony convictions are certainly red flags. There are also those that may have done one less than brilliant thing in their youth and have long since paid their debt to society. Do they deserve a second chance? Understanding the difference between youthful indiscretion and criminal behavior and doing thorough due diligence helps to discern when to help those who are ready to be helped and skip those that are along for a free ride.
If a prospective employee has been convicted of a minor crime – misdemeanor drug charge or petty theft, for instance – employers will generally look more kindly on applicants with these types of criminal histories if those applicants are forthright and honest about their past mistakes.
Are there other ways that apartment employees can scam the system or cause undue expenses from poor decision skills? Read on for nine signs of covert financial drains on your apartment property ROI.
1. Falsifying Applicant Criteria
Your once quiet apartment community seems to filling up with problem tenants….hmmm. Leasing agents and property managers have been known to falsify applicant criteria in an effort to fill vacant units and meet quotas. While this might seem to be an innocent offense, the longer-term cost can be substantial when unruly residents damage apartments, commit crimes and/or need to be evicted.
2. Bad Debt Creep
Pour over those monthly financial statements carefully. Is bad debt creeping up? Are bills not being paid on time? Are funds being diverted elsewhere? Get a handle on this quickly.
3. Maintenance: Asleep at the Wheel
A good maintenance staff is indispensable and should preform many, if not all of the day-to-day maintenance tasks in-house. When there is outsourcing of simple paint projects and make-ready, find out why. And, do it quickly. Sloppy maintenance work can cost thousands of dollars down the road when potential large maintenance problems are overlooked or not spotted early. Assess maintenance supplies monthly. Are they being regularly utilized? If not, the maintenance staff is not doing the job they are being paid to do.
4. Appliance Bonanza
When a disproportionate number of appliances are being replaced, this can signal that maintenance is either lazy or not qualified in minor repairs. Most good quality appliances should last for years when maintenanced properly. A good maintenance team can add years to the life of your appliances and to years the life of your community.
5. Fees = Cash
Money changes hands when fees are collected. Money orders are sometimes left blank and trusted to be made out to the proper payee. Track fees for each lease and lease renewal. They should all add up like clockwork.
6. Concessions are High
Deposits are waived, application fees are reduced or waived, free month rent is offered here or there. These are all enticements to fill units. When concessions are not authorized by the apartment owner or the property management company, this is lazy work and equates to lost revenue.
7. No Labor and Slippery Benjamins
Charging labor to a property and then not performing the service leaves the door wide open to funnel funds elsewhere. Be sure what labor is being charged is documented with photographs of completed work, legitimate invoicing and documented payments to contractors.
As an owner, make sure rebates offered by vendors are retained by the property and not used by personally by the apartment staff. Remember, there is no such thing as free. If a service is being discounted or rebated, that cost is being made up somewhere. Keep an eye on vendor services including big-ticket items.
9. Fuzzy Math
Check property management software to make sure things add up. Petty cash can sometimes be not so petty. Small accounts pushed over to the side often get lost on reporting. Get familiar with monthly reporting and watch for outliers.
Create a Loyal Employment Culture
The number one way to avoid being robbed is to create a loyal employment culture. Hire a property management company that has leadership that has worked at all levels of apartment operations. Hire well, pay them well and treat them well. Leasing agents, property managers, assistant managers, lead-maintenance can all be trained as eagle eyes to watch out over your assets. Constant training and reinforcements build moral and loyalty. Spending time with each employee creates relationships and careers rather than simply jobs. Everyone is not motivated in the same way. Finding positive aspects with each employee to reinforce and identifying traits that need work and teaching workarounds to improve those skills is the art of a good property management company.
100 Years of Experience
Terri Clifton, President of Better World Properties LLC, started as a leasing agent in the apartment industry. A single mom with not much more than a beanbag chair and a TV to her name, she worked in leasing in exchange for her rent. Throughout the years, Terri worked her way up the corporate ladder into regional management positions and eventually to owner of her own apartment properties and owner of her own apartment property management firm and family of apartment companies. She has never forgotten the days of the beanbag chair and the TV. Known in the industry as firm but fair, Terri provides her employees every opportunity to grow, earn and learn.
At the Better World Family of Companies, we offer complete apartment life cycle solutions all under one roof. Our team of industry leaders has worked in all aspects of the apartment industry and have over 100+ years of combined industry experience. We treat our managed properties like our own. We find, analyze, manage and improve apartment processes while uncovering hidden value.
Would you like to find where your value is hiding? Contact us today to buy, sell, manage, rehab or finance an apartment property in Texas. We provide everything apartment owners and apartment investors need to grow their portfolios and increase their profitability.
Better yet, stop by and visit. We will take you on a Lone Star tour. We love nothing better than to talk apartments.