Risk management is one of the primary concerns that often overwhelm property managers. With legal and administration risks being the most common one, there are many other risks that almost every organisation has to come through.
In the most common risk scenarios, there are three possible strategies that you can follow:
- Risk Avoidance: You can not choose risk avoidance if your actions seem too risky. For instance: in the situations where a property manager is not purchasing property just to avoid the risks that come with them.
- Risk Control: Risk control is all about controlling or minimising the risk by conducting regular inspections just to prevent the development of physical damages.
- Risk Transfers: Its all about shifting a persons responsibility to another, like your responsibility to the tenant or insurance company.
In addition, paper lease, missed calls, property maintenance issues and other screening issues are all responsible for creating risk. Here are a few risks that are associated with property management:
1. Physical risk at the property
Whether you have a small property or you own a billion-dollar bungalow, risk of physical damages is always there. Things like furniture breaks, scratched paints, wear to exterior walls and more are some of the common risks that are associated with property management.
While there are many different methods to control a risk like this, the most common one is to transfer it to the insurer. General liability insurance will protect an organisation from physical damages, stolen or damaged goods as well as covering the cost of damages that occurred because of the tenant’s negligence.
Further, maintenance and repairs should be conducted by the contracted personnel, not by tenants or property managers unless they are completely qualified.
2. Tenant risks
Tenants are another obvious risk to property managers as they can create risk for a single individual right up to a million-dollar organisation. Let's say, if a tenant gets injured while residing in a property you are managing, they may have a right to claim negligence and can also attempt to take legal action.
As a part of insurance coverage, a property manager could minimise incidents by having regular inspections as well as maintenance.
By tracking all incidents and performing regular analysis can help in identifying problematic areas. Carefully contracting everything and efficient record keeping can also prevent property managers from ending up in court. Tenants can also put financial risks to property managers which is best avoided by carefully selecting tenants that are right for your properties.
3. Administration risks
Since there’s a lot of information like databases of residents, rent rolls, incidents and claims that property managers need to handle, it sometimes becomes quite challenging to manage everything and without having an effective system, things become messy.
Things like an overlooked clause, improper claim handling, missed deadlines and more can cost a huge amount of time as well as money. However, today property managers can easily store, organise and analyse data with ease to make it accessible from any site.
4. Market risks
Property managers are also subject to external market risks; their performance in the economy can impact a number of factors that are linked with property managers.
Irrespective of the type of risk, if you know how to deal with risks, you will be able to minimise them with ease!
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