Whether you are new to the manager role, or the new manager to a property; chances are you inherited a number of financial problems that need to be resolved in order for you to achieve optimum financial performance. This is part two of a series of short, related articles are intended to give you some ideas and things to look for as you investigate the condition of your property’s financial health and performance whether you are in this position, or are simply scratching your head at where to start.

Managing income and delinquencies

·         Ancillary income – If you don’t have it, WHY? And if you do, how can you increase it?

o   Laundry income, if you have laundry machines for the property and not in the units; how much are you getting off it? Will you get more if you owned them as opposed to an agreement with a contractor? If you bought card based machines (with a recharge station) as opposed to coin operated, how long would it take to pay for this? Once paid for this is 100% profit as long as you have a service contract for repairs.

o   Vending income, if you have a vending machine on property and are not receiving a cut, again WHY (I had this problem and had the machine removed because they would not negotiate); if you have a larger property, I would also consider a video rental machine as well.

o   With the increase in hybrid/electric vehicles; do you offer recharge stations for these? There may be government funding available for these and you may be able to charge residents either on a monthly basis (like renting an optional garage or 2^nd parking space), or on a per use basis. If you have these on property, this is also another marketing amenity for those looking for it.

o   If you have gone with solar panels as discussed above and are selling the excess power back to the provider; are you getting a fair rate for this?

·         Collections - Review all files for former residents, looking specifically at those that left owing money.

o   If you have the time or resources, attempt to make contact with the former residents directly to collect these balances before sending this information along. In your attempts to collect, indicate that you WILL send the files to collections unless the accounts are paid within 30 days; and once that happens, this debt affects their credit score negatively until the account is paid.

o   If your attempts to contact do not produce results within 30 days, send those files (along with documentation of your attempts to collect) to your attorney or collection agency so they can assume this task. If you have no collection agency on contract; find out through other properties you are connected to (either under the same umbrella, or know as your competition) what companies they use. If you enter a new agreement with an agency, make sure that they have a clause that indicates if the former resident comes to you directly to pay; you can terminate their actions at no cost to you.

·         Delinquencies – how are you handling residents who have been delinquent on their rent?

o   If you have residents that are always a few days late because their pay schedule does not allow them to pay you until after the day rent is considered late, see if you can get documentation for this and waive the late fees as a form of a reasonable accommodation.

o   If you have residents who are habitually late and have incurred a large delinquency. Sit down with them and determine the issue.

§  Try to arrange a reasonable payment plan that would get you paid back with 3-4 payments. Make sure that the resident knows that if they pay their current obligation with their additional commitment on time as agreed, you will not collect any further late fees. Insist that the resident pays in certified funds (cashier’s check or money order) only until the past debt is resolved.

§  If you are unable to come to a reasonable payment plan with the resident, or the resident is so far delinquent that it will be unrealistic for them to catch up and meet their obligations (or potentially fall out of compliance with an established payment plan) it may be time to consider giving them the opportunity to decide to leave on their own within 14 days. Make sure they understand you will keep their security deposit and apply it to the move out statement, but expect to be paid back in a timely manner for the balance. Set an appointment and do the move out inspection and statement with them there and let them know how much they owe using the unpaid rent, and the estimated damages they would be responsible for. Set a deadline for the balance to be paid in full, with a schedule of when payments are to be made and how much is required. Make sure you stipulate that if a payment is missed, after the first 30 days, you will refer the file to collections. This should be presented as an alternative to you filing for eviction; which would cost more. If you have an invoice for an attorney that did an eviction for you; you can tell them the estimated cost that they will eventually be responsible for under their lease and that if this results in a court awarding you money; it will affect them in many ways until it is paid.

§  In the event that the resident does not leave or pay as agreed; send the file to your attorney to start the eviction procedures.

§  If you have a pattern of delinquencies not limited to a few residents, I would take a look at your rents and your resident selection plan; it is entirely likely that your rents may be a little too high, or your selection plan is too lenient. In either case, you may be in a position that you are literally setting your residents up for failure. Make sure any revisions to your selection plan are reviewed by your legal team to make sure you are not crafting one that has any fair housing issues in the process. Once a new selection plan has been crafted DO NOT DEVIATE from it; if you have to decline an applicant, make sure that it is for cause. The only case for deviation that can be made is in the event your applicant has a common name and there is an eviction or criminal match. Contact the provider of the reports and confirm the identity of the potential match against your applicant. I had a case where an applicant had a potential criminal match, but had a common name. I contacted the provider and found that the match and my applicant were clearly not the same person (opposite sex, different race, AND in a state where my applicant had never been). Make sure you document the results. There is no room for ‘judgment calls’ when evaluating applicants. When you start making these ‘judgment calls’, you start to head down a slippery slope filled with fair housing potholes.

§  In order to prevent any appearance of violating fair housing laws; make sure you offer all residents the same opportunities.

This is not meant as an all-inclusive list of things to consider as your property needs may be different than what I have seen. There is no better time to save money than the PRESENT; this is a GIFT to the owners and should not be considered only when you are preparing your annual budget.