Multifamily property management is a risky business. With insurance premiums on the rise (annual increases between 30-50%), it’s important to understand the risk you’re up against, and how to mitigate that risk.
There are typically five types of risk we associate with managing a multifamily property:
- Financial
- Legal
- Operational
- Reputational
- Asset
Below, we’ll dive into the five types of risk and offer simple strategies for mitigating risk in each area.
Financial
Financial risk is a constant concern for multifamily operators, and one particular area that can pose a challenge is damage chargebacks to departed residents. When a resident moves out, operators have a finite amount of time to document any damages and assess the charges accordingly. Failure to do so within the state-mandated timeframe can result in lost revenue, as owners and operators will be unable to collect.
This underscores the importance of proper documentation, as any oversight or mistake could result in a significant financial hit for the operator. By proactively addressing this risk and implementing effective processes for tracking and documenting damages, multifamily operators can minimize the potential for lost revenue and maintain a healthy bottom line.
Legal
Legal risk management typically revolves around code compliance. If you have properties scattered across multiple jurisdictions you probably find it difficult, if not impossible to keep track of all the local safety codes that are applicable to each property. This includes understanding and complying with building codes, zoning laws, fair housing laws, and other regulations that govern multifamily properties. Operators should focus on fostering a culture of multifamily compliance across their organization, as well as staying up to date on any changes to these laws and regulations to ensure continued compliance.
Operational
Operational risk in multifamily usually involves some type of incident occurring on your property (think slip and falls or a balcony collapsing). This can have serious consequences for both residents and property owners, as incidents can result in injuries or property damage, leading to legal liability and reputational damage (we’ll get to that in a second).
While it’s difficult to eliminate these incidents entirely, property managers and staff can take proactive steps to minimize the risks and their potential consequences. Implementing rigorous safety protocols and maintenance schedules, such as conducting regular inspections of the property to identify potential hazards and address them promptly. For example, they can fix uneven walkways or install handrails to prevent slip and fall incidents before they occur.
Reputational
Keeping residents and tenants happy and satisfied with property operations is essential. According to the National Apartment Association, 89% of renters rely on online review sites when searching for an apartment, and the reviews play a critical role in helping them narrow down their options. Furthermore, 70% of renters base their decision to visit a property on its reputation.
Taking daily walks around the property and conducting quarterly inspections make it more likely you will catch and be able to fix any mistakes early – it also shows your residents you care, which leads to greater resident satisfaction.
Asset
The long-term goal of any asset is to raise its value. In multifamily, this requires effective risk management practices across every aspect of your operations. This includes maintaining the physical condition of the property, conducting preventative maintenance, adhering to structural and code issues, and accounting for crime in the neighborhood.
Take this example. Say a snowstorm recently impacted your property. A resident claims the staff had not cleared the snow or used any melting agent at the property, resulting in a slip and fall. With proper preventative maintenance and documentation, this all could have been avoided, but instead, you’re left dealing with a negligent management claim.
What You Can Do
Poor risk management can lead to a decline in the value of your asset. Using tools such as Leonardo247 can help mitigate asset risk by enabling operators to easily access historical data on the property. With this information, operators can ensure they are conducting regular inspections and performing preventive maintenance to maintain a high standard of property management, ultimately protecting the value of the asset.
Take a proactive approach to risk management. Request a demo of Leonardo247 today!