In real estate operations, risk mitigation comes in a lot of different forms
When most people think of risk, they think of legal risk or liability risk. People trip and fall on your property or somebody gets into a pool because a gate isn’t locked, and something bad happens. That’s liability risk. But there’s also property risk.
What is Property Risk Mitigation?
Simply put, property risk involves issues that put the property at risk. Such issues can include:
- Pooling water on a roof
- Water coming in through holes in a roof
- Pooling ground water that needs to be directed away from the foundation
- Bricks that need tuckpointing
You’ll have increased risk if these issues aren’t addressed. And that risk can increase the cost of maintaining the property.
Legal Risk
There’s also legal risk. There are municipal codes, as well as city, state, county, and federal codes that you need to follow when operating properties.
Many people have no idea what those are. And some of them are significant. You can be fined, and some violations even count as misdemeanors. They can count as criminal negligence and you can end up in jail. Staying up to date on what the municipal codes say about operating your property is very important.
Reputational Risk
You also have to consider the reputational risk if you fail to maintain the property properly.
Failing to keep residents and tenants happy because you’re not keeping up with property operations will eventually cost you business.
At some point, you will not win new business as a third-party management company because people have had bad experiences with your service.
Operational Risk
Operating properties can even bring operational risk.
Not completing tasks like leasing, marketing your vacant units, adjusting rents, or updating your website in a timely fashion can affect your top as well as your bottom line. Even something simple like an incorrect phone number listing can create operational risk.
Risk Mitigation for Property Operators
Frankly, most property management systems don’t manage these areas of risk well. They’re basically accounting platforms that aren’t intended to tell you how to operate a property.
Everything you need to do beyond receiving checks, leasing properties, or responding to work orders has to do with reducing real estate operations risk. In fact, that was one of the reasons we developed Leonardo247.
Bringing Your Risk Management Plan to Life
The magic behind Leonardo247 is you can take a step back and create a risk management plan and then bring it to life. In most models, that plan probably goes on a shelf and nobody pays attention to it.
You can reduce risks by scheduling key tasks throughout the year. You can assign them to the right person, at the right time, with the right form or inspection checklist that needs to be completed. Over the course of a year, these tasks ensure you’re taking all of the proactive measures necessary to reduce risk.
The results can range from lower operating costs, fewer lawsuits, and fewer missed opportunities to increase revenue. Things like marketing, raising rents, even sending people to collections on time results in a higher net operating income (NOI), which is the goal.
Understanding Risk Mitigation for Property Management
Risk mitigation is probably one of the most poorly understood and executed aspects of property management.
When we get involved with a client, there may not be a risk mitigation plan at all. If there is, we typically find it in a binder on a dusty shelf in someone’s office. No one is opening it or reading it. Maybe the plan is online somewhere for easier access, but nobody is downloading it and reading it.
The challenge with a risk mitigation plan is that, typically, the things in that plan are not top of mind tasks. They don’t drive revenue, they don’t address resident complaints, they don’t increase your occupancy.
They do, however, stop the bleeding on the back-end of operating your property. And they are critical for maximizing NOI and minimizing the operational risk that, in the extreme, can cost you ownership of the property.
Let’s say, for example, that there is a fire at your property and you haven’t done proper fire inspections. If people die at that property and you can’t demonstrate that you’ve done enough to mitigate that fire risk, you can lose your insurance coverage. That could lead to losing the property and lawsuits that you aren’t covered for. So in the extreme, these things can be very, very serious.
We address that challenge by taking that plan in that binder off the shelf and bringing the tasks and procedures inside to life.
Procedure Templates, Tasks, and Transparency
First, we take each one of those procedures and create a template. The template knows, for example, that this procedure applies to a certain piece of equipment or a certain amenity. If you’re in a certain part of the country, or if your property is susceptible to hurricanes or floods, those things trigger certain tasks and templates that we create.
Second, we make sure that the template has the latest policies and procedures. When the template triggers a task, we provide the person on the other end who executes it with the latest form, or procedure, or inspection approved by that operator.
Keeping current operational policies and procedures in front of your operators is something we can do through these templates. And we codify everything that needs to be done in a way that brings it to life so the task gets completed on site.
Third, a key to all of this is providing visibility to the owners and investors of that property that the tasks are being done. And that’s really important. That shines a light on the areas that often go unnoticed. If they’re not attended to, nobody notices until it’s too late, when you have a problem, a lawsuit, or hurricane damage that you weren’t prepared for.
We avoid all of that by providing real-time visibility into whether or not your risk management policies and procedures are being followed by the folks in the field. If they’re not, we’ll raise our hand and bring it to your attention. You can get involved and retrain or update procedures before you have a problem.
The ROI of Preventing Problems
Sometimes we like to say that our risk management procedures prevent problems before they happen. And while it’s sometimes hard to pin an ROI on preventing problems, it is key to maximizing NOI.
A system like Leonardo247 can consistently give correct guidance to your teams in the field. It creates accountability for completing or not completing those tasks.
Executives and managers need a way to ensure that teams are using the latest policies, procedures, inspections, and forms. Without a system, you’re forced to constantly ask them, did you do this? Did you do that? You’re texting, calling, emailing, traveling to the site, and spending time talking about it. That’s incredibly inefficient.
If you have Leonardo247 in place, you remove the need to discuss minutia from the conversation. Yes, it’s important stuff, but you want to be discussing constructive issues, like how to drive revenue. You want to have conversations about occupancy, or raising rents, not operational details.
If we worry about the minutia — the things that are important but not as urgent — that frees up your people to talk about the important things. The things that really help drive the top line of your business.
Mitigating Risks with Best Practices
We’ll also let you know when we see a potential problem on the facility side. If certain inspections aren’t being done, for example, we’ll let you know. And we’ll let you know about any data you’re collecting that is outside of the acceptable range.
If you have a pool pH that’s too high, for example, or equipment operating temperatures that are too high, we can raise our hand and let you know. Otherwise, you don’t have to focus on that. Your time can be spent elsewhere. Your smartest people can go back to doing their best work, which is marketing, leasing, and providing resident satisfaction. We enable that freedom by taking care of the nitty-gritty.
The Reality of Real Estate Operations
This isn’t what we lead with when we talk to potential clients. It’s not the fun side of owning and operating properties. It is, however, the reality of owning and operating real estate. In a very real way, people’s lives are in your hands.
That includes things like making sure that fire inspections are completed in a timely fashion, and follow-ups to those inspections are completed if deficiencies are found. It means maintaining equipment properly so that people aren’t injured. And maintaining the grounds in such a way that there aren’t hazards where people can trip and fall.
Regrettably, we’ve had clients come to us after a child drowned in a pool because the pool gate didn’t latch. Or after someone was crushed in a gate that wasn’t maintained properly. Those things can happen. And it shouldn’t take something like that to bring you to Leonardo247’s doorstep. But for some operators, those tragedies are what moved risk mitigation and risk management from a ‘nice-to-have’ to a ‘must-have’.
Developing Risk Mitigation that Works
The industry is keenly aware of the risks that are involved in operating real estate today. And to the extent that we can, we help prevent problems before they happen by bringing the best practices in risk mitigation to bear.
Why do we think they’re the best practices? Because we put the time in to find out. We talked to insurance companies. We work with insurance brokers and carriers to learn their best practices. And we learn from our clients. We can see what’s happening in the industry and what others’ best practices are.
From all of that, we’ve been able to assemble the most comprehensive library of risk mitigation procedures in the industry. And we can lay that out for you as our client. You can choose to implement or not implement certain policies or make changes that fit your needs.
In other words, you can implement those procedures exactly, modify them, or ignore them altogether if you want. But at least you’ll have access to the best practices in the industry for risk mitigation.
Of course, things can always happen, even at properties that follow the very best of mitigation procedures. But now you’ll have a demonstrated, documented intent to mitigate that risk. In short, you won’t be negligent with Leonardo247 in place. You will be able to demonstrate, in a new and clear way, that you weren’t negligent in attempting to mitigate risk.
Bad things will still happen. But bad things that happen because no one was paying attention are infinitely worse than bad things that happened when you did everything you possibly could, and that the law and best practices would expect.
Incident Reports
When things do happen, Leonardo247 facilitates incident reports so that you can alert your corporate office and insurance broker quickly and easily.
Consistency in incident management has driven a number of clients to adopt Leonardo247 solutions. You can capture data, photos, and even signatures of witnesses in real-time, in a format pre-approved by your insurance company or corporate office. Timely, contemporaneous reports enable you to take action and address the situation quickly and effectively before it gets worse.
Putting systems in place for difficult situations ahead of time is an essential component of Leonardo247’s risk management and risk mitigation.
Contact Leonardo247 now to learn more about risk mitigation for property management.