6 Ways Property Managers Can Lower Risk in Economic Recessions

February 28, 2023 0 comment

Written by: Eric Davis

In the middle of 2022, it’s almost certain that we are heading to a recession. Back-to-back quarters of negative GDP (Gross domestic product) – ordinarily the measuring stick used in determining the state of the economy- coupled with a stock market that has been bearish in the same period has everyone declaring that we are in for a rough ride.

Recessions are a part of the natural cycle of an expanding and shrinking economy. However, we all want the expanding part to continue as long as possible and for the shrinking part of the cycle to end immediately.

To everyone’s happy surprise, the GDP for the third quarter has shown growth. There is also some additional good news in an upward trend in jobs recovery. The growth of our GDP was attributed to higher consumer spending. This slightly covers the fact that we have a 7.4% decline in the sector of housing based on the report of the Bureau of Economic Analysis.

In the future, we can use the following methods to help us navigate in a recession.

This photo shows a sample graph.

Tips—from software solutions to standard operating procedures (SOPs)— that lower risk and boost the bottom line before and during a recession.

  1. Estimate expenses conservatively with tighter budgets.

The risk of rental property damage is typical of being a property manager, no matter the size of your property portfolio. Furniture might break, the outsides may, bit by bit, wear out, the paint might get scratched, and so on. There is little a property manager can do to avoid this. In any case, there are a few risk control choices accessible.

Property managers should expect higher labor and turnover costs during a slump. Make an activity plan for owners and tenants, and don’t underrate costs.

Make sure to include the costs for the following:

  • Vacancy fee
  • Lease renewal fee
  • Maintenance and repairs
  • Management fees
  • Taxes and other charges
  • Insurance fee
  • Staff, bookkeeping, accounting, and administrative overhead
  1. Refinance before interest rates rise.

Rising costs, known as inflation, influence the movement of an economy. This includes new policy for banking, interest rates, prices of raw materials as well as finished goods, and any other normal economic indicator.

Refinancing is a technique for getting cash from unmortgaged things like equipment or vehicles owned by a business. Assets that are completely paid off and completely owned by the business can be refinanced to deliver additional cash which can be used in any part of the business that requires additional funds. (EG Refinancing the company car to get funds to buy a new computer or software.)

Here are why you want to refinance your assets or hardware sooner:

  • Inflation does not end overnight, so refinancing straightaway will keep away from future rate spikes.
  • You can readily use the funds depending on need.
  • Taking care of your loan faster will lower your interest rate and minimize your risk of default payments which will cost you more.
  • Savings. A slight decrease in your interest rate will give you a significant savings overtime. Funds saved by paying less interest can be used and enjoyed by the business anyway they need.
  1. Streamline workflows with automation and standardize the way you work.

Standard operating procedures standardize the method, technique, and approach on how a business operates. The direct benefit of following SOPs is the reduction of error, increase in efficiency and it will allow all part of the business to be in sync.

  1. Create protective lease agreements.

This photo shows the lease agreement.

A rental lease agreement is a valid contract that describes and lists the terms for renting a home from a landowner or property management company.

The agreement safeguards you and the prospective landlord. Both of you need to comply with the rental lease agreement’s terms.

The rental lease agreement starts with the essentials: your name, the date, the individual or entity who will rent the property to you, and the property’s actual location.

While each rent is unique, they will all cover the following data:

  • Arrangement to lease
  • Rent
  • Extra monies
  • Property use
  • Apartment Ownership
  • Security Deposit
  • Addendums, arrangements and exposures, and revisions
  1. Prioritize tenant retention.

Tenant retention is your ability to keep the vacancies of your properties consistently low by retaining your good paying tenants from switching to another property.

Property managers and owners alike will agree that changing tenants is the most expensive part of running a rental business.

You always need to conduct an inspection on any newly vacated unit. All repair, remodeling and redesigning of the property is best handled while it is vacant. That means that before you get a new tenant, expect extra expenses, including promotion, tenant screening, house tours, and other charges. Meanwhile, the unit stays empty, producing no income whatsoever.

That is why you need to keep all good tenants as much as possible. It lowers the expenses that you have to incur, and you can perform all your maintenance work based on your schedule. A good tenant retention is the difference between a profitable rental property to one that only loses money.

Ways to retain your tenants:

  • Reward lease renewals. Give them the motivation to remain.
  • Be responsive and keep up with your tenants. Make sure that you address all their concerns and questions.
  • Keep rental rates fair and steady. Try to be consistent and if you need to increase rent, make sure that it is within a reasonable rate.
  • Prioritize maintenance. Standard maintenance should constantly be performed so you can avoid a major breakdown of all your properties.
  • Be flexible with great tenants. Tenants who have shown what they are dependable ought to have some negotiating room occasionally.
  • Seriously treat tenant complain. Make sure to listen and act accordingly every time a tenant has a criticism or complaint.
  • Pre-screen all tenants. Tenant retention isn’t just about being the best property manager you can be. It’s also about picking the right tenants and ensuring they have reachable expectations.
  • Create a friendly and social environment towards your tenants. Make sure that they have an emotional investment towards the area or property that they rent.
  1. Hire an expert and cut costs.

This photo shows a person talking to an expert.

An expert can spot or create expense-saving opportunities. Recruiting experts costs more each hour than employing passage or mid-level consultants. However, they can, as a rule, finish the work quicker — and better.

Recruiting experts is an extraordinary method for ensuring you come by the best outcomes as fast as expected.

DPM representatives are responsive to change. We frequently execute flexible work styles in order to meet any diverse scenario. We acknowledge not every situation will yield the same response. Our commitment is to find the best solution with a timely and cost effective approach, using common sense problem solving. Call us now at 425-658-7471 or send us an email at info@davispropertymanagement.com.

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