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Managing Risks in Real Estate

The most number of consumer complaints, commission penalties, and license suspensions and revocations by far in most states, occur in the property management industry. Not that those property managers are being inefficient. It’s just that the business of property management is very transaction-intensive. Even as a typical agent might handle dozens of sale transactions every year, a typical property manager can tackle hundreds of smaller transactions.

Just because they’re smaller doesn’t give these transactions less importance, and it doesn’t decrease the risk entailed in doing them. As a property manager, you deal with an owner to market and rent their property, collect rent and remit the cash to them, apart from managing the property in all other aspects, from implementation of tenant rules to maintenance.

This means you’re transacting with owners and tenants, advertising agencies, repair guys, contractors, etc. Each of these transactions brings some risk into your business, especially financial.
That means risk management component is extremely important. The economic survival of a property can be threatened by a huge disaster. Record-keeping plays a significant part, with any legal action taken by others being easily disputed by existing detailed records that contest their claims.
A Beginners Guide To Professionals

A considerable part of risk management is determining risk versus reward. Take, for example, a property with a swimming pool on it. The property manager and owner must balance the value of the pool and the risks it brings. After a risk is identified, it should be addressed in one of three ways:
A Beginners Guide To Professionals


The pool will be removed as the extra rental income it brings is far less than the insurance cost or the risks involved.


Retaining the pool is possible with the installation of a coded lock and fence to keep small kids out.

Risk Transfer

The most common way of dealing with risk is to get insurance and transfer the risk to the insurance company. The successful property manager will anticipate and plan for problems, keep records of each activity, and consistently assess these functions to know if change is in order.

Documents and Email

In different states, you only need to maintain transaction records for half a year. But it is advisable to keep them far longer, especially if you can do so in digital format. Most probably, if any of the parties may have a claim, anyone who intends to sue you for something that happened six years and ten days ago will still have their document copies on hand. It’s a lot harder to plead your case without your own copies. Lastly, in terms of email, whatever court action that involves a federally guaranteed loan (pretty much every residential deal), can force you into producing emails that are related to your transaction and communications with your customer.