As a landlord, juggling a couple of tasks and responsibilities is a staple in your life. Most often, these involve family issues, issues relating to tenants, repairs and maintenance or records. Not handling any of these properly may lead to financial trouble, stress or something worse. As such, it is imperative that you handle these tasks and responsibilities judiciously and fix issues immediately as they occur before they fester and become a lot more problematic. We would like to take you on a journey with us as we identify some of the thorniest issues and propose ways you can prevent or deal with them to get the best results.
5 Common Problems Landlords Face
- Low Occupancy Rate (High Vacancy Rate): Rental property makes financial and economic sense when it is occupied by tenants who pay fair market rents for the property. Whenever a unit of the property is vacant and that vacancy lasts longer than minimal, the landlord/landlady loses money directly (rental income) and indirectly through depreciation and other sunk costs that are not recovered.
- Late Rent Payments: Having an expectation of a payment from a tenant that is not respected could be very frustrating. Worse of all, if the tenant in question has made it a habit of making payments only after being forced with reminders and sometimes legal actions, with little or no regard to the payment terms of the tenancy agreement.
- High Rate of Deterioration and Destruction: Naturally, buildings should last for a couple of decades. However, that is not the case for some landlords. They have new buildings that are already dilapidated.
- Handling Tenants Complaints: Tenants often complain about one thing or another that they might want addressed. From issues with neighbours, broken pipes to electrical faults and more. Sometimes, such complaints require the services of technicians who come with their own wahalas. Other times, such complaints simply need the landlord or property manager to address.
- Recording and Reporting Issues: In order to know if the property is profitable or not, proper financial and operating records have to be kept so that relevant reports can be derived from them. As a result of the technicalities involved in setting up recording and reporting systems, landlords most often face issues setting up the right recording and reporting systems.
1. The Best Ways to Increase Occupancy Rate
One of the worst things to happen to a landlord is to have a vacant unit in their rental property longer than is necessary. To be successful as a property owner or professional property management company, occupancy rates ought to be close to the 100% mark. When Occupancy rates drop below 90%, then there is a problem that could lead to the landlord facing financial difficulties. Low occupancy rate comes with lost rental income, higher costs of advertising and presentation to prospective tenants. The best ways to increase and maintain High Occupancy Rates (Low Vacancy Rates) include the following:
a. Optimal Rental Value + Fair Terms and Conditions
Savvy landlords review their rents continuously so they can get the most optimal rental value for their properties. When the rents are relatively too high, it scares off potential tenants thus limiting the pool from which the best tenants can be drawn from. When the rents are below standards, the landlord leaves money on the table for no just cause. In order to get the optimal rental value, the landlord or property manager must carry out general and targeted comparative studies that seek to narrow down the best range to set the rents of the property.
In addition to the rental value, the Terms and Conditions that go with the tenancy could also be a huge source of discontent and turn off for potential tenants. As such, the optimal thing to do is to set Terms and Conditions that are fair to the Tenant, protect the long term value of the property and most certainly bring in the right rental income per period.
b. Maximum Reach to Target Niche of Tenants
Each property, given its nature, rents per period and Terms and Conditions is positioned to target a specific segment (niche) of the market. As such, it makes perfect sense to use a media that will provide maximum exposure to the target niche and a message that this niche will most definitely respond to. In order to get this right, the landlord or property manager needs to classify the properties and match it to their respective niches.
c. Instituting Appropriate Tenant Screening
Having the right tenant from the start means a better tenant in the long term. It is therefore imperative to have the appropriate Tenant Screening Methods. The focus for every Tenant Screening and finally Occupancy is to have a Tenant who is a good long term fit for the property. A good long term fit therefore looks at the Tenant beyond financial capability. A good long term fit takes into consideration Character, Background, History etc of the Tenant in addition to their financial capabilities.
d. History of Good Tenant Relations
The worst thing that can happen to a Landlord is for their property to be a temporary option while the tenant searches for better long term options. There are many reasons that could lead tenants to consider a property as only a temporal fix. Our research shows that one of the main determinants is the relationship the tenant has with the landlord or the property manager. Like every other human, tenants do not like being in a place where their peace of mind is threatened. The key to maintaining a Good Tenant Relations lies in the landlord or property manager’s ability to remain professional and helpful to the tenant, while limiting interference into the tenant’s private life as long as it does not have spillover effects on the property or neighbours. A History of Good Tenant Relations is a priceless resource that can not be easily replicated and it spreads via word of mouth like wildfire.
2. The Best Ways to Avoid Late Rent Payments
Dealing with Late Rent Payments is not a nice thing. It is emotionally challenging and financially expensive. In situations where Tenant Screening failed, then there is nothing else that can be done than to deal with the Late Rent Payments. From our experience, there are a few strategies to put in place that will enable the avoidance of late rent payments. These include but are not limited to:
a. Clear Communication
Clear Communication is the main tool to use in ensuring late rent payments are avoided. It starts with Tenants having clarity on the Tenancy Terms and Conditions, Rents Collection Process and Policies and most importantly consistent reminders of the rewards for early payments and penalties for late payments as due dates approach.
On having Clarity on Tenancy Terms and Conditions, the landlord or property manager must give the tenant ample time to go through the Tenancy Terms and Conditions, take time to explain critical Clauses and give room for the tenant to ask questions with regards to the Terms and Conditions. These are to be done before the execution of the Contract.
On Rents Collection Process and Policies, the tenant should be provided with details on when, how and how much rents are to be paid. This is best provided in a document separate from the Tenancy Terms and Conditions.
b. Enforce Late Payment Fees
Sometimes, Clear Communication fails. At such times, an alternative remedy could be enforcing late payment fees which should act as a deterrent. This works most especially for cost conscious tenants who consider any extra franc spent as a waste and as such, will do everything to not incur extra costs.
c. Offer Rewards for Early Payment
Another tactic is to encourage Early Payments by offering Rewards that will be appreciated by the tenants.
3. Best Ways to Avoid High Deterioration and Destruction
Except when affected by natural disasters and wars, most modern buildings should have a lifespan of at least 30 years. However, that is not the case for some landlords. They have buildings that ought to be new but are greatly dilapidated within a very short span of time. In order to avoid high rate of deterioration or destruction on their buildings, we recommend the following:
a. Appropriate Project Management during Construction
Project Management during the development of the property is of utmost importance to the long term sustainability of the property. With proper Project Management during Construction, material, techniques etc used will serve the long term purpose they were meant for. Improper Project Management during Construction most often leads to buildings with subpar quality hence leading to faster deterioration and higher vulnerability to destruction.
b. Effective Tenant Screening
(See Instituting Appropriate Tenant Screening above)
c. Fast Response to Repairs
It is said in English that “A stitch in time saves nine.” Whenever there is a need for repairs, it is in the best interest of the building and therefore the landlord for the repairs to be done earlier than later. Once a broken item is not repaired, it gives room for further deterioration and destruction.
d. Frequent and Appropriate Maintenance
Whether there are repairs or not, it is imperative for the landlord to frequently and appropriately maintain the property. There should be a timetable for maintenance and record of maintenance works done for different aspects of the building. With frequent and appropriate maintenance, the landlord is certain about the long term suitability of the building, thus making it attractive to tenants.
4. Best Ways to Effectively Handling Tenant Complaints
The satisfaction of a tenant depends a lot on whether the issues raised in his/her complaints are addressed and when they are addressed. When a tenant lives in a building that it takes longer for issues to be addressed, they feel bad and tend to consider moving out as soon as possible.
a. Institute an Effective Complaint Management System
The best way to handle complaints from tenants is to institute an Effective Complaint Management System. The system provides a means for tenants to make their complaints known to the landlord or property manager and the landlord or property manager to handle the issues raised and provide feedback to the tenant on the possible course of action. Once the required action is taken, then it has to be indicated that the issues raised have been resolved so all parties have clear records.
5. How Best to Do Recording and Reporting
Recording and reporting has been an issue with many landlords and property managers we have been in touch with. You might be one of them. The funny thing is, working without records and reports puts you at a disadvantage. Without accurate records, you can not have relevant and timely reports that can be critical in informing your decisions. Our recommendations in dealing with records and reports are as below:
a. Use Professional Accountants
Generally, financial information is the basis for property management. Rents are paid by tenants, repairs are made, suppliers and staff are paid etc. All these are financial transactions as such Accountants are in the best position to assist the landlord or property manager in capturing the right data (records) and deriving the right information (reports) from them.
b. Use Computerised Systems
Once the basics of accounting is sorted, it will be easier using computerised systems for recording and reporting. The landlord or property manager can start with simple accounting systems, and with time move over to fully integrated property management systems. The value of such systems can not be overemphasised, most especially for larger properties and higher numbers of tenants.
We believe these have been very insightful for you as a landlord or property manager. We hope you use them to the best of your capabilities so you can make your investment worthwhile. We are also available in case you might need more hands-on assitance as you try to implement any of these techniques we have shared or any other challenge relating to your property or the tenants.
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About Genie Capital
At Genie Capital we identify, develop and invest in opportunities, technologies, IPs, processes, etc that deliver superior long term returns to our investors, whether they're investing in Real Estates, SMEs, Stocks, Bonds or Crypto Assets. We provide Professional Property Management services to Real Estate Investors who own properties in Cameroon.
We have a mission to help build the financial infrastructure of Cameroon that will enable Cameroonians to directly invest in and benefit from the development of the country, rather than leaving it to foreigners who might not understand our needs and aspirations.
Though the concepts that are the foundations of Genie Capital have been in the development since 2013 or so, the company was incorporated in Limbe in July 2021 with head office at Mile 18 Junction, Buea - Silicon Mountain, SW - Cameroon.