Risky Business: How to Manage Risk and Improve Debt Recovery in Property Management

1 2018 © AppFolio, Inc.@AppFolio #AppFolioChat

2 2018 © AppFolio, Inc.

Risky Business: How to Manage Risk and Improve Debt Recovery

in Property Management

Laurie Lowe - Manager, Value Added Services, AppFolio

Kirsten Rowland - Manager, Value Added Services, AppFolio



• Property management and accounting

• Online rent collection (free)

• Prospect / guest card tracking

• Vacancy Marketing

• Websites

• Online applications & leases

• Resident Screening

• Mobile Inspections

… So You Run A More Successful Business

Web-Based Property Management Software

@AppFolio #AppFolioChat

AppFolio


Meet Today’s Presenters

Laurie LoweManager, Value Added Services

Kirsten RowlandManager, Value Added Services


“A clever person

solves a problem.

A wise person

avoids it.”

~ Albert Einstein


Managing Risk: Best Practices

✓ Strict applicant screening policies

✓ Data collection and management

✓ Tactics to protect your properties

✓ Ways to improve your debt recovery


Strict Tenant Screening Policies


Adhere to Internal

Best Practices

• Familiarize yourself with

consumer protection laws,

like Fair Housing

• Problems occur when you

inconsistently apply criteria


Automated Decisioning Tool

• Removes human bias

• Keeps entire company

consistent

• Reduces risk of bad debt


Data Collection and

Management


Automate Gathering Data and Documentation

Store your data and documentation all in one place!

• Reduce errors

• Single source of truth

• Access anywhere

• Resolve disputes


Required Fields on Applications

• First Name

• Last Name

• Email Address (enter it 2X!)

• Phone Number

• Current Address

*Make it required!


• SSN and DOB

• Driver’s License Number

• Emergency Contact

• Employer Information

• Personal References

Personally Identifiable Information

Make it a policy to collect.


Lease Agreement

✓ Legal contract

✓ Eliminate loopholes

✓ Review lease language regularly

✓ Scan and store a legible copy

✓ Lease addenda and renewals


Tenant Communication and Engagement

● Letters

● Emails

● Texting

● Phone or In-Person Conversations


Damages and Repairs

● Maintain the property

● Move In/Move Out Inspections

● Before/After Photos

● Invoices


Tactics to Protect Your Properties


Trends in Renters InsuranceMandatory Renters Insurance on the Rise

Percent of renters who

have renter’s insurance.

Insurance Information Institute

Percent of leading apartment

companies who require residents

to buy tenant insurance.

National Multifamily Housing Council


• The National Fire Protection Association

reported 1.3M residential fires in 2016,

of which the leading cause was cooking

• On Thanksgiving, the average # of fires

per day goes up by 230%!

• Fire claims have an average loss of

nearly $40,000

• Tenants seldom have the means to pay

for severe damages.

Accidental Kitchen Fires


FAQ: What exactly does renters insurance cover?

✓Covers legal liability for accidental tenant-caused damages

✓Protects tenant’s personal belongings from theft or damage

✓Covers on- or off-premise bodily injury

✓The most comprehensive coverage

Renters Insurance:


Why Require Tenant Insurance?

• Transfer of risk

• Recover repair costs for damages

• Proactively protect property owner’s assets and bottom line

• Competitive advantage

• Peace of mind

• Tenants pay premiums

Overall Benefits:


Improve

Your

Debt Recovery


Debt Collections for Property Managers:

Unavoidable part of the leasing cycle

Time-consuming and paperwork heavy

Compliance risk and regulations

It’s difficult to find a good partner

Poor visibility

Court costs and fees + recovery rates are low


Current Debt Collections Industry

• Consumer complaints

• The importance of a legal and accurate balance

• Legal versus “just”

• Credit Bureaus’ stricter requirements

Debtor/Consumer Friendly Environment


Best Practices to Maximize Debt Recovery

Be proactive, not reactive

○ Strict screening practices

○ Thorough data and documentation

○ Efficient and reliable storage

#1



Pursue accurate and realistic claims

○ Lower balances have higher liquidation

○ Lease-break fee in lieu of accelerated rent

○ Avoid collection fees and high penalties

#2



Act quickly and consistently

○ Recovery decreases as debt ages (“Rule of 16s”)

○ Streamline your collections process

○ Review delinquent accounts every 30 days

#3



Utilize a third-party partner

○ Specialization

○ Licensing and compliance

○ Extension of your business

○ Red flags: fees and recovery rate

#4



Leverage technology

○ Eliminate idle time

○ Seamless integration

○ Allow consumers to pay online

#5



Improve your process over time

○ Be accountable to your process

○ Avoid repetitive actions

○ Define your “red flags”

○ Measure the outcome

#6


Next Steps...

✓ Document and follow internal screening policies

✓ Automate, gather and store comprehensive information on occupants

✓ Require and enforce Tenant Insurance to avoid costly situations

✓ Act quickly and consistently to maximize your debt recovery


Thank You!

Laurie LoweManager, Value Added Services

Kirsten RowlandManager, Value Added Services


Real Estate

Risky Business: How to Manage Risk and Improve Debt Recovery in Property Management