6 Mistakes that Can Bury Property Managers

Eden Sunshine
Vice President, Realty Executives


Residential property management is a complex business that, if not conducted properly, can cost an individual a lot of money, create legal issues, and even lead to criminal action taken against them. Here is a breakdown of some of the key areas to pay attention to as a property manager and how to avoid them.


1. Avoid Fair Housing Violations

A fair housing violation can lead to fines of $10,000 or more plus legal fees. The best way to avoid potential fair housing violations starts with  a great system for selecting the right tenant for a property. Begin with an application process that is followed 100% of the time. Standardizing an approach to evaluating credit scores, monthly income ratios, employment histories and other criteria to evaluate the quality of an applicant, is critical. For example, if you determine that an applicant must have a 685 FICO credit score to qualify, never make an exception to that rule. Even if you have a good “feeling” about a candidate, making an exception for them if they have a lower score could leave you liable for a discrimination case.

Have a set policy when it comes to collecting late rents too. Essentially, the best approach to eliminating the possibility of a fair housing violation is to have solid systems in place and treat everyone equally all the time.


2. Minimize Loss of Rents

Finding the right tenant who can be trusted to pay their rent on time can be tricky. Like the process of reducing a potential fair housing violation, it is wise to have a system you can follow to identify a good tenant. Begin by looking for a consistent employment history. Extended gaps in employment could be a red flag. Also, a reliable source of income is critical. A general rule of thumb is the tenant has a 3 to 1 ratio of income to rent. Be sure to check credit scores, criminal records, any eviction history, and conduct background checks to maximize certainty that the potential tenant is stable and responsible. One method used to take the subjectivity out of decision making is to create a scorecard for each of the criteria you use on a scale of 1-5. For example, you might score a candidate with five years of consistent employment or more a five on the scale. A person with gaps of employment of more than a total of two years over a 5-year period would be scored a one on the scale. The scorecard can also include pass and fail elements such as meeting credit score or income to rent ratios. Again, the more standardized the approach, the less likely of running into issues of tenants not paying rent on time.


3. Minimize Property or Bodily Damage

On occasion property managers have allowed potential tenants to access a property without the property manager being there. This can pose many potential risks. Specifically, people can damage the property, steal or get hurt while on the premises. There will be costs and liabilities that occur in these scenarios. It might be more convenient to give a potential tenant the key or lockbox code, but this can lead to a wide variety of costly problems. Conduct regular property inspections.


4. Hiring the Wrong Contractors

Saving money on repairs and construction is a viable concern for Property Managers. Cutting corners by hiring contractors that are not licensed and insured can open the door for all sorts of problems. You might find difficulty in getting warranty issues covered and have no recourse if the contractor does poor work or doesn’t complete the job.


5. Using the Wrong Contract

Use a well written, professionally developed Lease Agreement. Ideally, use the AAR Lease or have an attorney write a lease agreement that can be used in all situations. Having a good lease agreement will reduce the likelihood of legal disputes and claims due to a loophole or unclear language within the contract.


6. Know the Property Management Laws & Rules

Be well versed in the laws and rules of property management and trust accounting. Legal issues, loss of license and even criminal action can be taken if rules are broken or misappropriation of trust funds occurs. Know your stuff.

Being a property manager has its advantages especially if you are serious and committed to the work and responsibilities. The best in the business tends to handle lots of volume which requires great systems in place, knowing the rules, great contracts and good relationships with quality contractors and vendors.


Eden Sunshine is an entrepreneur, the creator of The Level 7 System, a speaker, author and Vice President of Operations for Realty Executive in Phoenix Arizona. Eden has coached and consulted with over 300 of the top Real Estate agents and teams throughout the USA and Canada since 2003. Eden specializes in helping businesses become scalable, positioned for exponential growth and productivity while establishing a meaningful, high performing business culture.

Eden developed the Level 7 System, which is a one of a kind, simple and systematic business development approach that guides businesses to become scalable, systems driven with great cultures. He also has developed other ancillary programs like the Systemize Your Business in 90 Days Program. He is in the process of publishing two books: The Book on Building Great Businesses and Woo Hoo: Successfully Transforming Your Business and Your World.