Risk Management Mistakes That Keep Property Managers up at Night with Guest Kathleen Richards

Risk management isn’t a sexy topic, but it’s something that you need to think about as the owner of a property management company. Making mistakes while managing – or not managing – your risk will keep you up at night. It could also result in lawsuits, huge fines, and even the loss of your business.

We asked Kathleen Richards of PM Made Easy and The Property Management Coach to talk through this topic with us.

If you haven’t thought about risk management before, this information is for you.

If risk management has been in your back burner for a while, this information is also for you.

Introducing Kathleen Richards

Most of you probably know Kathleen, but we asked her for an update on what she’s doing now.

Kathleen sold her property management company in 2017, and before doing that she became a certified business coach. She launched Property Management Coach and then bought LandlordSource, which has recently been re-branded and newly launched at PM Made Easy. She helps property management business owners figure out what they need, and one of the things they always need is risk management.

What Does Risk Management Mean for Property Managers?

Risk management means covering all your bases. The property management industry is very litigious. So, you need to manage the risk that’s present in the properties you’re managing, and you also need to manage your own risk as a business owner.

As a property manager, you have risks associated with accounting, hiring employees, and how you do business. Mitigating as much risk as possible is crucial to the success of your property management business.

Common Property Management Risks

1. Regulatory Compliance

Would you believe that some property managers start a business in states where licensure is required, without being licensed?

Often, they don’t even know that they need the license.

So, your first risk could be this simple. Do you need to be licensed as a property manager in the state you’re in? Find out, and if necessary, get licensed. Moreover, make sure you read up on the laws and regulations related to property management in your area. Each state can have different rules, and these regional or state specific rules are subject to change by the regulatory bodies. So make sure you are always up to date with new laws and any changes.

2. Risks associated with owners, tenants, and vendors

You have to screen owners as carefully as you screen tenants. Working with bad owners is a huge risk. You don’t want to work with owners who don’t care about their own risk, because that only increases your risk. Perhaps a new owner who wants to work with your company has a vendor who they’ve been working with for years. But, the vendor isn’t licensed or insured. You shouldn’t use that vendor, no matter how confident your new owner is in the work. It introduces too much risk.

Kathleen was once an expert witness in a court case where a tenant asked an owner if the tenant’s friend could trim some trees on the property. The owner agreed and the tenant’s friend fell off the ladder, shattering a hip. That friend had no insurance and sued the owner. The property owner absolutely should have known better than to let that tenant’s friend climb on a ladder while at the property. This was a huge and unnecessary risk that cost the owner a lot more than it would have cost him to hire a professional company.

Another example from Kathleen’s personal experience involves marijuana.