Common Mistakes in Property Management
What Property Managers Should Avoid Doing
Property management is a daunting task that needs to be handled meticulously well. That’s why it helps to find out the most common blunders involved in this area.
Property managers can avoid such risks if they only know how to cover all the bases involved in managing properties.
Management fees understated.
A good property manager must be a people person and should be extremely talented at juggling various tasks. Taking care of a rental property is a full-time job and many landlords are not fully aware of how much a property manager can do to streamline and simplify their lives.
Some property managers often have the idea that they can’t charge management fees on “outgoings”. However this would not be the case, since outgoings are usually a lump sum fee charged to tenants on a monthly basis depending on a budget to which the “real estate agency is entitled to collect management fees based upon their agreed percentage on receipt.”
GST on tenant on-charges for commercial leases.
As always, the GST is not charged on expenses such as land tax, water or council rates since the expenses are GST-free when paid. When referring to on-charges to tenant, this would become a separate taxable item in which GST applies considering the owner is registered for GST, where in the supply is not marked as “Input tax” as compared to residential leases.
Missing rent reviews and other valuable lease dates
There are some cases where property managers miss out on getting rent reviews and other important stuff such as insurance expiration dates as stated on the lease and other option notifications. This will usually happen when the property manager is disorganized and fails to use an efficient property management system. A good system must have the ability to check for date reminders, upcoming events and should have a check and balance on such related tasks to avoid missing out on tiny details that are small yet necessary to be attended to for the satisfaction of both landlords and tenants altogether.
Coding of transactions
Even for both commercial and retail properties, sometimes property managers can put in the incorrect code transactions sometimes forgetting to verify the information, resulting to unhappy tenants and disgruntled landlords.
Outgoing costs should be coded correctly to the outgoings cost center especially when it involves properties that have both net and gross leases. Tenants get their exact apportionment on the full outgoing cost which is set when the variable outgoing costs are calculated correctly.
Outgoings on the sale of a property.
A good calculation of how much the outgoings should be, must already be adjusted to the settlement date. A good calculation of the outgoing costs beforehand, can save time and promote good customer service as a property manager, thereby getting satisfied tenants that would be more than happy to go for a renewal on the contract lease anytime.
Incorrect applications of rent reviews.
This is usually done after the date has passed, particularly CPI and market reviews and if these calculations are done incorrectly due to wrong dates applied then it might result to a necessary chargeback to tenants.
Variable outgoings based on cash basis payments.
Sometimes inaccurate calculations on outgoings can happen especially when these are made via cash payment basis. Insurance for example is not always based on a financial year since there are short term leases that happen. So, it’s only right to compute applicable expenses variable to the outgoings reconciliation, which complies with accounting standards.
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