When renting out properties, you’re putting your assets in the hands of others, and it can be risky business. Our experts discuss ways to mitigate common risks in the industry and share tips for recovering delinquent tenant debt.

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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

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• 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

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Meet Today’s Presenters
Laurie Lowe
Manager, Value Added Services
Kirsten Rowland
Manager, Value Added Services

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“A clever person
solves a problem.
A wise person
avoids it.”
~ Albert Einstein

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Managing Risk: Best Practices
✓ Strict applicant screening policies
✓ Data collection and management
✓ Tactics to protect your properties
✓ Ways to improve your debt recovery

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Strict
Tenant Screening Policies

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Adhere to Internal
Best Practices
• Familiarize yourself with
consumer protection laws,
like Fair Housing
• Problems occur when you
inconsistently apply criteria

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Automated
Decisioning Tool
• Removes human bias
• Keeps entire company
consistent
• Reduces risk of bad debt

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Data Collection
and
Management

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Automate Gathering
Data and Documentation
Store your data and documentation all in one place!
• Reduce errors
• Single source of truth
• Access anywhere
• Resolve disputes

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Required Fields on
Applications
• First Name
• Last Name
• Email Address (enter it 2X!)
• Phone Number
• Current Address
*Make it
required!

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• SSN and DOB
• Driver’s License Number
• Emergency Contact
• Employer Information
• Personal References
Personally Identifiable Information
Make it a policy to collect.

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Lease Agreement
✓ Legal contract
✓ Eliminate loopholes
✓ Review lease language regularly
✓ Scan and store a legible copy
✓ Lease addenda and renewals

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Tenant Communication and Engagement
● Letters
● Emails
● Texting
● Phone or In-Person
Conversations

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Damages and Repairs
● Maintain the property
● Move In/Move Out Inspections
● Before/After Photos
● Invoices

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Tactics to
Protect Your
Properties

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Trends in Renters Insurance
Mandatory 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

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• 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

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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:

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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:

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Improve
Your
Debt Recovery

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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

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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

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Best Practices to Maximize Debt Recovery
Be proactive, not reactive
○ Strict screening practices
○ Thorough data and documentation
○ Efficient and reliable storage
#1

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Best Practices to Maximize Debt Recovery
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

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Best Practices to Maximize Debt Recovery
Act quickly and consistently
○ Recovery decreases as debt ages (“Rule of 16s”)
○ Streamline your collections process
○ Review delinquent accounts every 30 days
#3

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Best Practices to Maximize Debt Recovery
Utilize a third-party partner
○ Specialization
○ Licensing and compliance
○ Extension of your business
○ Red flags: fees and recovery rate
#4

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Best Practices to Maximize Debt Recovery
Leverage technology
○ Eliminate idle time
○ Seamless integration
○ Allow consumers to pay online
#5

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Best Practices to Maximize Debt Recovery
Improve your process over time
○ Be accountable to your process
○ Avoid repetitive actions
○ Define your “red flags”
○ Measure the outcome
#6

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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

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Thank You!
Laurie Lowe
Manager, Value Added Services
Kirsten Rowland
Manager, Value Added Services

34. 34 2018 © AppFolio, Inc.