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Property Management Systems
From A To Z
All Rights Reserved.
Copyright © 2016 Dick Jonilonis
v2.0
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Table of Contents

Chapter 1: Intro and Overview

Chapter 2: Marketing and Property Management Systems
Chapter 3: The Monthly Cycle – Part l – Accounts Receivables
Chapter 4: The Monthly Cycle – Part II – Accounts Payable
Chapter 5: The Monthly Cycle – Part III – Reports Preparation & Distribution /
Communications -
Chapter 6: Maintenance Managment & Accounting
Chapter 7: Accounting Basics For Property Management Systems
Chapter 8: Intro To Niche Property Management
Chapter 9: Property Management Systems & The Internet
Chapter 10: Property Management Contracts & Records
Chapter 11: Property Management Systems and their Security
Chapter 12: Risk Management – A Property Management Systems Perspective
Chapter 13: Property Management Systems and the California BRE/ DRE
Chapter 14: Government Entities & Issues in Property Management Systems
Chapter 15: Evaluation & Selection of Property Management Software
Chapter 16: Property Management Systems Management – Management Must Manage
Addendum 1: System Management – Top Ten Tips
Addendum 2: The Three Phases of Systems Implementation
Technology Addendum —
Introduction
Ach - Eft & Nacha
E-Mail Operations
Scanning Operations
On-Line Versus Standalone Systems
Topics - Portals
Remote Devices
Voice Recognition & Artificial Intelligence
 The Future
Property Management Systems P/M/S
Property Management Systems – From A To Z Glossary
Acknowledgement
 CHAPTER 1
Intro and Overview

Although it appears to be understood by industry trade associations, such as IREM,

(Institute of Real Estate Management), NARPM (National Association of Residential
Property Managers), NAA, (National Apartment Association) and the many state trade
associations there appears to be a lack of awareness or interest of property management
systems by many property managers, real estate academics, and property management
authors. A review of property management textbooks and “how-to” books will generally
display an almost complete lack of content related to property management systems and
their ever increasing use of automation and technology in those systems.
An initial impetus to this book was a 4th edition property management, 600 page textbook
which included 2 pages of general information and a minimal statement indicating that
“property management systems are used in the industry”. As I recall that book was
published in either 2005 or 2006.
Another example is that of a well credentialed property manager/author and his 2nd edition
“how to” soft cover property management book published in 2008. Systems content
consisted of 5 pages related to systems out of 410 pages. The author identified 5 systems
including one which was no longer available and the second was pending one more year
of support. Two of the five were products of a popular and pricey California developer.
One of the two was very expensive and the only on-line system that was identified. The
fifth system was a basic program from Intuit (the QuickBooks developer) and still
available today. It was designed for owner operators.
In addition, no mention was made of the major trend and increase in on-line systems that
were prevalent since the millennium.. Key differences financially and in their innovations
and operations were also not identified. That was probably the most significant systems
information that was not provided. Considering the expansion and evolution of property
management systems, both in standalone and on-line systems the related systems content
in the s book was not very helpful.
The goal of this book, (and possible future e-course and seminars ), is to supplement and
update the current textbooks, “how-to” publications, and property management courses
with pertinent property management systems content for fee property managers and
owner/operators. It attempts to promote a better understanding of property management
systems and their current capabilities. New systems capabilities continue to provide new
benefits of automation, innovation and technology within the property management
industry. The rapid development of new technology requires that both awareness and its
use be promoted among members of the industry. (See IREM and Technology White
Paper in the Addendum – The Future)
We have authored 3 prior “Automation and Property Management” articles in prior
decades, two of which were published in regional trade association magazines. The
articles were overviews of “Property Management Automation” during those times. The
first article was published in February 1986, while the second appeared in October 2000
(recognizing the millennium). The third was an unpublished article that was distributed
among our clients and systems prospects. This book chapter is derived from the third
article and has numerous updates. It is written at a time when there is even a greater need
to recognize and understand the ever growing importance and improvements of
PROPERTY MANAGEMENT AUTOMATION and its benefits.
Note: A number of additional articles have been authored, mostly for regional trade
association magazines, one for a national magazine and a few that have not been
published.
The content of this book is heavily focused on California fee management based on the
following:
The size of the state, its population and its diversity –
Some of the earliest popular systems were developed in California -
Our decades of experience with California property managers/owner- operator
clientele –
The content should also be of value for fee property managers and owner/ operators
in other states based on the benefits of systems and generic content relating to the
subjects identified in the table of contents. -
The level of government regulation including that of fee property management
operations –

Note: Many of the regulations effect both fee managers and owner/ operators. Caveat
emptor!
Note: California has perhaps the most regulated set of state mandates relating to property
management operations. In contrast, it is our understanding that two states, Idaho and
Maine, have no licensing, certification or special requirements whatsoever for its property
managers!
But before we go any further, it may be helpful to identify the functions and tasks
specified in the California Department of Real Estate (DRE), (now Bureau of Real Estate
(BRE), web site related to property management. It is, perhaps as well as any other
description you may find in a textbook or “how to” book on property management, very
detailed and well defined. It is well done with the exception of the lack of recognition
regarding the importance and use of system automation and technology within the
industry.
The description follows:
Functions of a Property Manager
“The many and varied duties of a property manager require the skills of a business
executive, decorator, salesperson, parking lot attendant, gardener, housekeeper,
information center, accountant, banker, doctor, lawyer, social director, psychologist,
marriage counselor, baby sitter, bookkeeper, rent collector, maintenance expert, security
officer, keeper of the keys, telephone operator, concierge, messenger service, and
complaint department. The manager must also be soft-spoken, fast-moving, poised, quick-
thinking, non-tiring, ever-available, mechanical-minded, all-knowing and never-ailing.
This “expert” knows how to visit without visiting, sell without selling, see without
judging, hear without repeating - and all without having time for an uninterrupted meal.
The property manager has a dual responsibility: to the owner or client who is interested in
the highest return from the property; and to the tenants, who are interested in the best
value for their money, including reasonable safety measures and compliance with fair
housing laws. The property manager must promptly rent the property/units at the highest
market rent possible, keep operational and other costs within budget, and preserve and
enhance the physical value and prestige of the property.”

SPECIFIC DUTIES OF THE PROPERTY MANAGER

Here are some of the specific duties a property manager must perform:
1. establish the rental schedule that will bring the highest yield consistent with good
economics.
2. merchandise the space and collect the rent.
3. create and supervise maintenance schedules and repairs.
4. if applicable, verify independent contractor license status and insurance coverage.
5. set up payroll system for all employees.
6. develop a tenant/resident relations policy.
7. supervise employees and develop employee policies, including an Injury Prevention
Plan.
8. maintain proper records and make regular reports to the owner.
9. qualify and investigate a prospective tenant’s credit.
10. prepare and execute leases.
11. obtain decorating specifications and secure estimates.
12. hire, instruct, and maintain satisfactory personnel to staff the building(s).
13. audit and pay bills.
14. advertise and publicize vacancies through selected media and broker lists.
15. recommend alterations and modernization as the market dictates.
16. inspect vacant space frequently.
17. keep abreast of the times and competitive market conditions.
18. obtain and pay insurance premiums and taxes.
19. be knowledgeable about and comply with applicable Federal, State and local laws.”

Considering the number and specificity of the functions identified above it is clear that the
likelihood of managing and maintaining all of the above functions without property
management Systems, procedures, operations and its technology would be too expensive,
too error prone, and too time consuming. The BRE/DRE appears to ignore the obvious
which is that property management for most companies, (except for those with the
smallest portfolios), could not function without systems automation and its technology.
This condition also periodically leads to conflicts in which automation and new
technology conflict with the BRE/DRE. A review of the above items allows a better
understanding as to the degree and the importance that automation, innovation and
technology may provide in the spectrum of property management operations and the
industry.
Our original property management article published in 1986 identified the basic cycle of
the property management operations along with the accounting and a few miscellaneous
functions that some systems offered in the mid “80’s”; (The PC DOS, (Personal Computer
Disk Operating System) Generation). The article discussed the reduction in costs of
property management systems (including the equipment) using Personal Computers
(mostly IBM Compatibles) versus the minicomputers and the early 8 bit micro computers
of the “70’s” and early “80’s”.
Prior to the “80’s” a number of key computer innovation s and which enhanced the early
property management systems technology. The earliest microcomputer property
management systems were written for the 8-bit systems using the popular CPM (Control
Program for Microcomputers[) operating system. A number of 8-bit programs that I had
installed and supported originally were reprogrammed to operate on what most consider to
be the first microcomputer, (IBM’s 16-bit Personal Computer).
My original experience with IBM took place in the late 50’s and early 60’s while
employed at the Chicago IBM Education and Datacenter. I worked with both the various
punched card accounting equipment and the first and second generation mainframe
computers in Chicago. Later I continued to work with IBM second and third generation
systems clients in San Diego, initially as an IBM representative /systems engineer, later as
a bank IBM customer and manager of systems and programming.
Important innovations included:
The IBM RAMAC (Random Access Method of Accounting and Control) which
introduced disk drive storage. The first drives consisted of fifty 24 inch disks which
initially stored a total of 5 million alphanumeric characters that could be randomly
accessed. Prior to RAMAC all data was accessed sequentially via tape devices or cards.
The system which introduced RAMAC was a hybrid computer which included accounting
machine plugboard operations. It was the first system I programmed and worked with
IBM customers as an IBM systems engineer.
Later RAMAC type devices (faster, with more data, and smaller in size) were included in
the first three generations of IBM systems. Each generation introduced major increases in
the access speed, the storage capacity and miniaturization of the devices. Disk storage
devices (floppy disks)were components of both the 8 bit and 16 bit microcomputers
property management systems of the late 70’s and 80’s.
SPOOLING – ( Simultaneous Peripheral/ Printer Output On-Line ) This innovation
initially matched very slow accounting machine printers and first generation computers. It
was a solution for initiating printing as a second and independent function of the main
processing operations of the computer. It did not require that the computer had to complete
its processing before the printer began its printing. The second generation ( transistors
replaced vacuum tubes and were a major element of the second generation - invented by
the AT&T laboratories ), also introduced new faster printers that shortened printing time
using the spooling technique.
In the late 70’s and 80’s the early printers used with the micro computer property
management systems were called matrix printers and were slow and noisy. Often the
printing of the monthly reports were often scheduled for overnight printing based on the
60 lines per minute printing of the matrix printers. Occasionally the continuous forms
paper would jam while printing and staff would confront a massive jumble of paper and
often needed restart the printing operation. Some of the early systems provided a printer
restart option and others didn’t. A 50 property continuous printer run averaging 5 pages
per property was about 4 hours of printing. If the printing was completed in a satisfactory
manner the reports then needed to be separated by property, packaged, and postage added
prior to mailing.
The introduction of laser printers designed for microcomputers had the immediate effect
of reducing printing time by hours, i.e. the 4 hour matrix / impact printer task would be
reduced to 30 minutes of quiet printing on 8 ½” X 11” copy paper. The first desktop laser
printer were $3000 + but they were a major success based on their features and
specifications. High end commercial printers currently available may range in the 35 to 45
pages per minute printer speed.
The relatively low cost of the PC’s and the limited number of basic property management
systems provided ample justification for Fee Property Managers (and some owner
operators) to begin their move into automation. Even though the automation was limited,
increases in productivity and reductions in cost resulted. A significant boost to the
marketing of property management systems at that time was that IBM PC hardware was
often initially partnered with the property management system. I participated in the sales
and training of an IBM PC based real estate based (plus property management system)
package offered by a California company and sponsored by CAR (California Real Estate
Association). I was also a CAR Director and Instructor at that time.
The main emphasis however, enforced by the limited systems capabilities available at that
time, was directed at the accounting tasks and the resulting reports that were automated
with the early PC/DOS software. Most of the additional features and functions that we
accept as normal systems operations today and many other features were not yet
conceived or available. Mail merge letters, work orders, multiple bank accounts, contact
management capabilities and many other features were still yet to be introduced, in
addition to the more recent technology including e-mail, ACH/ EFT (Automatic Clearing
House/Electronic Funds Transfer) operations and Internet services.
“Automation & Property Management 2000”, our second article, focused on the migration
of more powerful database capabilities, and the DOS based, text oriented software
migration to the Graphical User Interface (GUI /Microsoft Windows - based) Operating
Systems. For many users this was considered as the 2nd or Windows generation of PC’s.
Extensions to the programs were supported by faster and larger amounts of memory and
hard drive storage in addition to the features and capabilities of GUI and new peripheral
equipment.
A diversity of storage and peripheral devices were introduced in part due to the release of
Windows 98 which supported an increasing diversity of USB, (Universal Serial Bus)
devices. More detail information was included in the tenants, vendors, and owners records
within the management software. Properties and units pictures and floor plans were
introduced in some systems. The first of the Internet based property management systems
appeared at the very end of the “90’s” and became the norm for new systems during the
first decade of the millennium. It could be considered the 3rd generation based on it’s
extensive use of the Internet and accessing the property management core programs,
support functions and the property management data from remote locations. (See Chapter
9)
Innovations in data retrieval and manipulation of data were also introduced providing new
benefits and productivity while working with larger volumes of data. Contact management
concepts were initiated which allowed appointments, tasks, and other activities associated
with property management to be scheduled with users reminders of the scheduled
activities.
Cost factors and comparisons were again analyzed with similar results indicating that
generally the cost of property management automation once again was lowered on a per
unit basis for standalone systems. Other factors that affected the cost, such as training that
was only provided on an out of area basis were identified and alternatives introduced. New
developers and systems entered the market and some systems were discontinued.
One developer which provided a number of products, closed their doors suddenly after the
controller and his wife, (who worked in accounting), left the country with most of the
company’s and investor’s cash. It was believed they went to Brazil. The company was
relatively new with significant investor capital and what would seem no insurance related
to embezzlement/ theft. It was my first, somewhat personal, experience with a company
embezzlement. About 5 months earlier I had visited the company in Texas and added their
product line as a supplement to the core systems I had represented for a number of years.
I initially became suspicious when the company phone went unanswered over a week of
attempted calls. Additional details were learned later from another systems developer who
had been working on a project with the company when the embezzlement took place.
Another contact with the building management confirmed that their space had been
vacated and the company defunct.
It was during this same time the Apple and MAC versions from a number of system
developers, (Yardi and Tenant Pro being two of the more prominent), were discontinued.
For all of the kudos Apple/MAC have achieved, they only had at that time a sustained
success in a limited number of generic non-business applications and property
management software was not one of those. The removal of those products and other non-
Microsoft operating systems and applications from the market reinforced the importance
of standards. The need for established and significant numbers of installed systems lowers
the risk factors for a property manager or owner/ operator related to their selection and
implementation of a “good” system. Loss of systems continuity and support can be a
devastating event for a property management company. Events of this nature have
occurred periodically during the past 3 decades of property management history.
The actual sales and use of Apple/ MAC systems generally did not support their ongoing
development and support and on that basis for the most part they were discontinued. A
web site which is a directory of property management systems, (
http://www.capterra.com/real-estate-property-management-software ) only included 6
MAC systems of the 100 plus systems identified a while back. However, based on pricing,
features, and company maturity/ stability, we are only aware of one system that we are
comfortable in referring currently.
Note: The website has since been updated and identified 195 systems as of April 2014. It
does include some niche and support systems, among the traditional property management
software that includes the basic accounting for residential property management, and the
tracking of tenant transactions. The systems currently are in no recognizable order, but are
provided are provided with search functions and program profiles are available. The
number of systems is intimidating.
Note: Niche management relates to the management of properties excluding Single Family
Residential (SFR), condos, and generally multi-family residential (apartments), A list of
property management niche’s is more extensive than most would believe. The 600 page
textbook mentioned above identified 26 separate niches including nudist camps. I chose to
identify less revealing niche opportunities. (See chapter 8)
More efforts were directed to training and documentation by the developers. Some
developers established schedules and programs which provided training periodically on a
regional basis, usually in the larger cities using hotel facilities. They were expensive, and
not always matched to the users’ system configuration.
One example would be the inclusion of a Maintenance Module (Work Orders) training in a
2 day Workshop of which significantly less than half of the attendees had the maintenance
module. To some extent it was a marketing effort; but it also nicely filled out the last part
of the 2nd day for the developer. For most of the attendees it was of minimal value.
I attended that workshop and assisted with the “hands on” training as a dealer of the
software. That event led to creation of my company’s computer lab to provide a “better
way”, ( a portion of an IBM slogan) for systems training of our local clients. It’s
availability negated hotel bills, reduced travel time and costs, and provided flexibility in
scheduling, such as half day scheduling options. Our company provided workshops in our
computer lab for over ten years in addition to customized client on-site training.
The importance of training remains a constant; however, the need or degree of repeat
training and advanced training has increased. Some systems have an active history and
policies of developing frequent ongoing enhancements and improvements. Other systems
are designed for larger and more diverse property portfolios and include more
customization, more options, more routines and more technology.
Therefore they require additional investments in staff training to take advantage of the
additional capabilities being offered with the enhancements and improvements that some
systems continually provide. Systems training can provide excellent payback based on the
ROI (Return On Investment), which increases productivity, promotes growth and often
may reduces costs.
Enhancements and improvements in technology training have also been developed which
offer new and important benefits. On-line training (Webinars and “Go To Meeting”
seminars technology is well established via Citrix’s collaborative and training on-line
software ), It has become a standard for some companies for both marketing and training
of both employees and clients. Developers, consultants and property managers can and do
provide on-line training as a valuable option. Video training library’s have also provided
another option for training, generally limited systems subjects.
There are additional elements relating to the third installment of our Automation and
Property Management article authored in 2010. What has happened since 2000 in regards
to Property Management Systems and Automation? A flood of technology has taken place
and for the most part has been readily accepted by consumers and businesses. The Internet
became an everyday use phenomenon and is now replacing older standalone property
management systems now with on-line fee management and owner/ operator systems.
Our observations suggest that the Internet now serves as the basis for the majority of
property management systems available currently. Some are relatively new and available
from new developers. Others are available from long time established developers that
either converted to an on-line Internet based system or created an on-line alternative
within their product line. Property Management Systems developers offering both
standalone (PC /On-site based server) and on-line systems are rare, but do offer some
unique benefits.
We discussed the Internet in an article that was published in 2003; “Property Management
Systems and the Internet”. Our chapter 9 on the Internet has been updated to reflect recent
advances. Today, even for systems that are run in a traditional manner, i.e. local
PC/Network based/ standalone applications, the system often depends on the Internet for
downloading of program updates and enhancements, plus program support and training.
The Internet may also possibly provide improved and updated methods of using
communications with the program. The Internet has provided a number of important new
capabilities to property management systems operations.
It is not however, without concerns or criticisms in regards to its possible replacement of
the traditional standalone systems now in place. There are many pros and cons for both
systems scenarios. We provide some of that content in Chapter 9. Additional content and
details discussion on that subject is in our article, “On-Line Systems Versus Standalone
Systems” which has been is available to our clients and prospects and is an addendum to
this book.
The Internet provides a number of new means to communicate with owners, tenants and
vendors. The most common being e-mail which includes the ability to also provide
documents, and pictures as attachments in addition to the text incorporated in the e-mail. It
is almost instantaneous, there are no direct charges, and is itself a document.
Note: An e-mail policy should be established at the same time e-mail operations are
initiated. E-mails have become an established evidence media in court. The use of e-mail
is replacing 1st class mail in our society based on both business and social uses.
The Internet also provides additional operations and program routines that can be
integrated with the main property management system to provide more capabilities, more
services, and more sources of income and productivity. Examples of the above include
tenant prospecting web sites and routines which allows a tenant prospect to:
view properties/ common areas/ units/ and floor plans,
see current and future vacancy information (uploaded from the main property
 management program),
request an appointment via e-mail
prepare and submit an application via e-mail
initiate a background /credit check, all on a 24/7 basis without ever going on-site or
initiating a phone call.

The concept and method for this Internet innovation is called a portal and it has become a
well established standard of the Internet. It is also becoming a fixture of business web sites
including those of real estate and property management companies. Portals often provide
both input, such as requests for products and/ or services, and outputs such as reports. A
more common description of a portal is that of a web site which is interactive in that it can
receive requests and inquiries and can prepare responses. We provide additional details in
our Portals Addendum.
Some property management companies are now providing functions that were initially
introduced on the Internet by a company that provided those services to hundreds of
property management companies on their web site. They have also provided an Owners
Page with an assigned Login and Password which allows owners to retrieve their
monthly/quarterly statements. We are also observing a trend which favors the use of the
PDF report format for owner reports which does not allow reports to be modified without
special program routines by recipients. Work order requests provided by tenants have also
been added to some web sites in addition to tenant payments.
We continue to observe continued expansion and extensions to property management
systems and to the services being offered to both owners and tenants. Obviously the
various systems are not all operating at the same pace or with the same degree of
innovation, but most users that have upgraded and/or migrated to newer systems in the last
five years would be likely to agree their new system does more in less time. Assuming
they are utilizing the majority of the features and technology available in the system they
are also likely to admit the system is now of primary importance and their current
operations would be unattainable without the system.
Note: The above comments and observations relate to popular, established systems. The
list of programs present on the Capterra website above very likely contains more than a
few new and relatively marginal systems. Their presence on the website does not presume
a successful system.
Systems are increasing in the ability to customize, prioritize, and provide procedures as
part of their set up of the monthly cycle of property management operations. Operations
are even more automated and diversified then they were just five years ago. We now have
tenants/homeowners paying their rent/ HOA fees utilizing ACH/EFT (Automatic Clearing
House/ Electronic Funds Transfer) and credit cards in addition to traditional rent
payments. We have owner draws being converted to ACH/ EFT deposits in addition to the
traditional check processing and distribution based on the owners option. .
The selection/customization of owner reports are now generally available in addition to
choices in the format and method of distribution. One owner may get 5 reports in PDF
format e-mailed to him while another gets three reports packaged and delivered via USPS.
The first format and method above is relatively new. They are added to existing
procedures which may entail different late fee processing, security deposit disposition
handling, commission structures and many other diverse procedures based on
geographic/property type/ number of units/ owner issues, etc.
We have stated for years that the system should best be considered as the combined
elements of:
Hardware - equipment which can now include Personal Computers, Mac’s, check
reader/ scanners, printers, external storage devices, CD – Writers and DVD’s – plus
remote access devices -
Software - which is located on the PC/ Server and/or accessed via the Internet -
Staff - including management –
Procedures - which should identify the who, what, where, when, why and how
property management operations are performed specifically for that
company/property/owner.

All of the above elements are important. Too often emphasis is only maintained on one or
two of the above. Continuing and increasing complexity of property management
operations must be offset with increasing innovations and technology. Automation
provides more opportunities for growth, new income sources, decreased expenses, new
owner and tenant services and new challenges for management and staff.
Management must provide the insight related to their market, their plans for growth, their
financial status and the leadership and motivation to deal with the evaluation, selection
and implementation of the system most appropriate for their company’s future operations.
They must also promote change to the staff, and for the owners and tenants in order to
implement ongoing improvements available in the system.
This is generally an understated and underestimated element in making the moves into the
new technologies. Authorizations must be provided and confidential information
exchanged for some of the benefits of the new methodology of advanced automation. A
new task of management and staff will be to cajole, motivate, and promote the changes to
owners and tenants to reap the benefits of e-mail, ACH/ EFT operations plus other
innovations and technology.
We analyze further the elements above and their importance in the management of the
“system” in chapter 16. One of the most common shortcomings I have observed in the
hundreds of property management operations( fee management companies and owner/
operators in California, Arizona and a few other states) is lack of management’s ongoing
involvement of the system. See Chapter 16.
The most recent addition to mandated procedures in California confronting fee property
managers is the 2010/ 2011 California Franchise Tax Board regulations relating to Out of
State Residents with California Residential Properties. Fee managers are now required to
withhold a % of rent income for those Out of State owners that have not filed California
State tax forms. Based on the current economy it is not unlikely that additional
government mandates will be added in California and in other states elsewhere in the
future. A few developers have incorporated the FTB mandates for California into their
systems.
This is generally another understated and underestimated element in making the moves
into the new technologies. State and regional government mandates and regulations should
be identified and matched when appropriate to the systems being evaluated.
Authorizations must be provided and confidential information exchanged for some of the
benefits of the new methodology of advanced automation.
Note: These new capabilities and services entail new categories of confidential data and
new liabilities associated with the security and use of that data. New laws are in place
mandating appropriate handling and use of the data in addition to penalties for
mishandling and misuse. See Chapter 14 -
In addition management must provide the planning and priorities for implementing the
many new elements of automation now available in the new systems. Too often we have
observed and participated in the implementation of systems that were only partly
implemented. Records from our past computer lab workshops indicate about a 10 to 1
ratio between the basic workshop training and the advanced training.
Observations on site with so many of our clients have shown that the advanced features
have not been implemented and in many cases at this time management and staff are not
aware of, or do not remember about their existence. Most often staff is too involved in
other tasks and too busy to take up the process of investigating and implementing on their
own. Similar circumstances seem to apply with management and their managerial
responsibilities which too often does not include the system.
Meanwhile, one of the solutions to the “too busy” issue is left in limbo. Advanced features
often provide the benefits of less labor and/or increased growth with no increase in costs
or administration. So why is management so reluctant to promote their implementation
and use? Most advanced features are well worth remembering and implementing.
Full implementations of the system needs to be planned, prioritized and promoted by
management and monitored by management. To not do so means that 20 -30 - 40 % or
more of the system investment is wasted. Without a change in management’s priorities not
only the current advanced features but future new features and technology will not be
implemented. As a result additional payback, i.e. increased growth, income, and
productivity are negated. Managers – Your system is a major part of your business! Treat
it as such!
Note: Systems development including the pace of upgrades and enhancements differs
greatly among property management systems currently. An extremely important element
and criteria in upgrading or replacing your current system is to validate the history and
policies regarding a developer’s commitment to system improvements.
Systems management should also include a commitment to system improvements as they
become available. The success of systems management should not be based on using the
system; it should instead be based on using the system completely. This requires an
ongoing awareness and promotion of the enhancements and improvements that are
provided by the systems developer and 3rd party systems supporting the base system.
Chapter 1 introduces some of the key content within the 16 chapters and Technology
Addendums and begins to identify the ways automation can and has become so integrated
within the functions and mandates of property management operations. Additional details
establish their value and their ability to provide ongoing benefits.
Note: For the most part the chapters are independent which explains the occasional
duplication of content within the chapters. Some readers may choose to prioritize the
reading of chapters based on their special interest in one or more of the chapter’s based on
subject and content. It is not necessary to read the 16 chapters or the addendums in the
sequence presented. In any case the content should be of assistance in evaluating systems
for acquisition and in improvements in the ongoing productivity of a current system. To
some extent the early chapters are organized based on the importance and sequence of
their functions in property management operations.
 CHAPTER 2
Marketing and Property Management Systems

Much progress has been made in the last five year in regards to Property Management
software and the very important function of marketing. The major differences between
marketing as a fee property manager and as an owner / operator initially are on focus.
A property managers (Fee Based). marketing is directed at two separate entities. The
marketing of management services are focused on:
the owners of investment properties and
the marketing of tenant based services for their owner’s property(s) -

Owner/ operators only need to direct their marketing on tenant prospects. Generally, fee
property managers will have a larger and more diverse investment property portfolio then
owner/ operators. As a result marketing operations will usually be more extensive and
diversified.
Owner/ investor marketing is more conceptual in that efforts are directed at promoting
return on investment, a major reduction of owner involvement and improved property and
tenant based operations via the use of management’s services. Generally fee management
will promote achieving and maintaining maximum income and minimizing expenses
while also promoting the benefits of minimized owner involvement and time
commitments. Fee managers should promote the “time is money” along “with what you
don’t know will cost you” factors to minimize the impression that new investment
property owners have regarding that managing property is “no big deal”.
It is a “big deal” and requires extensive Risk Management policies and procedures to
minimize the likelihood of litigation, fines, penalties and even jail time if certain laws and
regulations are violated. Professional management implies an ongoing awareness and
active effort in under- standing and complying with all federal, state and local laws,
mandates and regulations associated with the rentals industry. We discuss Risk
Management in Chapter 12.
Fee managers should provide sample reports based on the property(s) and owner
requirements. Considerations include the business/ accounting background of the owner
and the owner’s property portfolio. Apartments and commercial properties would
normally indicate a more sophisticated client and more detailed financial and
miscellaneous reports preparation. Generally Single Family Residences (SFR’s) and condo
rentals will entail a very basic set of reports to be provided for the owner/ client(s).
The marketing of owners may be customized. It should be based on the background and
experience of the owners and their property profiles. There are casual, don’t bother me
with details owners and conversely owners who would prefer daily updates on their
properties. Traditionally, providing management services to new clientele that have
previously managed their own properties are some of the toughest property owners to
satisfy. Often the additional efforts that fee managers apply to risk management operations
and government regulations are under-valued and generally considered unnecessary by
owners.
SFR’s and condo rentals usually comprise the majority of properties being managed by
most fee property managers and owner/ operators. For SFR/ Condo owners we do
recommend a quarterly or semi-annual cash flow be included in the report list which will
identify the year to date totals and most likely will reduce future calls relating to Year To
Date, (YTD) financial status of the property(s). This is easily established in many
management systems available currently and is a valuable service at tax time.
Some property owners will always maintain that their properties looked better, and tenants
stayed longer at their properties when they managed them. Also traditionally, owner
managed properties were usually rented and maintained at lower then market value which
tends to establish longer tenancies. Many owners settle into a minimum hassle operations
mode which coincides with lower rents and minimal turnover. This is a significant factor
that should be presented to the owner at the earliest opportunity and will help offset
objections of management commission issues as rents increase to market rates. It is also
worthwhile to determine if the owner would prefer higher rents or longer tenancies as a
management guide. Multi-unit properties value are directly affected by Gross Income
primarily resulting from the rents.
Note: It is a possibility at some time that an owner client may choose to sell or exchange
one or more of their managed properties. If the management company also maintains
brokerage services there is a likelihood that the company may be considered for the listing
of the property. If an active brokerage service is not a component of the company services
then a referral may be a benefit/ service for the client. This may also provide a source of
income for the management company. Some management companies advertise they do not
do brokerage to assure that agents will not lose their clients to the management company.
Marketing for owner / operators will focus on tenant prospects and the marketing of the
owner’s properties. Tenant services and the amenities of the owner / operators properties
are emphasized. in whatever media is used. Generally owner/ operator marketing/
advertising is basic and most often entails a single advertising medium. Providing multiple
tenant prospect marketing methods may prove to be an important incentive for owners
concerned with vacancy’s of their property(s).
There are possible opportunities for niche management and marketing based on owner
property types other then SFR’s, Condos, and 2-4 unit apartments. Owners with
commercial retail, office, mini-storage, marina, mobile home parks, industrial, etc., may
provide a management company a special opportunity to establish the beginnings of a
niche specialty. Even if a management company chooses not to move into a niche when
and if that opportunity exists with a prospective /owner/client, a significant benefit may
accrue as a result of being able to refer that owner’s property to a management company
that does specialize in the management of that property type. See Chapter 8 for a better
understanding and additional details of niche management operations.
It is important that management companies and owner/ operators are aware of Fair
Housing caveats in the advertising and prospect activities related to the renting of a
property / unit. Phrases used in the advertising and during prospect communications which
seem to be harmless and helpful may be contrary to Fair Housing policies. We discuss Fair
Housing issues in Chapter 14.
It is appropriate to utilize marketing material that showcase the management policies,
standards, terminology and reporting common to the property type. It is also appropriate to
be wary of some marketing policies which when adopted may generate risks and
conditions not in accordance with BRE/DRE or other state regulatory agencies. An
example would be inappropriate and/or inadequate policies which allow property balances
in a Trust Account, to go negative when a tenant bounces a rent check. Based on that issue
we strongly recommend that security deposits share the Trust Account with operating
funds to reduce the likelihood of negative balances.
It is our understanding that some states require security deposits be maintained in a
savings account and interest be paid to the tenant. Some states may also require that the
security deposit be kept in a separate bank account from the operating account. It is
possible that each security deposit may require its own account or be established as a trust
account for all of the tenants security deposits. Determine the requirements of your state in
order to verify that the property management system is compatible with the state
requirements.
Note: A good source for detail information on state security deposit requirements is
http://www.landlord.com/security-deposit-law-guide.htm -
Note: The California BRE/ DRE is the supervisory/ audit authority for California Real
Estate Brokers who manage client properties. Their regulations and mandates are quite
rigorous on behalf of the owners of California investment properties. Their activities and
the means with which the BRE/ DRE oversee Fee Property Managers may be interesting,
but of greater importance is that they promote stricter management and accounting
standards and have the capacity to close a real estate / property management office and/ or
restrict its operations and initiate potential fines.
Some California Property Managers may promote the BRE/DRE’s mandates and oversight
as a marketing ploy based on the additional level of accounting and records security
required by the BRE/DRE on behalf of owners. The DRE is not in any way involved with
owners managing their own properties.
California and a number of other states require Trust Accounting procedures and reports.
Quick- Books and some property management systems lack Trust Accounting capabilities.
The California BRE/DRE mandates specialized reports that are identified as Trust
Account reports. We identify these reports and the mandates associated with systems
operations in detail in Chapter / Session 11( Property Management Systems and the
BRE/DRE.
It is also appropriate to provide optional reports which may be of special interest to some
owners. Some property management systems today allow property managers to create
customized reports, which can be provided on an on-call or regular basis. Traditionally
optional reports were often prepared on an irregular basis which were a problem in less
automated systems that required extra preparations, procedures and possibly additional
software. Today some systems have resolved the problem with customized batch
operations and customized report preparation.
In the past it was not that unusual to hear about some special report(s) that the owner
wants because he/ she originally acquired the report(s) often via a local programmer’s
attempt at a property management program. The report may then have been recreated
when the original program was replaced by a traditional program augmented by a Report
Writer or custom report. That is a rare occurrence now but was not uncommon in the
“80’s”and early “90’s”.
Our experience with the small to midsize property management companies and owner/
operators generally indicate that existence of General Accounting Practices (GAAP),
increased standard report offerings. Our experience also indicated that the mandated Trust
Accounting Reports for California and a few other states, were available in a small
number of property management systems. I have rarely observed companies requesting
custom reports for their client(s). On the rare occasion when there was a need to provide a
custom report most often a solution evolved consisting of consolidating two or more
exported reports into a customized spreadsheet report.
Most recently one of my clients with a diverse portfolio, ( commercial properties and
hotels) required a special report involving hotel departments. The system developer is
currently assisting in the creation of the report.
Note: Among the many evolutionary and revolutionary changes and additions to property
management systems is the increase in all categories and numbers of reports. In the 1980’s
an average number of reports in the earliest systems may have totaled 30 or 40. Currently
a few systems offer 200 or more in their standard report offerings.
When marketing it is an excellent option to have the owner’s CPA/ accountant preview the
reports and approve them. This tends to resolve the report issue up front and avoids the
backtracking for reports deemed necessary by the CPA later.
Note: Be prepared to defend your property management systems reports and your system.
Many CPA’s only seem to recognize QuickBooks as a basic accounting system and believe
that it is a valid system for property management operations. They often will not be aware
of the specific issues and mandates that California and other states fee property managers
must maintain to remain compliant.
Owners who will provide enthusiastic referrals re: your property management services
should be encouraged to provide testimonials in any format available including letter,
audio and /or video referrals. Establishing a high quality referral and testimonial list is one
of the easiest and best ways of marketing and acquiring new management contracts.
Note: We have on occasion used the Internet to acquire additional information about a
current or prospective client. On a number of occasions “Googleing” the property
management company determined very little presence. Even more damaging however,
were the few comments posted by prospective, current and/or past owner and/or tenants
that were very negative about the company and/ or specific management functions. This of
course results in a very negative Internet image of the company. Even companies not
inclined to maintain an Internet presence ( i.e. a web site or e-mail address) should still
periodically check the web for harmful, and inaccurate posts. If possible corrective
measures should be considered.
Pictures of properties and units can be used to show owners that the property is
maintaining a good appearance, that the units are being maintained and that pictures are an
important element in the marketing to tenant prospects. It can also be stressed that the
pictures will often provide a shorter vacancy since marketing can start immediately and
not be deferred until the unit is rent ready. These same pictures can also be used in the
initial tenant prospect marketing efforts via the Internet.
Marketing efforts generally require periodic meetings and / or calls with owners and or
tenant prospects. The importance of making the meetings and /or calls in a timely manner
is extremely important. Arriving for a meeting late or not at all is not a good beginning for
a business relationship. Late or missing communications may also cause an owner or
tenant prospect to look elsewhere for the services they seek.
Property management operations require a variety of appointments, to do’s and
miscellaneous activities. As the property portfolio increases so do the number
appointments, to do’s and miscellaneous activities. A calendar to list and track those
activities is required. Software such as MS Outlook is an important support facility, but
even better alternative is a calendar and the associated appointments, to do’s and
miscellaneous activities, listings and tracking integrated in the property management
system. Another improvement is a calendar that is assigned to each user of the property
management system instead of separate support routines for each staff member. The
application of integration of routines is a powerful enhancement to a system.
A relatively new capability that may become a common practice in property management
in the future is the use of GoToMeeting type software that allows a property manager to
present the reports, pictures, work orders, etc. accessible on his desktop to an owner
viewing the information on his PC. This meeting method is a natural for the out of area
client, but offers benefits to the property manager and local owners also. It saves time and
travel plus provides a state of the art communications medium which in itself is a
marketing and management plus. It can also be used for training and/ or meetings for
resident management staff minimizing the need for travel.
A relatively new marketing method for the small to midsize management company or
owner/ operators with a large portfolio is the use of a company web site with interactive
functions. The real estate and/or management company website in addition to traditional
marketing content may have a property owner page which provides interactive owner/
client services available via a login/ password function. Once a login and password is
entered management clients have the ability to retrieve property reports, documents and
activate an e-mail option for owner questions and concerns. This type of web site is
known as a portal or gateway.
Web Portals are becoming more common among property management companies and
large owner/operator (includes company owned properties) operations. The portals
generally do not have the same level of sophistication or services as the Internet based
prospecting systems. It is most likely however they are the future for many property
management and large owner/operator management operations. We provide additional
details in our Portals Addendum.
Marketing must also include the promotion of ideas and concepts which result in benefits
to both owners and tenants. Innovations and technology are some of the best candidates to
increase benefits including the company’s bottom line and services. In addition to
increasing income the other major method to improve the bottom line is to reduce
operations and administrative costs.
The newer technology provides numerous means to implement methods of reducing
operations cost and providing new services. Generally however, some up front costs will
be necessary for the acquisition of equipment and/ or software to initiate those reductions.
In addition marketing must be initiated to present and promote the benefits that may
accrue from current and potential future technology.
There may be another cost however, that many property managers have not considered.
Often concessions / incentives may be the answer to increase the volume and the speed in
which the technology effecting owners and tenants can be implemented therefore
accelerating payback.
Property managers may be surprised by the lack of interest that both owners and tenants
may indicate when offered the option of ACH/ EFT (Automatic Clearing House /
Electronic Funds Transfer), and E-mail communications and reports distribution. It is
likely initial efforts and results will be somewhat less then management’s expectations
especially from older clients. Concessions/ incentives offered either initially or in a follow
on effort to increase the acceptance of innovations and technology may be a necessity.
Traditional owner checks, reports preparation/ distribution, plus tenant receivables, may
provide an excellent return on investment based on implementation of technology that
improves procedures and productivity.
The main focus on tenant marketing is directed at prospective tenants. In addition to the
traditional marketing and advertising mediums, signs, newspaper ads, and tenant referrals,
rental magazines, et cetera, there has been a multitude of Internet based alternatives in the
last decade. The portal mentioned above, may also provide numerous services for both
tenant prospects and current tenants.
In the past both management companies and owner/operators depended heavily upon local
newspaper ads and on-site temporary / permanent property signs with a vacancy /no
vacancy supplemental sign. In fairly recent times the 3 line / 3 day ( weekend) ad could
cost as much as $150. Management companies for the most part have reduced their
dependency on newspaper ads. Owner/ operators still use newspaper ads but have begun
looking for alternatives. The Internet has certainly impacted the use of newspaper ads and
has provided a number of options.
Those options include:
CraigsList and other Internet rental services – Some surveys indicate it is now the
advertising medium of choice -
Apartments for Rent magazines also offering website exposure –
Tenant Prospecting Internet Sites and services –
Management Company and Owner / Operator Web Portals – (Identified above) –
Social Media – Facebook – Twitter – YouTube – etc.

One observation that I have noted on a regular basis is the lack of web site addresses on
property signs. This should be mandatory for properties that are owned or managed by the
managing entity. Building signage is a low cost 24/7 operationally active marketing
medium that can provide enhanced information via the Internet 24/7 on the posted
property and other properties being managed.
Even if the signage with the web site address does not have a vacancy in the property
currently on which it is positioned, the website may be used to create a waiting list when
vacancies do occur and identify vacancies at other properties on the web site belonging to
the management company or property owner. Referral fees may even be possible when
referring a prospect to another management company or owner/ operator.
Any company or owner/operator that has a web site capable of posting vacancy
information and is not using their building signs to expose their web site address is short
changing the web sites effectiveness and their marketing efforts. It should be noted that a
management company or owner/operator web site will most likely only host property /
unit information being managed by the company or the owner/ operator.
Housing rental magazines are primarily used by management companies and owner/
operators with large apartment portfolios. They are expensive. In addition to the pictures
and descriptions of apartment properties the magazines generally offer a web site which
offer the same or more content on those properties. The web site is shared by all the
properties present in the magazine which many consider a negative. Of course other
advertising mediums, newspapers, Craigslist and a growing list of rental property websites
also share that characteristic, but the cost of the rental magazines is greater considering
that your properties are sharing the magazine and the website with competing properties.
Most other advertising mediums, newspapers, housing rentals magazines, etc. provide
mediums which are shared by competing management companies and properties. Given
an option do you really want your properties competing directly with the other properties
in the rental magazine that has a single initial website address? Probably not! Some
current systems today do provide features which integrate property and unit information
that generate listings for CraigsList and other rental advertising services. CraigsList, is an
all purpose advertising medium.
CraigsList has become one of the heavily used advertising mediums for both real estate
and property management. It is time consuming in its preparation of the ads, and has
begun to collect fees for a number of account categories, ie. Jobs, dealer cars & trucks.
New York apartments etc. It is expected that more high ticket items including real estate
sales and possibly rentals will be added some time in the future. For the most part it is still
a free Internet service..
Automating and integrating property management systems with CraigsList is one of the
marketing innovations now available on some of the current leading property management
systems. The newest systems provide a number of techniques to integrate the system data
with various advertising/ marketing real estate oriented outlets including CraigsList. It is
of such significance that programming routines have also been developed to enhance ad
appearance, content and ease of use.
A bothersome aspect of Craigslist is the frequency of changes in the activation of
CraigsList generating delays and frustration among its users. A more worrisome aspect of
CraigsList operations are the criminal activities that have occurred based on CraigsList
ads. A general CraigsList search recently identified a number of the hits on the first page
related to serious CraigsList based crimes. Be sure to apply appropriate security
procedures when using this Internet service.
A relatively new service is focused on SFR’s, and condo unit owners interested in short
term rentals of their property. AirBNB is a San Francisco company that advertises the
property and arranges the rental. This service is of special interest to owners with
properties (generally high end) in the proximity of special events, and special attractions.
We have provided additional details re: AirBNB in Chapter 8.
A small number of Internet based companies have established sophisticated interactive
tenant prospecting programs. They are significantly more capable then the Apartments for
Rent Magazines based on the many interactive functions provided and in that each
portfolio has its own web site which may include a gateway (link to each property’s
advertising content).
A number of Internet Tenant Prospecting Systems are being used by many large residential
housing corporations. Some have been developed at great expense and over an extended
period by the company’s IT staff, while others were developed by Internet software
development companies independently and then marketed to large and mid size property
management companies and residential housing corporations. My past experience in bank
and corporate systems and programming management has led me to believe that
modifying and updating an existing program will generally cost less and be operational
sooner than developing a program as a new project; sometimes significantly less and
significantly sooner.
These systems provide a wide range of capabilities associated with a property including
interactive routines that provide current /future vacancies, common area and unit pictures,
floor plans, amenities, local attractions, schools, an application, and request for
appointment / additional information. These systems were designed as standalone systems
but have also been integrated with property management company web sites. They have
also been customized for commercial property management operations, single family
residential property management, assisted care senior housing, and other niche properties.
Other important marketing tools in property management systems involve the creation and
use of applicant records. Some systems provide additional information, which identifies
the effectiveness of various marketing media. In a low vacancy market it is likely that low/
no cost mediums, i.e. signs, the Internet, tenant referrals, may provide enough qualified
tenant prospects that high cost mediums, i.e. newspaper ads and rental magazines are no
longer required. Some mediums will also provide prospects that have higher education and
financial resources. The Internet tends to fall into that category.
Property management software that provides maintenance management routines should be
promoted as an important systems feature to prospective owner clients. These routines
provide lower ongoing maintenance and administration costs and unit maintenance history
reports which provide both current and future value. Surveys have also indicated that good
maintenance services are high on tenant satisfaction lists. Maintenance routines are
generally available in most property management systems but vary greatly in the number
and sophistication. Additional details related to maintenance system features and
operations are provided in Chapter 6.
Most systems today provide various/ features and routines of what is generally identified
as “Contact Management”. It includes reminders, appointments, and logs of the contacts
associated with tenant prospecting. Many of those same features and routines are also
applicable for contacts with current tenants, owner/ clients and vendors. Instead of paper
notes, the logs are appended to the prospects, tenants, owners and vendors. They provide
valuable tools for organization, productivity and risk management policies. Strong contact
management routines are an important indication of an established and capable system.
Newer PC innovations and technologies are in some cases now are the expectation among
some affluent and sophisticated tenant prospects and property owners. ACH/ EFT
processing of receivables for tenants and payables for owners are displaying increasing
awareness and interest.
Property management software that provides the ability to store pictures/ floor plans of
properties and units provide distinctive advantages to prospects, staff and owners. The
pictures can be placed on a web site and/ or presented in an office in lieu of traditional
meet and meander walkthroughs.
Traditional tenant prospecting activities usually involve meeting the prospect at the
property/unit directly when showing a SFR, condo unit or apartment unit at a non-resident
manager property. That process is especially inefficient time wise and can be personally
dangerous for the staff and/or owner. It is also a process in which scams have been
established involving individuals posing as owners or property managers taking security
deposits and rent on properties that they do not own or manage. Management companies
and owner/ operators need to revise their policies regarding the means in which tenant
prospects are met and processed.
The use of the Internet and the picture/ video walk through has reduced the use of
traditional newspaper advertisements and the associated advertising costs. It also tends to
draw higher educated and more affluent tenant prospects. The use of digital pictures,
scanned or entered directly off of the digital camera into a computer also provides the
content for brochures and the web site quickly and inexpensively.
They will also generally rent faster as a result of not having to wait on rent ready units. An
abundance of good pictures of the grounds, the to be rented unit (rent ready of course from
a prior vacancy) and the special amenities and features of the property will usually allow a
prospective tenant to make a rental commitment. This is especially true during low
vacancy periods. This of course results in higher occupancy rates and more income for the
client/ owner(s) and the management company.
Pictures taken after a move out can also secure a higher likelihood of a successful legal
action in small claims court for the property manager and / or owner when a unit has been
trashed or seriously abused. Comparison pictures taken prior to the tenancy in conjunction
with a signed detailed move-in document will also be of great value in court.
Marketing in property management has been dramatically changed as a result of
automation, innovation and technology. We are not likely to see a return to the traditional
advertising and marketing of earlier decades. Our Technology Addendum provides
additional information related to the ways and workings of today’s and tomorrow’s
technology.
CHAPTER 3
The Monthly Cycle – Part l – Accounts Receivables

Accounts Receivable identifies a major set of accounting functions common to business

operations. In property managements the majority of scheduled tenant receipts are
received and processed at the beginning of the month. Unscheduled receipts, i.e. owner
contributions, security deposits, laundry income receipts, etc., may be received and
processed anytime during the month. A/R functions are a primary element of the property
management monthly cycle. They usually dominate the first third of the month and
traditionally processing receivables is a very labor intensive function.
Most systems require a charge as a means to establish the ongoing balances to be paid by
the tenants / residents of rental properties and/ or homeowners of condo Associations.
Prior to the processing of the receipts, (usually monthly) most systems require the creation
of charges which are a request for payment. Charges are amounts which tenants /
homeowners owe for a specific category of service or use; rent primarily for tenants and
HOA fees for homeowners residing in a unit of a homeowner association.
Note: Sometimes the term charge is also used when accounts payables are created and / or
invoices are received from vendors. Our experience with our many users strongly suggest
that the term charges always be defined as a request for payment for a specific type of
service or use and only used with accounts receivable operations. Using charge
terminology for both accounts receivable and accounts payable will most likely confuse
some junior staff members and increase the potential for errors in processing.
Note: In accrual accounting charges, not receipts, are used in the financial reports while
payables, not checks, are also included in accrual financial reports. Our experience has
shown that accrual accounting is rarely used in the property management industry in
California. It is occasionally found with large HOA’s and with large company/ estate
owned properties. It is generally recommended by CPA’s based on potential tax benefits.
(See Chapter 7)
For example, rent is a charge for the use of a unit, additional parking or a preferred
parking space, i.e. covered parking is a charge for an enhanced amenity. A CAM
(Common Area Maintenance) is a charge for maintenance or other expenses associated
with a commercial property, i.e. a retail shopping center, an office building, an industrial
property, etc. CAMS tend to be an exclusive element associated with commercial
properties.
Note: Another CAM acronym, (rarely used) is that related to Home Owners Associations
(HOA’s) also known as Community Association Management. The fees that HOA/ CAM
owners pay does include expenses associated with common area maintenance, but are not
charged as CAM’s. Those expenses along with other management, administration and
facilities repairs and replacement costs fees are usually identified as HOA Fees or Dues.
Security Deposits are another important charge and receipt type. Generally they are
received at the beginning of a tenancy, but may entail multiple partial security deposit
receipts over a number of months as a result of a negotiated security deposit between
property management and tenant. This type of arrangement tends to appear when vacancy
rates increase significantly (8% or more) versus our local norm (4-7%).
Charges are paid or resolved by receipts from tenants or homeowners. Generally, the
majority of the charges are established thru a recurring / auto charges template that
identifies the various details associated with a specific charge. The templates then allow
the actual charges to be created / posted, (usually monthly) en masse either automatically
or by a simple overt staff action prior to the end of the month.
Additional charges not regularly scheduled may be created for various reasons. They
usually involve a special infrequent service or as a result of the breach of the rental/ lease
agreement by the tenant or homeowner Covenants, Conditions and Restrictions. CC&R’s
are the governing documents that dictate how the homeowners association operates and
what rules the owners and tenants that may be renting the condo must obey. We will
discuss HOA/ CAM operations further in Chapter 8 which identifies the various categories
of Niche Property Management and their operations and characteristics.
Examples of charges include:
Late Charge – are charges created as a result of rent and other payments not
received in the time frame identified in the rental agreement. There may or may not
be an established grace days identified in the rental agreement. Late charges may be a
fixed amount or a percentage of the rent due. Additional charges may be applied after
the initial charges are applied, i..e. a daily charge. Late charges generally will not
exceed more then 10% of the rent charge and are usually created through a systems
routine. Grace periods are usually optional and if present are defined in the lease/
rental agreement and in the system where the actual calculations take place.
Maintenance Charge – A charge generated as a result of maintenance, repairs, or
replacement based on normal circumstances or tenant based ignorance, maliciousness
or negligence. Newer property management systems provide the ability for charges to
be applied to the tenant at the same time the completed work order is converted to a
payable.
Note: Tenant guests and their actions are also the responsibility of the tenant and may
cause maintenance charges to be applied to the tenant.
Garages, Parking and/ or Storage Charge - Garages, additional or premium
parking fees are a relatively common fee especially where parking spaces are limited.
Storage spaces are also a commodity which when available will provide an additional
income source requiring minimal management and maintenance.
NSF Charge – A NSF charge can be created when a tenant/ homeowner’s check does
not clear based on non-sufficient funds. Some management software will also create
 the bank NSF fee at he same time the NSF routine reverses the payment and the paid
charges.
Lock out Charge – A Lock Out charge could be applied when management staff
unlocks a an owner or tenants unit as a result of a lost, or forgotten key. This tends to
be an informal charge often identified in the owner’s / tenant’s agreement or posted at
the resident management office and may not be reported to the office.
Pet Fee Charge – In addition to an increase in a tenants security deposit or separate
pet deposit, property management companies and owner/operators also may establish
monthly pet fees based on the additional common area maintenance that pets
generate.
Other Charges – Additional charges and income can be implemented as property
managers and owner / operators perceive additional amenities and services that can
be rendered based on the property and management/ staff recognizing income
generation opportunities.

Note: Additional income sources that have been identified in the past by property
managers are listed at the end of this chapter.
A Receipt is an accounting transaction that records the money that was received.
Most receipts are received from tenants of rental properties and/ or homeowners of
condo Associations. Other receipt sources include:
Owner contributions –
Loan proceeds –
Vendor income – Laundry & other vending equipment income –
Utility rebates –
Savings and money market interest -

Note: We are identifying tenants / residents payers and/ or homeowners of condo

Associations as the usual source of receivables in property management operations.
Chapter / Session 8 (Niche Management) identifies many other categories of management
operations where the payers may be identified in a different manner.
Alternative Payments – Receipts may also include payments from owners and vendors.
Most systems do not require charges to offset this type of receipt. They will however,
provide the identification of the payer (company or individual ), date, dollar amount,
general ledger account and description.
Owner contributions are provided by the property owner for a number of reasons. They
include:
A shortage in the property funds based on one or more vacancies –
Expenses exceeding the income is usually a rarity but can occur with vacant units –
 Capital improvements requiring a major investment of capital –

Vendor receivables - Some vendors also collect funds based on the products / services
they provide, i.e. laundry equipment, soft drink vending equipment, renters insurance, etc.
and are distributed to the management company or owner/operator based on the service
agreement that was executed. There appears to be an increase in the number and types of
vendor receivables as new products and services are made available to tenants and HOA
homeowners. Some newer products and services include:
Renters Insurance -
Flat screen TV’s -
WiFi and Cable services -
Recreation Room and Activities -
Appliance Rentals – Microwaves, etc. –
Furniture Rental -
Concierge Services –

The products and services above may entail charges/ receipts from the tenants/
homeowners directly or from vendors based on the products / services provided.
Note: Generally owner contributions and vendor receivables are usually processed without
charges being applied based on amounts and dates varying greatly among those receipts.
Note: The California BRE/DRE requires all sources of income associated with rental
operations be disclosed in the management agreements including all sources of income
acquired by the management company even if the owners property(s) is not a direct source
of the income. See Reserve Analysis.
Note: Home Owner Associations are not under the purview of the BRE/DRE. In
California they are under the oversight of the Department of Corporations.
Receipt Types - Traditionally receipts included cash, checks and money orders which are
then processed by entering the property, unit, tenant, identifying income account codes
plus the amount and date received into the system. Most systems would already have the
charges in place which identify the tenant’s current balance. HOA receipts are generally
identified a either fees or dues, but may also include periodic special assessments, late fees
and penalties for violation of the CC&R’s.
Current systems may now include additional types of receipts, and methods of processing.
New receipt types may include credit cards, debit cards, e-checks and ACH / EFT
(Automatic Clearing House / Electronic Funds Transfer) transactions. The above receipt
types are an increasing element in current management operations and do provide
important new benefits for the receipt payers and recipients.
ACH receipts require the most set up which includes an authorization and bank account
information of the tenant / homeowner. ACH receipts can be established as a recurring
receipt in the property management system and/or processed via a payment made in a web
site. We offer significant additional information in our Technology Addendum re: ACH/
EFT and associated transactions and operations.
Check reader/ scanners are now also being made available by banks and / or software
developers to aid in processing. The bank supplied reader/ scanners forward the check/
money order data to the bank via the Internet relieving the management company or
owner/ operator of bringing the checks to the bank and preparing a formal bank deposit. In
addition the scanned check information is also transmitted to the bank and becomes an
accessible archive to the management company or owner/ operator if a visual copy is
needed at some time in the future. This process however, still requires that the receipt data
be entered into the property management system.
Those rare systems developers that do provide a check reader / scanner will in addition to
updating the tenant record with the check data may also provide a copy of the scanned
copy of the check and possibly attach it to the tenant’s record. An additional option
available with a small number of systems is that of conversion of the check information
into an ACH / EFT transaction negating the need for the checks to be entered into the
system manually. Additional information related to scanners is available in the Scanning
Addendum.

Special Processing –
Prepayments - Any money received from a tenant / homeowner where a charge is not yet
in place is considered a prepayment. Usually prepayments occur because a tenant
generates a payment/ receipt before a charge is recorded in the system. For example, a
tenant may pay next month’s rent on the 25th, even though the rent charge won’t normally
be created until the end of the current month. Prepayments therefore create special issues
which must be accounted for based on the type of property, and property owner.
Prepayments also occurs when tenants overpay either by mistake or when they may be
prepaying for additional rental periods. A prepayment will generally be reported in one of
two different ways.
As a Liability – The rent payment is established as a temporary liability and then
transferred to rent income when the rental charge is created and due. This process
allows the management company to maintain continuity in owner payments in lieu of
doubling a payment one month and then no payment the following month. It is
usually the preferred method when SFR’s and condo rentals are involved.
As Prepaid Rent Income- When multi-unit properties are being managed and a
prepayment is received it would normally be processed as prepaid rent income with
the other regularly scheduled rents processed that month. The existence of multiple
rent receipts and associated income negates the likelihood of not being capable of
 providing owner checks continuity.

New Tenants Processing –

Application Fees – Are usually used to primarily fund a background / credit check for the
prospective tenant. Assuming an acceptable report is received from the company
providing the background / credit checking service a security deposit is usually required as
part of finalizing a rental agreement.
Note: Fair Housing officials have special interest in all facets of the tenant prospecting and
renting operations. The advertising and background / credit checking operations are
reviewable to assure that discrimination is not a factor in the process. Fair Housing is part
of the content in Chapter 14 – Government Entities & Issues in Property Management
Systems.
Security Deposits – In many systems Security Deposits are initially processed as an
element of a Move-in Feature. This feature will create a tenant record, charges and receipt
records which include a security deposit, first month’s rent and other one-time and/or
recurring / auto-charges required by the property and rental agreement.
Note: Security Deposits are normally processed as Liabilities as compared to Income. This
is based on their purpose and the assumption that all or part of the funds received will be
returned to the tenant at the end of the tenancy. We define Liabilities and Income along
with many other accounting terms in Chapter 7 which is focused on Property Management
Accounting Basics.
Move Ins – Generally these are established necessary programmed procedures designed
to simplify the process of creating the necessary charges and receipts for initiating a
tenancy. It would also entail a physical walk through of the rental unit in order to
document the unit’s condition and possibly establish additional charges or concessions
based on the condition of the unit and special tenant requests.
Section 8 / HUD Tenants Receipts – Department of Housing and Urban Development -
Many systems allow a procedure of creating 2 charges per month for each Section 8 /
HUD Tenant’s rent. A charge is created for the tenant portion of the rent payment and also
for the HUD portion of the rent payment. This provides a more detailed level of
transaction processing, an audit trail plus a clearer picture of the tenant’s and HUD’s
payment status based on the separate charges.
The Deposit Function – Traditionally a hand written deposit was created for each batch
of receipts associated with a Trust Account to be deposited in the bank. The batch may be
created on a daily basis or may entail a number of days after the first few days of the new
month. Later banks begin to accept a deposit total as long as a detailed list of the receipts
was included with the deposit slip.
A further improvement was introduced in some systems when a deposit report (including
the Magnetic Ink Character Recognition –MICR encoding ) was a report option negating
the need for a hand written deposit slip. Hand written deposit slips were time consuming
and occasionally were incorrect in that check numbers, check amounts and even deposit
totals were wrong.
Reversing Transactions are transactions that void a transaction previously entered. In
many systems the accounting effect of the original transaction is eliminated without
deleting the record of it. The fields of a reversing transaction are identical to the original
transaction except the amounts in the line items are opposite. Normally the amounts of a
reversing transaction are negative numbers, but if the original had some negative line
items (e.g., rent concessions or discounts on an invoice) the reversing transaction may
have some positive amounts. Many current programs can automatically create reversing
transactions and link them to the original transactions thus providing an audit friendly
function.
Deletion of transactions are still possible in some systems, but generally only available at
an administrative level. Deletion of transactions must be highly controlled due to the
potential of masking illegal and / or inappropriate actions. Deletion of transactions may or
may not create a log identifying the deletion based on the sophistication of the
management program.
Accounts Receivables Reports -
Tenant / Resident & Home Owner Ledger - One of the results of charge and receipts
processing is the continued development of the Tenant / Home Owner’s Ledger. This is a
log of all the ongoing charges, receipts and balances in date sequence. It is often provided
to tenants when there are issues / disagreements re: payments made, to be made or
corrections issues involving charges and payments.
The Rent Roll is a report used prior to, during and after receipt processing. It is often
made available to the resident management staff of apartment properties to affirm tenant
balances prior to rent due dates. It is also used by property managers to monitor the status
of property receivables during the month. Variations in the monthly tenant balances can
then be highlighted and tenants informed of the appropriate payment for that month.
Another option for tenants with irregular payment activity and multiple charges is the
preparation and distribution of a monthly statement.
Delinquency Reports – Often a number of delinquency report options and formats are
available with the purpose of highlighting the absence or less then full payment of rent and
associated charges. Most often delinquencies are reported based on 1 to 30 days, 31 to 60
days, 61 to 90 days and over 90 days delinquencies. Resulting actions can include calls,
letters re: the delinquency. In newer systems automated preparation of letters, (e-mails)
and/ or phone calls may be automated.
Late Notices / Letters - Various state & local laws regulate the procedures necessary to
document breech of rental agreements based on rent payments or inappropriate behaviors.
Some common legal documents include:
3 Day Notice – Pay Rent or Quit –
3 Day Notice – Perform Covenant or Quit -
30 Day / 60 Day Notice

Contact Management & Communications – Various communications with tenants

and/or homeowners are generally required based on the tenancy and the receivables
processing. Logs and ledgers are the primary means to document any and all issues.
Maintaining logs of all forms of communications, i.e. phone calls, letters, e-mails and
conversations should be a primary operations requirement. A few systems have developed
audio records as an additional means to document phone communications. Additional
details regarding the means and methods of communications with owners, tenants and
vendors are identified in Chapter 5.
CHAPTER 4
The Monthly Cycle – Part II – Accounts Payable

Accounts Payable identifies an important group of accounting / bookkeeping functions

associated with the recording of invoices/ payables and preparation of checks or other
payment options. The A/P functions are a primary element of the property management
monthly cycle and usually dominates the middle of the month management operations.
An Invoice / Payable record is created when an invoice/ bill is created in the system and/
or received from a vendor as a result of products or services rendered for one or more of
the managed properties or for the management office. An invoice is a document
identifying a product or service and its cost provided for the specific business / property/
unit or individual. It will usually describe the product / service, vendor, price, date, and
terms. This information is then entered into an invoice form in the system by creating an
accounting transaction and associated content for the creation of a check or ACH/ EFT
transaction. Additional check /information would normally include a payment date and
appropriate memo information.
Invoices will be received from vendors and possibly tenants for products and services that
were provided for properties/ units by agreement with the management company. The
invoices are entered into the system, converted to a check or ACH payable by the
accounting staff and directed to the vendors. Invoices may also be created by management
staff and directed to property owners for special services, i.e. a maintenance project. In
some circumstances the invoice may also serve as a quote identifying the cost of the
project prior to an owner’s approval.
Generally owner draws are created in a special routine that calculates the appropriate draw
based on set up specifics. Other types of payables are created within the system. They
include:
Recurring / Auto Payables - Many property management systems offer a feature
that provides a payables template which can be created with the purpose of
generating a specific invoice / payable on a scheduled basis. This is a significant
productivity tool based on a major reduction in time and keyboard operations.
The recurring / auto payable can also be batched by date/ priority/ category i.e.
mortgages, utilities, etc. The resulting payable is then established as a pending check
/ ACH with the other one time invoices and other posted recurring payables. Some
newer systems provide additional scheduling options other than just monthly. Some
systems allow bi-monthly, quarterly and other payment schedules in addition to
monthly payables.
Another time saving technique is to create a recurring payable even for monthly/ bi-
monthly payables in which the amount changes. The recurring payable amount is a
coded amount, such as 99 cents which signals that the actual invoice/ bill amount
 needs to replace the coded amount. This generally is a significant savings of data
entry time especially valuable for utility bills. The process is much quicker then
preparing a complete payable from scratch.
Owner Draws - Payment schedules are usually based on the property type.
SFR’s and Condo Rentals - Owner payment s are usually scheduled between the
10th and 15th of the month after rent payments have been processed.
Apartments / Commercial - Owner payments tend to correspond with month end
and checks and are often distributed with financial reports.

Owner Draws may be established as a

fixed dollar amount –
as a percentage of net income including 100%.–
all of the net income minus a reserve or withheld tax amount –

Management Commissions, Fees, and Reimbursements – The Management Agreement

specifies the method of calculating commissions for the management company. Those
methods may include:
A fixed amount –
A percentage of rent collected –
A percentage of other sources of income –
A percentage of charges -
Special tenant and management fees – Reimbursements for credit check fees, NSF
fees, lease up fees and other special circumstances where management may initiate
payments for special services provided for a particular property /owner.

Tenants Payments - Primarily payment to tenants are as a result of Move-Outs based on

the end of their tenancy. According to California law security deposit refunds must be
returned within 21 days along with a detailed list of any charges effecting the actual
deposit being returned. –
Note: The disposition of the security deposit after a Move Out is often the most
contentious event between the property manager, ( fee manager or owner/operator) and
often involves Small Claims Court proceedings.
Other payments may entail as a result of special services provided by the tenant which is
based on a verbal or written agreement with the property owner or management company.
It may entail cleaning of apartments, gardening services, painting of units, handling trash
or movement of trash cans during trash collection day. Many owner/ operators and a few
managers have discovered that a tenant based service often resulted in a “do over” based
on poor performance of the tenant.
Most companies however, avoid this type of arrangement based on the above and the
various risks/ liabilities associated with a tenant not being an employee. Significant
liabilities and legal issues tend to support an avoidance of using non-employees for
maintenance tasks and other services. The risk associated with an ongoing arrangement for
tenant services is a likelihood of government agencies to determine that the tenant is an
employee and therefore all of the associated employee regulations and fiscal
responsibilities are applicable.
If an owner/ operator or property manager does utilize a tenant for a specific task, i.e.
painting of their apartment, general common area clean up, etc., a better method of
reimbursement is to use a rent concession. A rent concession is usually established as a
credit against their rent ( a reduction in rent) and creates a simpler audit trail in the tenant’s
ledger. In any case legal advice is recommended prior to initiating payments in any form
for tenant’s services.
Special payments may result from reimbursements to tenants such as material damage
resulting from leaky roofs or hotel/ motel accommodations necessitated by termite
extermination operations, flooding of the rental unit, etc. This type of disruption may often
end in the termination of the tenancy, possibly promoted by the management company or
the owner/ operator based on the likely costs of repairs and extended hotel/ motel housing
costs.
Move Out & Disposition of Security Deposit – Is a required report in some states
generated at the end of a tenancy. It details the final accounting and disposition of the
tenant’s security deposit. A walk through of the unit is generally required and
documentation related to the unit’s condition is established. Cleaning, repairs and
replacements if necessary are initiated and the associated invoice amounts may be all
charged against the security deposit therefore creating a receivable. All or a portion of the
security deposit (assuming the move out charges do not exceed the security deposit) will
become a payable to the past tenant.
Note: The security deposit disposition tends to be the most likely disputed event in a
tenancy. It may result in small claims litigation, a tenant generated complaint and resulting
BRE/DRE audit, and/or a negative posting on the Internet.
The report would normally be accompanied by a check which would be the balance of the
security deposit minus the costs of the cleaning, repairs and replacements determined to be
the tenant’s responsibility. California Law mandates that the report and the security
deposit disposition be finalized within 21 days. Occasionally a repair or replacement may
take longer than the 21 days designated in the law.
One logical recommendation is to prepare and distribute the check of the known repair /
replacements, and a portion of the pending repair/ replacement while indicating an
additional check is forthcoming once the repair/ replacement has been completed. Intent
would normally be a consideration by the judge if the tenant pursued a Small Claims
action.
Employee Payables - Includes traditional payroll of office staff plus Resident
Management & Maintenance staff of larger residential properties. California has specific
payroll requirements for employees that reside at a managed property and serve as resident
managers or maintenance staff. California law requires that a portion of their earnings will
include all or a portion of rent.

Current Payment Alternatives -

SSA Direct Deposit / Electronic Fund Processing – One major alternative option began
with the Social Security System. The SSA introduced Direct Deposit / Electronic Funds
Transfer in the late 60’sas an optional alternative to SSA checks. On a personal level I
recall the processing of SSA Direct Deposit / Electronic Funds Transfer payment tapes in
the bank computer center I served as the Manager of systems & programming and the
Assistant Manager of the computer Center. The tapes updated the bank accounts of the
SSA recipients that were bank customers.
The ACH/EFT program was then introduced and implemented for the military, federal
employees, Fortune 500 companies, and state employees, etc. replacing millions of checks
with the Direct Deposit / Electronic Fund Processing alternative.
The Social Security Administration had announced that the option of providing printed
traditional Social Security Checks to recipients wasto be halted after March 1, 2013. That
ended a long history of SSA check processing and distribution.
The Direct Deposit / Electronic Funds Transfer technology was the beginning of a number
of later developments that evolved into today’s ACH (Automated Clearing House) EFT
operations. ACH/ EFT was established in effect as a Direct Deposit / Electronic Funds
Transfer for one-time and recurring transactions for individuals and companies utilizing a
diverse group of financial organizations as the transaction processor.
NACHA – ACH/ EFT - NACHA - (National Automated Clearing House Association)
was created to assuming the role of creating and maintaining the rules that govern the
ACH/EFT (paperless) operations for over 11,000 financial institutions who are members
of NACHA. Originally NACHA was first established in California in 1974 and included
California banks and the Federal Reserve. It continued to expand with major growth based
on the growth and use of the Internet. ACH/ EFT transactions continue to increase in
volume providing new efficiencies and lower costs for banks, businesses, and consumers.
ACH/EFT operations are now a feature in most of the popular property Management
systems. ACH/ EFT transactions are established for both one-time and recurring
transactions.
Credit Cards – Credit Card originated in the 1940’s. The first called Charg-IT and was
introduced by a New York bank. A bill was generated by the business and sent to the bank
which then paid the company while transferring balances from the customers account to
the banks account.
The first popular Credit Card was the Diners Club offered by a company of that name.
American Express introduced its card in 1958 which was well received based on their long
time association with travel activities. Banks soon entered their own credit card operations
and partnered with Visa and Mastercard companies who offers their services to bank and
other financial organizations.
Debit Cards – Debit cards were used in Europe before they were introduced in the USA.
The first US debit card was introduced in 1978. The debit card was then matched ATM’s
in 1984. Debit cards are tied to a users bank account like a check transaction without the
check. They continue to increase in volume and popularity. There are a number of banks
now charging debit use fees and there are strong indications that new fees will be
forthcoming.
Note: Property management systems generally continue to implement the handling of
paperless transaction methods while increasing the volume of transactions.
Check Creation - Variations will be effected by the number of bank accounts being used
and the availability and degree of use of ACH / EFT processing. Physical checks are not
created when ACH/EFT alternatives have been implemented. Many systems today provide
the option of creating and using multiple bank accounts and printing the formatted checks
on blank check stock. This provides a major increase in efficiency and a reduction in
check costs and void checks.
Each check has its own check number and the MICR (Magnetic Ink Character
Recognition) information in a special font at the bottom of the check. The MICR
information includes the check number, Transit / Routing ( a means to identify the bank
and branch in which the account resides ) plus the bank account number of the Trust
Account. Note: Some banks are now capable of reading the check information based on
OCR (Optical Character Recognition technology) and no longer need the magnetic ink
that traditional check reading equipment required.
Note: Many property managers have discovered additional efficiency is established by
using a 2 drawer set up for their laser printers. One drawer is reserved for the blank check
stock and the other for plain paper for reports. The separate drawers are established as 2
separate printer drivers. This technique reduces the errors and misprints when a single tray
is used for both reports and checks.
Check 21 - Additional technology that had been introduced in the past is the Check 21
system. This is technology which captures the check information by the initial processing
bank in a digital format. The digital information then moves through the banking system
as a digital record versus the old system where the physical check was transferred from the
receiving bank, possibly one or more Federal Reserve Banks, (for out of state checks) and
finally to the bank and the account it was written on. Prior to Check 21 the delay in a
check clearing may have taken 3 or 4 days based on an out of state check’s processing
time.
On October 28, 2004, the Check Clearing for the 21st Century Act, also known as Check
21, took effect. This federal law allows banks to transmit checks electronically and
substitute electronic images for original paper checks. Check 21 provides many
advantages for banks and financial institutions. By transmitting checks electronically,
banks can reduce the amount of time it takes to receive funds. This is because they no
longer have to wait for another bank to receive paper checks before they send the funds. In
addition to saving time, Check 21 saves banks millions of dollars in transportation and
processing costs.
While Check 21 has made check processing more efficient, it has reduced the time for a
check to clear. In the past “kiting” would often provide two or three days for checks to
clear, giving consumers additional time to deposit the appropriate funds to cover the
check. However, with Check 21 banks can clear checks within 24 hours of receiving them,
cutting this safety net by days in many cases. In addition, although banks can process
checks and update t their customer accounts right away, they can still hold out-of-state
checks for five days or more.
Currently, the increase in tenants and property owners requesting and being offered the
option of ACH processing of rent payments and owner distributions continues. Property
management systems that provide ACH processing as an option are also increasing as new
systems appear and some older systems upgrade their capabilities.
A very important requirement, other than systems ACH capability, is the need to acquire
the authorization and the necessary financial information, (bank account information) to
implement ACH from both tenants and owners on an individual basis. Property
management companies have often discovered that gathering the necessary authorization
to implement ACH operations has required significantly more time and effort than
expected.
We recommend that property management companies and owner/ operators begin their
efforts as soon as possible in order to acquire the benefits of ACH sooner, rather than later.
Generally, this is less of an issue for owners, with the exception of some seniors who still
want their checks because “they have always received their checks that way” and look
forward to their time with their favorite teller. It is possible you may find that 90% or
more of your owners will respond favorably to having their distributions automatically
deposits via ACH / EFT operations. It is possible some owners may not be aware of the
ACH technology and its use in the property management industry and may require both
marketing and educational efforts to convert the owner to ACH distributions.
We are aware of at least 5 traditional and current methods of distributing owner draws/
distributions. They include;
Owner check mailed to owner –
Owner Check mailed to bank to be deposited in owner’s account –
Owner check deposited by management staff in owner’s bank with other owner
checks –
Owner check delivered personally to owner by management staff –
Owner check converted to ACH / EFT transaction and deposited in owner’s bank-

It may not be obvious, but the ACH / EFT operation for owners is the least costly option
in staff time, and materials / postage costs. It is also in most cases an owner service/
convenience that will be appreciated. Another element that most property managers will
relate to with traditional owner check processing is the owner who places the check in a
drawer or loses the check before it is ever deposited. This creates reconcilement issues and
the periodic voiding of the original check and the redundancy of re-issuing and re-
distributing the check.
Note: Additional information re: ACH/ EFT transaction processing is available in the
Technology Addendum of this publication. ACH/EFT transaction processing is one of the
most significant technology enhancements effecting both A/R’s and A/P’s now being
implemented within the property management and rental housing industry.
A relatively new alternative/ modification related to invoice processing is the scanning of
invoices. Based on the equipment / software used this may be completed on a single scan
per invoice or on a batch basis. Various options are available effecting OCR (Optical
Character Recognition), data importing, storage and distribution operations. Recent
improvements to desktop scanners such as batch processing) have provided major cost
reductions over the very large and expensive floor equipment of the past. Scanning is
discussed in additional detail in Chapter 5 and the Technology Addendum in the book.
The Accounts Payable operations in Property Management provides some of the most
technology oriented options for major ongoing payback and productivity during the
property management cycle, They along with a solid set of procedures are priorities in
establishing a system. Procedures should include the following functions:
Creating vendor records –
Creation of invoices –
Creation and processing of recurring/ auto payables -
Scanning of vendor invoices and distribution to owners –
Creation and distribution of owner draws –
Scheduling of payables and their distribution –
 Preparation of A/P reports -

The procedures above will maintain owner client good will, minimize mortgage and other
late payment penalties and fees, plus minimize the time and cost of A/P operations. They
also need to be assigned to staff with responsibilities for those functions. Payables do
require appropriate security precautions.
CHAPTER 5
The Monthly Cycle – Part III – Reports Preparation &
Distribution / Communications

The end of month in the property management cycle normally entails a significant effort
focused on report preparation and distribution of reports and checks to owners, designated
CPA’s, and financial institutions. Traditionally owner reports were printed, collated,
packaged and mailed. Those distribution operations and costs included materials, i.e.
paper, toner, envelopes, check stock and postage. They also included the labor costs of
administrative and manual operations.
The time and costs of report preparation and distribution is significant. The time and costs
savings of e-mail operations are also significant. In some cases they may equal or surpass
the monthly cost of an on-line system or a leased/ purchased standalone system. See
Chapter 16 for financing alternatives for system acquisition.
One of our commercial clients who has managed to convert about 95% of his owners to
digital reports (PDF’s) and e-mail distribution has indicated he is saving over $300 a
month compared to traditional report processing and distribution. The reports are batched
and e-mailed with one click of the mouse, once they have been set up in batch mode.
Some management systems also allows customizing the owners report batch for each
owner based on the owners preferences and possibly their CPA’s requirements. That
feature is often in place with additional routines that automate the preparation and
distribution via batch e-mail operations possibly initiated by a single mouse click. Some
states may require special reporting based on state mandates and regulations. Examples
are California Department, (now Bureau) of Real Estate Trust Accounting Reports and
Arizona’s Rental Income Sales Tax reporting for the Phoenix and Tucson area
communities.
Traditionally these reports are filed for reference, backup, audit and possible state
mandates. Newer systems generally provide other options then hard copy printouts. Newer
systems offer digital formats such as Excel, Word, and PDF (Portable Document Format)
and many more format options. Use of these options negate the use of paper for some
company maintained and owner reports substituting digital output to be saved on various
storage media and e-mailed to owners. These capabilities are among the most productive
innovations and technology in newer systems.
Newer systems also generally provide a larger number of reports in addition to vast
improvements in the means of distribution. Early systems may have included up to 30 or
40 reports. Newer systems may offer as many as 200 or more reports as a standard
offering. Report writer modules / routines can easily increase that number of report
availability based on special report requirements.
Now that we have started the second decade of the new millennium it can be assumed that
most of our population is at least aware of e-mail even though not all of the population is
using e-mail on a daily basis. It appears that many property managers are using e-mail on
a fairly regular basis based on limited e-mail capabilities within their system. Older
systems users may use e-mail for client, tenant or vendor communications and report
distribution, but as a separate support program, i.e. MS Outlook or Outlook Express which
is rarely integrated with their property management system.
Property managers may be communicating with owners, tenants and vendors by e-mail,
but if it is an older system, more then ten years old, it is likely a limited process using
grouped contact lists separate from the owner, tenant, and vendor records within their
management system. Slightly newer systems may provide a limited e-mail capability
which requires that each e-mail be prepared and e-mailed on an individual basis within the
management system. That is an improvement, but still an inadequate feature for
management operations involving a substantial volume of e-mails.
The use of multiple databases consisting of common key data within the databases has
long been considered as a major systems design limitation by systems analysts.
Maintaining two or more files with common data, phone numbers, mailing addresses, e-
mail addresses, etc., requires additional oversight and efforts in order to keep the data files
synchronized and up to date. An address or phone number change must be applied to both
databases almost instantly. The two database system is subject to frequent errors based on
the synchronization requirements associated with this type of systems configuration. It
should be avoided if possible.
Some newer systems offer the option of providing advanced user defined fields and even
tabs/ screens which allow extensive data fields and screens additions not associated
directly with the management application. The data could support a separate business,
profit center, etc. operation which may share key information in the property management
system. An example is the data associated with real estate sales/ listings principals data
that may also include property management clients data. Property owners who have or
may acquire, sell or exchange properties, and may or do use the management services of a
real estate / property management company would share the contact and other information
associated with both applications , but present in one database.
Based on the age, design and limitations of the management software there is often
inadequate ability to provide the additional data required for the brokerage data perceived
as necessary. For some companies at some point in the past it was then decided to add a
contact management database program to accommodate the sales side of the company in
addition to the property management program already in use.
In most companies it was inevitable that key data in one of the programs at some time was
wrong based on inadequate synchronization efforts. The need for ongoing synchronization
of the two separate databases can become a major problem limiting the benefits of
maintaining both databases. Many companies discovered that maintaining the separate e-
mail and address lists required more time and effort then expected and failures in
maintaining the list could and would create serious and costly management problems
involving incorrect addresses and contact information. We have had the opportunity to
observe this faulty system structure a number of times in the past, It is to be avoided.
It is a given that the older management systems were most often using a Letters routine
that was significantly less capable then MS Word or Word Perfect and in some systems
more complicated. In many cases the Letters routine was never implemented based on
lack of training and lack of management direction. Usually no serious evaluation was
applied to determine the benefits of an integrated Letters function which was an important
feature present in their property management system, albeit limited and possibly
complicated . Considering the issues associated with the double database alternative or
manual data entry of what would be mail-merged data ( name – address – rental charges
due – etc.) a better solution is now available.
A better solution is using a current property management system with an established
integrated Letters/ Mail Merge function plus a batch preparation for report processing and
e-mailing. Hopefully it is simple to use and provides the ability copy the company’s
current library of letters into the property management system instead of the need to re-
enter the letters manually.
Note: E-mail and mail-merge functions were available in generic office applications, i.e.
MS Outlook, MS Word, Word Perfect, etc. before they were established in property
management systems.
Appropriate solutions include the following:
Utilize a property management system that provides the functionality to expand the
design of the system to offer the ability to create additional data screens/ fields to the
system to accommodate the additional uses of the system. Today there is a growing
number of systems that provide those capabilities.
Utilize a property management system which includes a Letter/ Forms Feature plus e-
mail capability simple enough for any user to master quickly including the use of the
mail / merge function for tenant, owner and vendor communications within the
system. Or
Utilize a property management system that uses MS Word, Word Perfect or very
similar word processing program to avoid the complexity and confusion of two
separate and distinct word processing programs.
Utilize a property management system that allows a Copy and Paste function in order
to quickly convert current documents into the property management system letters
library. Many newer systems will provide an existing library of property management
letters.
 Another worthy feature would be that copies of the newly created letters would also
be added to the tenant, owner, vendor record logs providing a history of the
communications directed to the recipients.
Note: Do not assume existing dated legal letters are compatible, compliant and legal
in your state or region. Confirm their legitimacy.

Other e-mail elements that have an additional value to property management operations
are the attachments. They may be reports, documents, scanned invoices, and/ or pictures.
Some of the newest innovations may include audio recordings or videos pertinent to
management operations and e-mail content. The documents / attachments may be
provided in a number of established possible formats such as Word, Rich Text File, Excel,
CSV for Spread sheets, and PDF. Current audio and video formats are being joined by
new formats with enhanced capabilities that are now beginning to be integrated in a few
property management systems as new technology.
Many property managers provide an additional periodic distribution of invoices for their
owner/ clients. Distribution may be monthly, quarterly and even on an annual basis. It is a
significant effort when being performed in a traditional manner which involves copying
the invoices, packaging and providing postage. The filing operations and storage issues
are also part of the invoice distribution process.
Transition to a scanning solution provides multiple benefits based on the savings in
administrative time and operations cost. Scanning should also replace the copying of
receipts that are a function in some management offices and are a required function
mandated by the California BRE/ DRE.
We discuss scanning further in our Addendum – Technology -Scanning Operations. We
are all aware of the “Paperless Office”. It is a good goal but most likely unreachable
currently. Voice recognition is another technology that may assist with our reduction in the
use of paper. That technology in addition to Artificial Intelligence is addressed in that
Technology Addendum.
Currently more property managers are appearing to utilize the PDF report format based on
the premise it requires specialized software for the report to be modified, therefore
suggesting a higher level of report integrity. (With a PDF format it is less likely that an
owner would be capable of modifying a financial report). In case of an IRS owner audit
PDF financial reports are therefore less likely to involve the management company based
on altered reports.
Unfortunately however, few companies are in position to transition 100 % from traditional
report preparation and distribution to e-mail operations only. The issue is very similar to
acquiring owner/tenant bank account information. Obviously acquiring e-mail addresses
and permission to implement e-mail operations for distribution of reports, etc. are a
requirement. Most companies will discover that obtaining e-mail addresses is more of a
task then they expect.
New owners, tenants and vendors are generally not a problem. The e-mail addresses can
generally be obtained from the documents and contacts used to set the new owners,
tenants and vendors into the system. Current tenants and owners may be a problem. Older
owners and tenants are less likely to be “on-line” and computer literate. This may also be
true of new immigrants who may also be struggling with English. Millennials generally
cannot survive without the Internet and are most likely already in the system.
The process of getting that same information from those already in the system but missing
e-mail addresses often will require multiple contacts by phone, letter or personal contacts.
Depending on the size of your management operations the time and cost of acquiring a
significant majority of e-mails for your management database can be intimidating and
initially is likely to be underestimated.
If your company has not initiated a e-mail address program start now. If you have started
and discovered it is not as easy as once perceived, double your efforts. With every new
address your company is providing another increase in productivity of your
communication, documentation and distribution operations. The dividends (time and cost
savings) accrue even with e-mail operations that are not integrated with your property
management system. They are less of course, but still present.
The savings will increase dramatically with some of the current systems that will create
formatted reports and e-mail them to the recipients as a batch with a single command. The
levels of automation in some of the newer and upgraded systems are impressive and
sometimes even breathtaking. It would be well worth your time to evaluate the potential
administrative and direct cost savings by implementing an aggressive policy and
procedures for e-mail operations. Initially staff should verify that every contact with an
owner, tenant or vendor has an e-mail address.
Personal contacts are the best source for acquiring or updating e-mail addresses. We
recognize the following content could and should be considered as part of your company
Risk Management policies. It should also be understood that e-mails are regularly finding
their way into both civil and criminal courts and must be considered as potential evidence
in any future litigation. This means that e-mail contacts with owners, tenants and vendors
must be created with the same concerns and discretion as company letters. A
recommended company policy would entail that every contact include an inquiry related
to the existence and request for an e-mail address if one is not currently present.
Much of the use of e-mails currently, (especially those generated by our young people) are
created with a level of casualness and informality which may be inappropriate in business
use. The key difference is that e-mails are automatically documented while cell phone
conversations are not (except for the NSA) unless they are recorded. Generally e-mails are
also easier to maintain and retrieve then phone recordings. That is changing with some
systems. See Technology Addendum.
Those characteristics provide both benefits and risk factors. The informality and “off the
cuff” casualness often observed in cell/ smart phone and ”texting” use is generally
unacceptable for business e-mail and must be constrained. In one respect e-mails can be
more damning in that tone and the subtlety of the language are somewhat more subdued as
compared to a phone or face to face conversation.
The actual text in an e-mail therefore may be more definitive then that of a voice
recording and is highly regarded as evidence in legal matters and litigation. It may be
easier to determine when a statement is made in jest with an audio record then an e-mail.
Voice recordings are generally less common in small business operations, but are likely to
increase as new technology and new capabilities are developed and implemented.
Voice recognition (VR) software currently can be used with Microsoft Office applications
which may be converted to some property management systems routines, i.e. Letters, E-
mails, Notes, etc. For an accomplished typist there is little if any benefit. For the “hunt and
peck’ user who is required to prepare communications, procedures, etc. there are major
benefits in the use of voice recognition.
Note: Much of the content of this book was created using the Dragon voice recognition
system.
If e-mails are not carefully prepared and not business like, the likelihood of successful
litigation is sure to increase. Miscommunications and misunderstandings are sure to occur,
which at some point will result in lost business, small claims and/ or law suits.
Management should review the e-mails of staff until assured staff fully comprehends the
need for clear, concise business communications.
A proper policy will reinforce the positive aspects of value to the business environment
and tend to neutralize the negatives. The policy should entail input from staff in order to
gain acceptance and commitment. Lack of a policy will tend to allow marginal use of
elements of the Internet with the potential of major disruptive issues between
management, staff and operations. We provide additional content on policies in Chapter 12
– Risk Management.
Newer systems are promoting the creation of batch operations in report preparation and
distribution. As indicated above most companies will require 2 or more distinct batch
operations to deal with the traditional non-e-mail report / distribution operations and the
advanced e-mail operations available with some of the newer property management
systems currently.
Some of the newest programs provide the ability once set up is finalized, will initiate a
batch operation that will accomplish the following:
Create owner reports specifically customized for each owner including an export
 format -
Match the reports with the correct owner’s e-mail address -
E-mail the owner reports within the batch as attachments with a single mouse click –

Management companies should calculate what is the cost of their traditional report
distribution operations in labor, materials, postage, etc. in order to determine the savings
associated with the use of current e-mail technology. A follow on to that calculation is that
of the cost of labor, materials, postage, etc. based on the preparation and distribution of
invoice copies.
Additional calculations should be prepared based on the savings provided by highly
automated e-mail operations for reports and scanned invoices. Scanning can be
accomplished with either a desktop scanner or a scanner capable of scanning batches of
invoices or documents.
Note: Additional information related to scanning is available in our Technology
Addendum.
Other e-mail operations generally will also provide savings. When used properly they will
generally reduce the number and length of phone conversations and average response
time. They will also provide better documentation and when properly utilized will
presumably minimize potential litigation and legal costs. Fully integrated property
management operations are a major leap in efficiency, productivity, cost reductions and
improved service. They most likely will entail new benefits and services not yet perceived,
and for that matter caveats may also be unknown.
We should note that while e-mail batch operations are still a relatively newer
communications feature another newer technology feature may limit or replace the use of
some specific e-mail operations. A very new feature for general property management
systems is that of the Phone Broadcast. It provides the ability to group tenants, HOA
homeowners, owners and vendors and broadcast a prepared phone message to the targeted
group. It is of special benefit to recipients who do not have access to the Internet and
could only be contacted by phone or USPS mail.
This feature was originated in a couple of HOA Systems 2 or 3 years ago. Fully integrated
property management operations are a major leap in efficiency, productivity, cost
reductions and improved service. They most likely will entail new benefits and services
not yet perceived, and for that matter caveats that may be unknown.
Finally the monthly cycle entails an end of the monthly accounting cycle. This may
require a specific end of month process which resets monthly totals and updates the year
to date totals on the financial reports. Creating charges for the new month may also be a
component of the end of month function or a separate function prior to the end of month,
Home owner associations and commercial property management usually entail monthly
statements that are normally prepared and distributed prior to the first of the month. E-
mailing the statements alters the timing and costs of that function.
Many systems also automatically create a back up as part of the end of month. That is
good but is an inadequate process. Backups need to be done on a much greater frequency,
We discuss this subject to a much greater level of detail in Chapter / Session 11.
It is possible that special quarterly reports and other special procedures may be required
by management companies. A new example is the California Franchise Tax Board
Withholding for Out of State Residents with California Properties being managed by
California Fee Property Managers. Withheld funds are required to be distributed to the
FTB on a quarterly and year end basis. Additional automation of this FTB mandate is
needed at the FTB and in the majority of property management systems marketing in
California. It is discussed in additional detail in Chapter 14 – Government Entities and
Property Management -
Current economic conditions suggest the possibility that other government entities,
Federal, State and /or Local agencies, will be creating new taxes which will be integrated
through out our society including our businesses. Some of the newer property
management systems have already been updated to accommodate the new California FTB
mandate. Caveat: Systems that do not have an ongoing history of regular updates and
enhancements are not as likely to provide the possible future government oriented updates
in a timely fashion if provided at all.
Note: Our experience and evaluations of other systems often indicate that the system
developers do not maintain routines required for state / city tax mandates and other
business regulations.
The 3 Monthly Cycle Chapters (Chapters / Sessions 3, 4 and 5) have identified numerous
new features and innovation which provide new levels of productivity, new client and
tenant services, plus opportunities for increased income and reduced costs during the
monthly property management operations. It is likely that many fee property managers
and owner / operators will be inclined to underestimate the real impact that current
technology may have in management operations once implemented.
The technology introduced in those chapters are further described in the Technology
Addendums available in the book in which those chapters are all present.
 CHAPTER 6
Maintenance Managment & Accounting

Good commercial / residential maintenance management operations entail effective

execution of planning, processing, and production on an on-going basis. Solid , successful
maintenance operations are harder to achieve then most people believe.
Planning entails all the events and activities required to successfully perform a significant
maintenance function within an appropriate period of time. To some a Move-In or Move-
Out is a significant management operation consisting of a number of important functions
including maintenance. It requires co-ordination with the tenant(s), maintenance staff
and/or suppliers, for the actual walk-through and the resulting work order(s)/ service
request(s), Planning will provide the procedures and document formats and designated
reports to complete the event, creation of appropriate documents, records and reports to be
prepared and the security deposit disposition finalized.
Good planning will assure a minimum amount of time, cost and confusion results before,
during, and after the maintenance function and associated tasks are completed. Planning
will also require that the proper tools and materials are available at the same time
maintenance staff or vendor is on-site. Finally proper planning will provides the necessary
information to create an accurate estimate of the time and materials required to complete
the work order / service request and assignment successfully.
Numerous conditions and events can negate the planning and add significant costs and
delay to the maintenance task. The type of property can add time and costs to the
maintenance task. The size of the property, the floors, the parking areas require additional
time and efforts to move tools and materials to the unit requiring maintenance when
compared to the time and effort of servicing a SFR. An example might include work
required on a second floor unit, (no elevator) , lacking nearby parking during a rainy day.
External conditions may entail additional staff for the delivery of appliances, equipment ,
materials, etc. Too often the maintenance task does not take into account all of the
elements associated with the maintenance repairs/ replacements needed. This can seriously
effect assignments and their scheduling.
The tenant may commit to being on-site during the maintenance and then be a no-show.
The tenant may generate limitations on the maintenance personnel and on the manner it is
performed, i.e. no noise and maintenance must be done when tenant is present.
Processing is the staff operations of creating and finalizing the work orders/ service
requests. It includes the creation of tenant charges if appropriate and invoices from
vendors, suppliers or in-house maintenance staff. The invoices than need to be converted
to checks for the vendors or payables for the company maintenance staff payroll. Those
functions apply to all of the support functions of maintenance management and its
accounting which may be are enhanced with many current systems innovations and
technology. Extensions to traditional maintenance operations provide additional benefits
to property portfolios of almost any size.
Processing is the act of recording all the pertinent facts and details involving the
production of the event or operation. It identifies the who, what, where, when and how of
the production, and may initiate a number of additional smaller events as part of the
recording process. This would be the case when a completed Work Order results in the
initiation of a Purchase Order to re-stock some inventory/ materials used in the completion
of one or more work orders.
The completed work order(s) reduces current inventory levels which may activate the
creation of one or more purchase orders. The resulting invoice(s) are then converted to
payables. It is also possible that the work orders may also initiate charges to be applied to
the tenant’s ledger and account if the tenant was responsible for the damage associated
with the work order.
Production is the actual doing of the event or operation. It would entail the Walk-Thru for
the property management staff – owner/operator and tenant, the preparation of the Work
Order(s) for the maintenance staff and /or suppliers, and work that is performed by the
maintenance staff and /or suppliers. Good production is based on good planning. It
benefits from the efforts of management to provide a good set of procedures and
established products and services available on a timely basis.
Move-Ins and Move-Outs are some of the more complicated production processes in
property management operations. In current property management operations they may be
are automated extensively simplifying and speeding up process time significantly.
Maintenance management and its accounting play a major role especially so in the Move-
Out operation.
Pictures and possibly videos in addition to unit condition check lists are used to document
the condition and discrepancies if any, of the unit at the beginning and end of a tenancy.
On a Move-in they may document an existing condition which may or may not be repaired
or replaced based on the circumstances.
On a Move-Out staff documents unit conditions which may require cleaning , repairs
and/or replacement in which the tenant is assumed to be responsible. The exception is
ordinary wear and tear in relation to the length of the tenancy. Costs for the necessary
corrections are then applied or estimated ( for more extended work assignments ) against
the tenants security deposit. This process too often creates a major disagreement between
property manager or owner/operator and tenant and too often involves small claims court
proceedings. The check list, pictures and videos may play a major role in the final
disposition of the security deposit and possibly additional costs designated by the court.
Note: As mentioned earlier Move-Outs generally are the most contentious events among
property managers, owner/operators and tenants. Some property managers maintain that
additional importance must be applied to the efforts in identification of management’s
expectations for the Move-Out walk through. This can be done with a pre-walk through,
pictures of the unit at the Move-in or a reminder of the conditions of the unit during the
Move-in. A combination of the pre- walk through and pictures would seem to be the best
means to emphasize management’s best expectations.
Some newer systems provide the means to document both the move-in and move-out walk
thru using digital pictures, video and audio. Those records are than attached to the tenant
or unit record in the system. Pictures generally are acceptable in court. Videos may be
used in court if the judge is so inclined assuming a minimum of equipment and set up time
is necessary.
Note: The judge presiding in Small Claims Court is not likely to allow a large collection or
set up of equipment to view videos or pictures. Most likely a tablet would be the best
device to support your comments and decisions re: a security deposit disposition.
Good maintenance practices in Property Management would usually include the
following basic criteria:
Reporting of common area and individual unit maintenance problems should be
recorded in a quick, efficient, and accurate manner. Priorities associated with
flooding, loss of power or presence of a hazard, must be identified clearly and
quickly. Maintenance staff must also be aware of unreported maintenance issues in
the units they are servicing and the common areas.
Scheduling, assignment, and completion of maintenance should be accomplished in a
timely, and cost effective manner, but also must consider the inconvenience and
hardship of the tenant resulting from a delay in completion of the maintenance task.
Record keeping standards and processing should assure that a correct and complete
set of records will result which correctly document the maintenance processing. The
initial records may then be used to create one or more payables, and/or one or more
charges to be applied to the tenants ledger, plus a unit maintenance history record.
Additional information that might be established could include details of common
area building improvements, and /or unit asset details which should include cost,
warranty information, and possibly a depreciation schedule. Some systems do
provide asset management capabilities in addition to work orders, purchase orders
and inventory.
Recurring work order assignments for common areas on a regular schedule should be
converted to a payable if the management system provides that feature. This allows
better management, better maintenance scheduling, and accounting.
 Purchase order (PO) procedures should be implemented as Work Orders and
maintenance staff increase. The PO identifies specific maintenance & materials to be
acquired for one or more properties for one or more work orders. It restricts
acquisition of additional items not mandated by management, but favored by
maintenance staff. They are an important element of management cost controls and
for maintenance of an inventory.

The above criteria requires a proper response time based on the seriousness and the degree
of hardship to be endured by the tenant(s) affected by the maintenance problem. The
criteria also assumes the maintenance is completed correctly the first time with no leftover
mess or any tenant dissatisfaction. These criteria are important during both high and low
vacancy periods. Poor maintenance management will increase tenant turnover and extend
average vacancy factors while good maintenance management will reduce tenant turnover,
and increase rental unit availability also known as “rent ready” units.
The above items can be accomplished with paper and pencil, but quickly become too
cumbersome and time consuming to continue when the number of properties/ units
increases substantially. A maintenance management and accounting routine is an
additional benefit as a component of a Property Management System for s property
managers and owner/ operators with almost any size property portfolios.
Maintenance Management & Accounting routines are generally becoming a standard in
most property management systems. There are however, significant differences in the
number and sophistication of the features that are provided in the many different systems.
There also appears to be a significant number of property management companies and
owner/ operators that have not deemed use of an automated maintenance management and
accounting system as a valid or valued capability. We disagree completely. The benefits
are many and major. A number of options are available.
One option for the small property portfolio manager is the use of an on-line maintenance/
work order support system. This is a system that is only focused on maintenance
operations only. It would seem to be less popular currently based on the almost universal
implementation of at least a basic maintenance / work order routine in general property
management systems. It may be of more importance to owner / operators who are more
involved with maintenance or rehab operations while using manual or Quicken /
QuickBooks for basic accounting.
Basic Work Order and Unit History is available in most Property Management Systems
that we have seen which is directed at the small to mid-size fee managers and owner /
operators. Surveys have shown that the quality of maintenance services is usually the
second or third most important factor in resident retention which in itself should justify its
use and presence in a system.
It is our opinion that fee managers and owner/ operators can usually benefit using property
management software somewhere after 10 units or so. This number is significantly
affected by the mix/ number of properties associated with the units. Ten single family
residences, (SFR’s) or condo rentals owned by ten separate owners will entail a
significantly greater management, accounting and recordkeeping effort than one owner of
a ten unit apartment building.
User Defined Fields - Other systems marketed to the mid size and large property owner /
operators and property management companies offer additional features and extensions to
the maintenance management and accounting software. Those systems often provide a
large number of user defined fields in key files to provide the ability to store maintenance
type data in property, unit, and vendor records. These fields can be used to identify brand
names, model numbers, serial numbers, warranty details including expiration dates, plus
other information deemed important for operations and accounting.
A/R and A/P Integration - Generally many current systems provide an ability to create
vendor payables and tenant charges from completed work orders. This is a significant
feature that provides major benefits based on an efficient time saving automated procedure
which increases productivity when utilized plus provides accurate reporting This
minimizes CPA fees and simplifies annual state and federal tax reporting.
Recurring Work Orders /Service Requests - In addition to the basic abilities, some
systems will provide Recurring Work Orders /Service Requests functions. They automate
the many redundant maintenance tasks including the scheduling of the recurring work
orders. This feature provides the ability to improve scheduling and minimize the
likelihood of missing an infrequent work order task. It is of special importance in regards
to scheduling maintenance for equipment that requires periodic maintenance to maintain a
warrantee or avoid penalties. Mandated equipment maintenance would include fire
extinguishers, gas furnaces. water heaters, smoke and CO2 detectors, etc.
Inventory – Some systems provide an integrated inventory capability which is generally a
benefit to mid-size and larger property management operations. Those systems provide
increased functionality to establish, maintain and track inventory of stock items in addition
to unit assets.
Volume purchases and inventory/ materials storage are often elements most compatible
with integrated inventory routines within the maintenance management and accounting
sub-system. Materials and maintenance supplies are acquired in volume and maintained in
inventory providing lower costs and quicker access to necessary equipment and supplies.
Note: Inventory must be maintained ina secure convenient location(s) and accounted for
with specific procedures.
Purchase Orders - Often additional controls on maintenance purchases are provided
through the use of Purchase Orders. P.O’s usually are matched with an inventory function
within the work order system. A completed P.O. transaction may update inventory of the
management company / maintenance profit center unless the materials are for a specific
property. Some property management systems provide increased functionality to establish,
maintain and track inventory of stock items in addition to unit assets.
Unit Assets – High end systems may also track and support unit asset functions. In
addition to establishing an inventory function unit assets also require special accounting
and possibly recurring maintenance services.
Reserves - HOA –Apartments – Office Buildings - Another feature that is usually of
great interest to property owners/ CPA’s working with larger properties and Homeowner
Associations is the ability to create and allocate reserves for future capital improvements/
building maintenance. CC&R’s may mandate that cash reserves be accounted for in a
specific manner to be compliant.
Projects - Some of the fuller featured systems will also provide the ability to group work
assignments in order to estimate and manage projects. Those systems have extended their
Work Order / Maintenance routines to enable larger maintenance / rehab / construction
type projects. The expanded routines include the ability to prepare quotes and schedules
for larger construction type projects. Invoicing is usually a necessary feature when
projects such as rehabs and significant improvements are a system requirement since often
these projects may not be associated with a rental property. Generally a project would
include multiple work orders and multiple vendors.
Templates -A relatively recent development is the creation of templates specific to the
maintenance management routines. The templates can be used to create work orders/
service issues for the more common maintenance tasks minimizing the need to create
redundant descriptions and data and speeding up the preparation of common maintenance
assignments. Templates are also being used in other functions of property management
systems and support systems.
Maintenance Profit Centers – Are often associated with huge management portfolios
and investment properties not necessarily managed by the management company. The
profit center which may be an additional entity of the property management company or a
standalone maintenance/ construction company. Property management companies who
have established maintenance profit centers often will apply additional service charges on
the maintenance based on the additional benefits accruing from their volume oriented
services. Generally, all management and maintenance service fees must be identified in
the management agreement.
Materials and maintenance supplies are acquired in volume and inventory providing lower
costs and quicker access to necessary equipment and supplies. Wholesale purchases by a
maintenance profit center/ department will generally require that sales tax payments to a
state or regional tax authority / agency will be required by the maintenance profit center.
We provide additional details on Maintenance Profit Centers at the end of this chapter.
Mobile Operations - Maintenance management involving real time operations is one of
the more applicable mobile applications in a few high tech property management systems.
Some newer systems are providing the ability for maintenance reporting and even
updating of work / service orders via “Smart Phones” and other remote devices. Real time
mobile maintenance operations will provide the ability to establish new levels of finely
tuned maintenance operations and services.
A few on-line systems are offering ‘apps’ which support pictures of a unit taken with a
Smart Phone and being transferred into the management system. Other “apps’ allow work
orders / service requests to be created / updated and finalized from a SmartPhone in the
field. SmartPhones now offer various GPS services which can be used to determine the
exact location of maintenance staff in order to increase efficiency in tasking while
reducing travel time. One of the most recent “apps” supports a detailed unit inspection in
the field with a SmartPhone.
These same services can also be used to locate leasing agents and property managers and
their proximity to the properties being managed. GPS capabilities may also provide a
significantly faster staff on-site response to tenant prospects and property emergencies.
Established vendors with a good history with a property management company or an
owner / operator may also participate with either their own Smartphone or a borrowed
device to provide the benefits that the mobility and real time operations provides. Being
able to show the details that are associated with a maintenance problem and its access to it
assists management in providing additional support where appropriate.
Understanding and utilizing fully the maintenance management capabilities of your
system is as important as understanding and utilizing fully the capabilities of your
maintenance staff and vendors. Proper and extended use of the maintenance management
and accounting routines that are available in your system will increase productivity and
lower costs.
Occasionally we observe some small or mid size portfolio manager who discounts the
benefits and value of integrated maintenance management and accounting with the
property management system. I heartily disagree. In those cases the maintenance
supervisors and staff have established a position and policy which maintains manual
maintenance management and accounting supported by the classic mantra, “We have
always done it that way”.
A relatively simple evaluation of their manual procedures compared to the automated
maintenance systems routines available would most surely indicate that ‘There is always a
better way.” (IBM motto- Anonymous) by integration of maintenance operations with the
property management system. The manual or separate generic accounting system,
generally entails a number of significant shortcomings based on their lack of a property
management orientation. They include the following:
 Inefficient – Too many phone calls, too much paper, manual information needs
manual input into the property management system, ( invoice and check data) -
Lack of consolidated, digital searchable data and history of property, unit, tenant
maintenance activity and the appropriate reports of major value to the owner,
prospective buyer, brokers, appraiser, and lender –
Lack of inventory control which may result in inventory losses, work order delays
based on unexpected inventory shortages or an oversupply of inventory –
Lack of vendor control and maintenance management control–
Lack of senior management control of the maintenance operations –

Separate manual accounting of maintenance operations, staff payroll hours, materials,

vendors invoices and billing of owners makes no sense if a maintenance management and
accounting system is available, or a property management system which includes
.maintenance routines are included is available.
I was requested to assist a few years ago to provide some training on a recently acquired
popular management system which included a fairly significant maintenance set of
features. As indicated elsewhere the company chose to use about 10 t0 20 % of the system
excluding detail handling of receipts, tenants and units. They also chose to continue their
current manual maintenance operations involving the approximately 3000 units under
management.
Considering the misuse of the underutilized system they chose and the annual payments
for the system they acquired, I was inclined to identify my recommendations re: proper
use of their new system. I also identified the various and many issues that would result
with their current plans and policies.
One of the most serious was the blatant lack of trust accounting reports. As somewhat
expected the consult and training session ended quickly. It was a mutually agreed and
quick termination of the session based on a complete lack of agreement on the training
agenda. I cannot think of any company that was so out of sync with good and
knowledgeable operations and management as this company appeared to be. They were an
audit disaster waiting to happen. In addition it appeared that there was a lack of checks
and balances in both the receipts processing and maintenance operations.
Good maintenance routines either in your property management system or as a standalone
maintenance program, (either on-line or PC based) improves maintenance services for
tenants. Good maintenance services include:
Quick responses to maintenance requests –
Considerate, courteous and competent maintenance operations –
Complete clean up at the completion of the maintenance task(s).
Follow up contact(s) to assure satisfaction –
 Ability to provide records that identify problem tenants that generate excessive
maintenance issues and costs. The system also documents the issues so that actions
can take place to charge the tenant for the damage resulting from negligence, or
malicious behavior.

Note: Volume directly factors in the importance and value of a maintenance system. The
more maintenance requests and services required the greater the need for automating the
system. This is generally true for most property management functions but even more so
for maintenance based on the increased number of details and their description plus the
duration associated with a maintenance task. Contrary to accounts receivable and accounts
payables operations maintenance operations are not batched. Assignment of multiple
maintenance tasks should be a consideration, but so should priorities.
A good maintenance system also benefits the property owner. Unit maintenance history
reports are of significant value in the future sale or exchange of the property. They benefit
the buyer, the appraiser, the lender, the brokers and perhaps most of all the owner by
increasing the value of the property and its assets through the presence of detailed records.
The availability of these records will provide impressive detailed documentation as to the
actual condition and age of the units/ property including unit assets, refrigerators, stoves,
water heater, air conditioners etc. An additional possibility may include actual purchase
pricing on many of the assets.
Recent IRS statements have indicated that the importance of standardizing the designation
of expensed items versus capitalized items has become an area of special interest. It would
be a benefit for owners to have their CPA’s provide a standard for establishing expensed
versus capitalized items for the owner and management company.
To the new owner the detailed reports provides an excellent set of fixed assets start up
balances for the buyer’s accountant and simplifies the issues of age and condition of the
units and their fixtures. It is a n important factor in determining value of their fixed assets
and condition of the property.
If the management company is planning to establish a maintenance profit center,
department or separate company they should require a robust property management
system with maintenance capabilities or a maintenance management system to use with
their future maintenance profit center or separate company. Generally the differences are
rather significant. A maintenance profit center or company will normally include the
following:
All maintenance services will include a percentage or fixed dollar amount added to
the billing for management clients and identified in the management agreement -
Appliances, materials an inventory will be purchased by the profit center or company
and not for a specific owner initially -
Those items will be added to the profit center or company’s inventory and accounts
 payable and then backed out when used at an owner’s property -
A maintenance profit center or company will provide services to owner properties
that are being managed by the management company associated with the
maintenance profit center or company and may provide services to other owners via
general maintenance services and escrow operations -
The property owner will receive an invoice in either case, but the managed property
owner will generally have the invoice paid by the management company via rental
income. Larger work orders or projects may entail a special owner contribution -
The non management property owner will be billed separately from the managed
owners and will be receipted separately -
In California the managed property owner will receive full disclosure as to the
pricing of the services received in their management contract. That is a mandate of
the California BRE/DRE -
Also in California the maintenance profit center or company will include sales tax on
the appliances, materials and inventory items. They will collect it and then distribute
it to the State Board of Equalization -
Depending upon the extent of services the broke or maintenance manager may be a
contractor -

Occasionally, I observe a small or start up property management company acquiring or

using a property management system which includes maintenance management routines,
but not using these important capabilities. As reported elsewhere in one of the chapters I
was aware of a large property management company that finally acquired a professional
property management system and did not use those capabilities. The prior one they had
was:
Created by a brother-in-law –
Written and tested in a garage –
Consisted of spreadsheets –
Hopefully that was the last time I experience that type of situation. I did not sense
any progress in their mindset and very little in the use of their powerful system.

I authored an article titled “Maintenance Management and Accounting” in 1999 which

was published in our local Apartment Association magazine. This chapter is based on that
article. As you may surmise the innovations and technology are substantially improved
since then.
 CHAPTER 7
Accounting Basics For Property Management Systems

One important observation I have made in the past after reviewing a number of property
management textbooks is that property management accounting and systems are barely if
at all mentioned within the 15/16 chapters of academic offerings. Accounting and systems
may be mentioned briefly by the authors and instructors, but detailed content almost
universally is non-existent.
Most property managers would be likely to agree that the importance of both of those
subjects to the daily operations in the “Real World” of the Property Management Industry
cannot be overstated. Accounting / bookkeeping and record keeping is integral to
investment property management for property portfolios of all sizes. As indicated in
chapter 1 the earliest property management systems first and foremost were primarily
accounting systems focused on basic property management operations.
We had also discussed in Chapter 1 that newer property management systems will increase
productivity and accommodate the increasing volume of management accounts.
Realistically, traditional paper and pencil operations are no longer practical except for a
start-up management company or owner/ operator with portfolios of 10 or so SFR’s,
condo rentals, or apartment units.
For the most part the changes and increases in regulations and government mandates that
apply to fee property management and owner/ operators and their properties minimally
apply to the accounting of properties.
In our fast paced technology oriented society one of the elements that tends to remain
relatively static is the accounting concepts and General Accepted Accounting Principles
(GAAP) of our businesses. Even so it takes time and effort to initiate and stabilize the
accounting procedures and internal controls of a solid system. Unfortunately there are 4
major issues that tend to destabilize. They are:
New staff, job description changes and turnover –
New technology – new software –
New government mandates and regulations –
A system disaster – i.e. fire, flood, BRE/DRE audit, embezzlement, systems loss and/
or breech of data, etc.

Based on all of the above the following content is a focused property management basic
accounting 101 presentation that should be beneficial for property management staff. Our
experience in our workshops and on-site sessions almost inevitably determine that one or
more staff members within a property management company is unaware of one or more of
the key concepts / GAAP (General Accepted Accounting Practices) identified below.
Occasionally the lack of basic accounting or bookkeeping knowledge is even more
pronounced resulting in serious errors that may be exposed to clients and/ or the
BRE/DRE.
Accurate and timely accounting operations are mandated by clients, tenants , vendors and
government agencies to a much greater degree for fee property managers then for
owner/operators. This fact therefore also mandates the need for both basic accounting and
systems education to be an ongoing integral part of property management education and
training and especially so for fee property managers.
Those gaps in staff members education do result in errors, “do overs”, reduced
productivity, and periodic major embarrassment resulting from incorrect reports and
owner, tenant and vendor checks. Other errors based on lack of organization and/ or
knowledge of systems features may result in added costs in addition to embarrassment; i.e.
a late/ missed mortgage or property tax payment.
Our observations also indicate that a significant number of Southern California Fee
Property Management Companies are only partially BRE/ DRE compliant in their
accounting and associated operations. We discuss BRE/ DRE compliance specifics in
Chapter 13 – Property Management Systems and The California BRE/DRE.
Accounting is a major part of any property management system and the level of
accounting / bookkeeping knowledge does differ based on the job description of property
management staff. There are differences however, among systems as to the inclusion of
some features. An example is accrual accounting which will be defined later in this
chapter. Very basic systems, generally those designed and marketed to owner/ operators
may not include a general ledger also defined later in this chapter.
Resident management staff may require the ability to discuss and explain account
receivables and tenant ledgers. They may be required to validate ledgers and identify
errors. Presumably senior staff can correct incorrect ledgers by providing corrections to
the incorrect data.
Property managers will normally require the ability to discuss and explain the financial
reports with property owners. They have additional responsibilities in that both
receivables, payables and to a lesser extent balance sheet issues may require additional
accounting knowledge in order to evaluate and review financial reports with owners. It is
not uncommon that an additional function of senior staff and management is to educate
owner clients re: financial reports and basic accounting principles.
Accounting / bookkeeping staff obviously has the largest role in re: to the basic accounting
and bookkeeping operations. Their responsibilities include the following:
Create/ edit property, unit, tenant, vendor and owner records -
 Create and post recurring / auto charges which establish ongoing tenant balances –
Enter tenant, vendor and owner receipts –
Create deposit reports for use in bank account reconciliations —
Create and post recurring/ auto payables –
Enter vendor invoices/ payables –
Prepare checks / ACH/ EFT transactions for owners/ tenants/ vendors –
Create/ process Move-ins and Move-outs –
Post commissions and print commission checks –
Create charges / payables from work orders –
Transfer funds as required –
Create / correct journal entries as required –
Prepare tenant / owner vendor reports as required –
Prepare office reports as required - bank / trust account / special reports –
Prepare / complete bank reconciliations* -

Note: Resident managers are increasingly assuming accounts receivables data entry via
remote access of the A/R routines in the property management system.
Note: The above operations include should be matched with staff experience and
controlled with the use of the systems security routines and audit reports ( if present)
within the system, i.e Login and Password requirements.
Note: Many companies use outside independent services for the bank reconciliation
function. It is an audit basic principle that staff entering the transactions should not be
reconciling the transactions and bank records.
It is important to understand the difference between accounting and bookkeeping. Too
often we have observed that both management and staff tend to equate the two and
creating situations where both accuracy and performance suffers.
Accounting is a methodology that produces useful information by establishing procedures
for:
Recording business events -
Classifying by groups -
Summarizing into concise reports identified as financial statements:

Accounting is the design of the system procedures formulated by GAAP ( General

Accepted Accounting Practices), which includes:
Preparation of the financial statements -
Development of the budgets -,
 Cost studies –
Tax consulting and reporting – Includes depreciation operations and overseeing state
and federal tax reporting -
Analysis & interpretation of information to assist in the creation of informed
decisions –

Bookkeeping is:
The detailed recording of company transactions –
The preparation of periodic reports –
Initiating other scheduled functions at the appropriate times –
Possibly supervising junior bookkeeping staff -

It is apparent that accounting requires a higher level of specific accounting training and
experience and tends to require additional creativity in order to perform the operations
identified above and may include certification, i.e. CPA – Enrolled Agent – Tax Attorney,
etc.
Bookkeepers and non certified accountants are generally found in most small to mid size
property management companies, while outside CPA’s, etc. may be used for audits, tax
preparations and other specialized services. They generally maintain their own business
focused on servicing other businesses.
I believe there are significant benefits for property management companies to establish an
affiliation with a CPA who is trained and capable of working with your property
management system. He /she can then assist your clients in understanding theirr owner
reports and in providing special accounting and tax services available in the management
system. Lower CPA fees would generally result in that costly conversion of client data
would not be required.
One specific tax issue area that is generally ignored by most property management
companies is that of property and personal property/ fixed assets depreciation. Very little
organization and set up is required by a CPA to create depreciation procedures and
schedules within property management operations. Having the appropriate data at year
end would allow the CPA to quickly create the depreciation associated with the physical
property(s) and new personal property assets acquired during each year.
One very regular issue our clients confront is that the CPA’s, they or their clients use, seem
to be only cognizant of QuickBooks and have no interest in acquiring expertise in the
property management system being used by the client.. Therefore, the CPA services
quality and quantity they render are reduced while client costs are increased. Finding or
establishing a CPA capable of working efficiently with your management system provides
a number of benefits for all concerned.
Cash Versus Accrual Accounting - Most property management accounting operations
entail cash accounting. That basically means that that a rent, other income receipts or an
owner contribution is accounted for as a transaction when it is received. A payment to an
owner, a vendor or to a tenant is accounted for as a transaction when it becomes a check,
(or ACH transaction).
Cash accounting is also what the California DRE and some other states require/ mandate
based on their Trust Accounting requirements. Trust Accounting in California is
compatible with cash accounting and DRE non-compliant with accrual accounting. The
clearing of the receipt or of the printed check has no bearing on the transaction in regards
to its status as a cash accounting transaction. Cash accounting is based on receipts
received and payables paid (although not necessarily banked).
Accrual accounting is rarely seen in traditional fee property management. It is often used
however, with company owned properties and Home Owner Associations (HOA;s) based
on the recommendations of CPA’s. It is claimed that there are certain tax benefits
associated with accrual accounting.
Accrual accounting assumes a transaction is activated when an income charge or when an
expense payable is created. Financial reports therefore are based on charges, (receipts not
yet received) and payables, (not yet paid). Therefore some flexibility is provided in
creation of the financials based on when and how often charges and/ or payables are
created. The flexibility can be misused to accelerate charges or payables which may
enhance or reduce financial statement balances.
Note: A few property management systems have the ability to provide reporting for both
systems (one at a time) via a selection during the report set up.

Balance Sheet -
Is a financial statement showing the financial condition of a business/ property at a
specific date-
It consists of a list of the assets, liabilities and capital / owner’s equity –

Note: Our observations based on our experience with small to mid size management
companies and owner/ operators tend to identify that in most cases Balance Sheet reports
for owners are a waste of time and resources. They are almost always incomplete / and or
incorrect based on various missing or out of date asset and liability accounts. Missing or
only annual updating of mortgage principle payments, mortgage balance, property and
personal property assets and depreciation balances are examples of balance sheet accounts
generally not appearing or not updated on most property balance sheets.
Assets - Are economic resources owned by a company / business / property –
They include land -
 Buildings -
Fixtures – Stoves, Refrigerators a/c units, etc.
Cash, stocks, bonds, etc. They are valued at cost to simplify issue of value -
Accounts Receivable possibly. Generally accounts receivables are not included in
property management cash accounting balance sheets.

Liabilities – Are debts. Liabilities specify the claims of creditors in regards to the
resources (assets) of the business – They include:
Mortgages -
Tenant Deposits -
Accounts Payable possibly – Generally accounts payables are not included in
property management cash accounting balance sheets.

Owner’s Equity / Capital – Includes Owner’s Contributions and Owner Withdraws /

Distributions from management rental operations -
Represents the value of the resources of a business -
Owner’s Equity increases through additional investment of resources and / or
profitable operations -

Owner Contributions and Owner Draws –

Owner contributions to, or owner draws from the business/ property are not considered as
income or expenses. They are instead to be considered increases of, or reductions of
owners equity / capital. They are also identified as additional investment or disinvestment.
Key Balance Sheet Accounting Formula’s –
Assets - Liabilities = Owner’s Equity - See 1 Below
Liabilities = Assets = Owner’s Equity - See 2 Below
Owner’s Equity - Assets = Liabilities - See 3 Below

Example –
1. Property Value of $500,000 = Mortgage of $300,000 = Owner’s Equity of $200,000 -
2. Mortgage of $300,000 - Property Value of $500,000 = Owner’s Equity of $200,000 -
3. Owner’s Equity of $200,000 - Property Value of $500,000 = Mortgage of $300,000 -

Income Statement Elements –

Income or Revenue is the price of goods or services sold, during a given period .
Rent is the price of a use of a unit as a service provided to the tenant.
Expenses are the cost of goods or services used or purchased during operations -
Maintenance is a service expense associated with the use of the rental unit.
Ledgers –
Transactions are recorded in a ledger. They are maintained and periodically used to
prepare financial statements –
A ledger account is maintained for each type of asset, liability owner’s equity, income
and expense -
Manual ledgers will maintain each ledger account on a separate page, and identifies
increases and decreases based on the type of transaction –
A ledger page is separated into 2 columns, and most often will also contain a balance
column –
All of the ledger accounts, both manual and the software ledgers are identified as the
general ledger –
Note: In many systems ledgers are also maintained for individual owners, tenants and
vendors which identify the specific transactions and balances associated with the
owners, tenants and vendors. Basic systems generally do not provide this level of
detail. They also may forgo the use of a General Ledger which tracks all transactions.

Debits – Credits Confusion - One of the major general confusion factors that we have
observed among staff, clients, and tenants is based on the terminology associated with
debits and credits. Banks are primarily responsible, ( in addition to a lack of company staff
training). The confusion is based on their monthly statements and the use of the term
“Credit” to identify a deposit to a bank account. Bank customers have grown accustomed
to this term usage and often have tended to use the same terminology when working with
property management transactions and reports.
The key difference between bank accounting and the property management accounting is
the difference between an asset and a liability. The bank’s accounting is based on the bank
account which is established as a liability account, (the account is not an asset of the
bank – it is a liability) while the property management company has a fiduciary
relationship with the property owner/ client therefore establishing the client’s bank
account as an asset account.
Liabilities are considered to have a Credit Balance while assets are considered to have a
Debit Balance. This may be a good time to review our prior description of the Balance
Sheet.
The above underlined text is paramount in correcting the confusion that is present among
staff, clients, and tenants. It is also necessary in order for staff to produce correct reports
and discuss the reports with clients and tenants. I do not recall ever having similar
observations or statements related to the confusion caused bank statements made by the
two instructors in the accounting classes I took years ago. I have however felt the need to
present this information a dozen times in our workshops and on-site consults over the past
decades in an attempt to correct a common and basic misunderstanding often found among
junior staff.
It is key in understanding the basics of accounting and the relationship between banks and
their depositors. Occasionally it is necessary to educate the property owner re: the correct
definition and origin of the debit/ credit confusion. Often it has tended to be a major
revelation for some of the management and staff in the understanding of their system. The
term contra accounts is sometimes used to identify accounts that tend to maintain balances
other then the norm. An example is the
Equity/ Capital owner draw or distribution account. Equity/ Capital accounts are generally
Credit Balance Accounts. The owner draw reduces the equity/ capital balance
Debits & Credits –
The left side is called the debit side while the right side is the credit side in general
ledger reports -
Recorded entries are identified as journal entries and debits or credits –
For balance sheet accounts assets increases are recorded by debits while liabilities
and owner’s equity increases are recorded by credits -
Income entries are recorded as credits while expenses are recorded as debits-
Income credits increase the income ledger account balance while expense debits
increase the expense ledger account –

Double Entry Accounting -

Assumes that an equal dollar amount of debits and credits will be recorded for each
transaction –
This means that under normal operations the ledger will remain in balance –

The Journal -
In addition to the ledgers above, companies also maintain a chronological record of
the transactions in the order in which they occurred -.
This list is called a journal -.

The Trial Balance -

Is a list of the transactions which totals all of the debits and all of the credits – If
 recorded and totaled properly, the debits and credits should be equal –

Note: We do recommend that a solid understanding of debits and credits should be

required for both staff and management even though they may not be needed to create
most A/R and A/P transactions as part of their job responsibilities. Property management
systems generally do not require that each transaction entails establishing specific debit
and credit accounts with of Journal Entries. See below.
Note: The details of accounting are not to be questioned. They have been around for a
long time and they work. Most researchers identify Pacioli ”The Father of Accounting “
based on the publishing in 1494 of what many researchers maintain was the first detailed
description of accounting. Other researches claim the first publishing of accounting
concepts originated late in the 14th century by another Italian. In any case accounting
basics have been in use since Columbus decided to check out what was on the other side
of the Atlantic ocean. (Information above provided by “Accounting For Dummies” and
Wikipedia).
I am inclined to believe students attending an accounting class are also more likely to
understand accounting when working with accounting systems in a business environment
compared to attending an accounting class. Personally I attended my first accounting class
without real life experience in a company’s accounting operations. Later, once I found
myself assisting IBM customers the accounting concepts presented in my 2 accounting
classes “came to life” working with my customers.
Note: My second accounting class as I recall presented Cost Accounting which is used in
the determination of the cost of production. It was of use when I sold and assisted on a
number of Construction Accounting system implementations. Fortunately the office
accounting system was the same accounting system in use with the property management
system I sold, trained and supported for well over seven years.
The method used to simplify most transactions entails the assignment of the bank account
and then automatically assuming a debit for the bank account for receivables and credits
for payables. Users however, do need to select a specific general ledger account for the
receipts, ( normally a credit income account or credit owner contribution)which offset to
the bank account debit. Users would also select a specific debit expense g/l account , i.e.
gardening or utility expense which would offset to the negative / Credit bank account.
Debit liability examples would include (security deposit refund or owner ‘s equity draw),
i.e. contra accounts.
Note: Some earlier systems including one of the most popular was limited to the use of a
single operating account per database. For some companies this meant the need to create
and maintain some redundancy in the chart of accounts and vendor records among the
databases. Generally, this is no longer the case except for circumstances where the chart of
accounts are substantially different among the properties being managed. Two situations I
am aware of include HOA’s that are substantially different among the HOA’s being
managed and a company that is managing a diverse portfolio including hotels. The hotels
use a department based chart of accounts.
Journal entries do require that both debits and credits must be applied based on the
special uses of journal entries.
Journal entries may be used to transfer cash from one bank account to another bank
account ( savings to the cash operating account).
They are also used to change / correct the classification of an account ( landscape
maintenance - an expense changed to landscape improvements – irrigation system –
an asset).

Net Income -
Net Income is the term used for the increase in owner’s equity based on profitable
operations.
Net loss defines a decrease in owner’s equity derived from non-profitable operations.
Net Income / Loss is reported initially in the property Income / Operating Statement
and then posted to the Owner’s Equity/ Capital Balance Sheet Retained Earnings
account.

Budgeting -
Entails a plan of financial operations / expectations for the future -
The budget is a specific set of detailed financial goals which can be used to measure
actual performance related to the goals –

Summary – The structure of accounting includes the following:

A chart of accounts (COA) which includes:
Assets
Liabilities
Owners Equity or Capital
Income
Expenses

There may be a number of sub-categories within the COA but the 5 standard categories are
listed above.
Debits & Credits
Which identify positive and negative balances according to the type of account and
the effect of the recorded transactions -
Which provide reports which state the results of the recorded transactions when
 added to the account balances. – Key Financial Reports Include
Balance Sheet which includes the Assets, Liabilities, and Owner’s Equity / Capital
account balances -
Income/ Operating Statement or Profit & Loss Statement which includes
summary totals of Income and Expenses for a specific period plus an option for year
to date totals –
Cash Flow Report -– A hybrid report which includes Income/ Operating Statement
periodic balances plus Balance Sheet accounts activity that effects cash balances -

Note: The cash flow report is a fairly recent development in accounting. Wikipedia reports
that the basic concept was initiated by a US company in 1863. It was initially called a
Comparison Balance Sheet and at that time identified that too much inventory was in
place leaving the company with too little cash.
In 1973, the Financial Accounting Standards Board (FASB) established rules that made it
mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources
and uses of funds. At that point different industries began to implement Cash Flow
Reports as an additional financial report. I discovered that report within an early property
management system in 1985. In small to mid size property management operations it
appears to be one of the most popular summary financial reports.
Although accounting / bookkeeping is often identified in negative terms, i.e. “bean
counting”, it is a basic and major function within the spectrum of property management
operations. Many new innovations and new technology have appeared since property
management systems appeared in the late 70’s and early 80’s with the intent of providing
accurate reporting and using GAAP for our businesses and our clients. See Chapter 1.
Those capabilities however, do not negate the need for staff to understand and exercise
their accounting / bookkeeping assignments appropriately whether it is the detail data
entry of transactions, the correction of data, evaluation and review of reports, and / or
discussion / explanation of reports with owners and tenants.
Note: Accounting education on its own is difficult to appreciate and assimilate until it is
applied on the job. For staff members of property management companies who have not
experienced Accounting 101 education this chapter should be a major epiphany. They are
experiencing the key elements of accounting in the monthly operations and possibly for
the first time a real understanding of the property management accounting cycle.
The innovations and technology alternatives also do not negate management’s role in
supervising staff and assuring that appropriate procedures relating to audit trails, internal
controls and systems security are created and properly maintained. All too often there is a
major lack of supervision of the system and staff and understanding of the accounting
basics. Lack of ongoing management overview will sooner or later result in negative
scenarios, i.e. loss of management contracts, negative referrals, DRE audits, sub par
productivity, litigation and/or embezzlement, etc. We discuss systems management in
much greater detail in Chapter 16.
Our past experiences on-site and on our phone/ on-line support have indicated that in
addition to errors in data entry, data correction and reporting, numerous improvements are
often possible via a system evaluation/ review. We often discover faulty procedures, non-
use of important and increased productivity features, major system security issues and
DRE non-compliance. We also often identify a lack of both management supervision and
internal controls which also can abet the issues above in addition to major disasters such
as embezzlement and systems loss.
Other consultants, CPA’s and experienced user’s of the system may also provide beneficial
insights in the operation of your system. The developer may also provide training and
support services that are well worth acquiring in the goal of achieving improved
productivity and processing skills.
For many brokers, property managers, management staff and owner/ operators basic
accounting does not appear to be that basic. It is however, the most basic function in
property management in that it is the beginning of the monthly cycle and with the
exception of marketing is senior to all other management functions. Its proper application
and understanding of its importance must be maintained in order for property management
to progress and succeed.
This chapter is perhaps the most challenging of the 16 chapters in this book. Perhaps the
best method to confirm understanding and acceptance of content is to match the concepts
and terminology to the reader’s system (if any). A current system with live data and
reports provides the medium to evaluate the understanding of the concepts, relationships
and terminology presented in this chapter. Management and staff must acknowledge their
need to understand and maintain proper accounting and bookkeeping responsibilities for
their system. Lack of understanding can only inevitably result in disaster.
 CHAPTER 8
Intro To Niche Property Management

Niche Markets are specialized Property Management opportunities which may supplement
or replace traditional / basic management property operations, i.e. Residential Properties,
in a management company. Knowing some of the basic elements associated with the
various niches may provide the opportunity to establish a secondary or alternative
property management operation with less competition and potentially increased income.
We will identify the most prominent niches and the specialized features and characteristics
which are usually associated with those niches which may be a factor in acquiring an
interest in initiating a specific niche management operation. We do not refer to Single
Family Residences, (SFR’s), Condos, or Multi-family housing (Apartments) as niches.

Overview - The Niches

Non-Residential / Commercial
Retail
Office
Medical Office
Mixed Use
Industrial
Mini Storage
Marinas
Private Airports Parks

Residential / Other
Homeowner Association Management
Short Term Rentals
School Housing
Military Housing
Government “Affordable” Housing
Mobile Home Parks
Home Owner Associations
Parks – Camp Grounds
Private Air Park Communities
Note: A number of the Residential / Other Niches above do have additional sub niches
within their niche. This is especially true of the Short Term Rentals and the Parks - Camp
Grounds Niches.
Overview - Getting Started - Commonalities
Niche Management opportunities are often presented as a result of the contacts, both
business and social that come about with people in real estate. It may be a client with a
mixed property portfolio or a contact in a trade or service organization in which you are a
member. The contact may be aware of your property management operations and may be
looking for management help.
It may be an inherited property of an associate, family member or friend. It is r possible
some other contact or activity may provide an opportunity to begin a niche management
operation. It is quite possible the property management software your company already
uses may be more then capable of satisfying the requirements of the niche. At the
minimum many of the operations already in place provide a good start for most niche
management implementation efforts.
A shopping center or apartment community developer new to a community may be quite
inclined to initiate management with a well established high exposure management
company with minimal experience in shopping centers or apartments, especially if they if
the management company is already in the shopping center or very near the apartment
property. It is likely that finalizing a contract would require some hard negotiations, but
“breaking the ice” on a high exposure niche could be a major management cous.
Obviously many of the niches identified require a local presence of the property type
associated with the niche. Student Housing requires the nearness of a college or university
with either campus dormitories or other student housing or potential housing nearby. Short
term rentals requires travelers / vacationers requiring short term accommodations and the
properties in which they can reside.. Many short term rental operations are associated with
regional attractions, i.e. beaches, mountains, or major entertainment attractions.
Note: It is very likely that the short term property will have some level of government
requirements which may include length of stay, number of participants and of course
taxation.
An awareness of the associated elements allows a property management company to focus
more effectively on the best and most viable niches to consider. Southern California in
general and San Diego County specifically offers a robust set of niche management
opportunities.
Other Considerations -
Accounting & Record Keeping Requirements –
Niche management operations may differ greatly in re: to accounting and record keeping
requirements based on Federal, State and local regulations and tax obligations. Niche
operations tend to involve business taxes and tax agencies to a greater degree than
traditional residential management operations. Those requirements may minimize the
effectiveness of the current accounting system or negate its use completely substantially
reducing the potential profit obtained from establishing a second management entity.
Record keeping and communications requirements may also significantly increase
administration efforts and may constrain the time and efforts required for the basic
management operations. Short term rentals require extensive communications and record
keeping prior to the tenancy and an intensity of operations that often require seasonal staff
to assist with the increase in operations. A significant number of the short term niches tend
to be seasonal requiring seasonal hiring and a major increase in the intensity of operations.
Government Regulations & Control -

Niche management operations may differ greatly in re: to the level of Government
Regulations & Control. Taxation is of special concern. We identify the sales taxes on
traditional rental operations that are in place in a few states and cities in Chapter 14.
Special Management Operations Requirements –

Commercial management operations usually require some capabilities associated with the
use of CAM’s (Common Area Maintenance charges).See additional information below.
Management and Staff -

A wide range of special backgrounds and experience may be beneficial in the development
of some niches. An example would be the experience, knowledge and special skills
beneficial in the operations of:
Short Term Rentals ( hospitality training/ experience ) –
Marina, (an experienced boat owner) -
Air Park, (commercial aviator) or private licensed pilot -.

As indicated above additional niche opportunities may be increased based on the diversity
of geographic, business and educational demographics.

Non-Residential
Retail Shopping Centers
Super Regional - The largest centers are usually associated with large population
centers. These centers are generally 800,000 SF GLA plus (Gross Leasable Area). In
California the Westfield Shopping Centers are a prime example of Super Regional
Shopping Centers. A standalone parking structure, a large movie theater complex and
/ or some other major entertainment facility would often have a long time lease in
 addition to multiple anchors. An anchor is usually a national or major regional
retailer.
Regional 400,000 + GLA based on the area served. A regional would have multiple
anchors and up to 100 or more commercial tenants.
Community 125,000 GLA to 400,000 - A somewhat smaller center usually with
about 1 to 3 anchors.
Neighborhood 30,000 GLA to 125,000 – Usually consists of a chain food store and
perhaps 20 or so other commercial tenants.
Strip - Less than 30,000 GLA – A strip could be of general products and services or
of a specific category of products and services. A strip would usually consists of a
small footprint, minimal parking and 6 to 10 tenants. Stores are arranged in a row or
strip, with a sidewalk in front. Strip malls are typically developed as a unit and have
parking spaces in the front of the strip.

Source - Appraisal Institute and International Counsel of Shopping Centers and Research
facilities including medical pharmaceutical and DOD facilities.
Standalone - Gas stations, fast food, and single story retail and service companies
appear to make up the majority of standalone commercial properties today. They
usually involve long term leases and often may may entail a “brand” i.e. franchise or
company owned business. Examples are ARCO, KFC, McDonalds, auto repair , etc.
Generally, some l special waste and hazmat issues are attributed to these businesses.
Mixed Use – Once again becoming popular. Commercial space on the ground floor
while residential or office units occupy the upper floors which generate additional
income to compensate for the higher costs of land in some areas. Locally we see a
wide diversity in the size of mixed use commercial. In older portions of the city we
will see the original mixed use commercial which originally entailed a family owned
business who lived in or above their shop/ business. Many cities also have
commercial streets where both small commercial and multi-unit residential are
present. The street level portion of the property will generally be devoted to small
business commercial.
Note: It is a benefit for the property management system to be able to differentiate
between retail tenants and office/ residential tenants in the mixed use property. This
“status/ type“ function is also of value for identifying homeowners and tenants in
Homeowner Associations.
Outlet Centers - A relatively new concept which entails multiple stores / outlets t for
major retailers offering their products for less than retail prices. It is generally
thought that outlets provide major discounts over regular retailers and tends to be a
key element in Outlet advertising. Generally equal to a community center in size, but
often located in remote / rural areas where land costs are significantly less urban
areas.
Commercial Property Key Terminology includes:
CAM – An acronym for Common Area Maintenance. Generally it pertains to commercial
properties with the most use in retail commercial leases. CAMS are a means to charge
commercial tenants for property expenses that are common to all or most of the tenants,
i.e. property taxes. parking lot maintenance, utilities, etc. The total cost of the CAM
expense is then divided among the tenants on some basis usually involving the size /
square footage of the tenant’s space. CAM’s and the additional increase in size and
complexity of the commercial lease are the basis of the major differences in managing
commercial properties.
CAM charges can include 20 or more and can be quite complicated in their calculation
and their reconciliation. Property management systems specifically for commercial
properties will include the CAM routines and reconciliation. General property
management systems may offer the CAM routines and reconciliation as a module or add
on routine.
Actual versus Estimated CAM charges - Actual CAM charges are calculated after actual
costs are presented / invoiced and received by center management. Estimated are charges
based on past costs and expected increases for some period, usually a year. Estimated
CAMs are usually present in smaller commercial retail, and smaller office properties.
Larger commercial properties are managed generally by large commercial brokerages
using 60 page leases and defining 10 to 20 plus CAMS.
CAM Reconciliation – The process of reconciling actual CAM costs versus the estimated
charges actually paid for some period, usually a year.
Leases – Commercial tenancies are initiated with a commercial lease. They may end with
a Month to Month arrangement but almost universally begin with a commercial lease.
Commercial leases may be relatively simple for smaller commercial properties, but
generally are significantly more complex and detailed then residential leases and normally
ate multiple year agreements. Base rent increases are identified with details on all of the
CAMs and other factors affecting the actual charges that apply. Anchor tenants, ( large
tenants that generate traffic for their business and potential traffic for other smaller stores
and businesses ) may have additional lease clauses including sales activity to justify their
anchor status.
Leases are generally offered and negotiated by the commercial management or property
owner or commercial management brokers who may advertise the property on the owners/
or management company’s behalf. Locally we have observed the relatively recent origin
of companies that only represent tenant lessees. The management of the properties may be
managed by the owner of the land lease, the developer or a management company.
Lease Rate - The East coast and San Francisco uses a yearly lease cost per square foot
calculation. It would appear as $60/SF – $5.00 X 12 - Generally urban office space -
Western states use a monthly lease cost per square foot calculation in the leases and in
advertising. The lease rate above would appear as $ $5.00 SF (Monthly ) - Generally
Retail and Industrial -.
Land Lease – A land lease is an agreement, (usually long term) in urban areas and
generally associated with commercial properties. Initially they may exist in a rural area,
but in the path of development. The local citizens may not be aware of their existence
since there are no signs identifying that the shopping center, office buildings, hospitals and
/ or research facilities were built on land leased land.
Recently a large 50 year large land lease in East San Diego County ended. The properties
were being managed by an out of state company and leased by a local commercial broker.
The family that owned the land lease and the land has announced they are going to
develop further some of the properties. Currently the properties include a Super Regional
shopping center, a number of hospital buildings, and some medical office buildings. The
family that owns the land moved to San Diego County approximately 150 years ago and
currently is a well established wealthy family.
They acquired the property prior to any significant degree of development and promoted
the commercial development. Generally the development cost is less and the leases
theoretically may be less since the land is not purchased. Land leases are fairly common in
Southern California.
Lease Analysis – Is a process that defines and analyzes leases from details associated with
the schedule of and the amount of lease payments. Lease analysis also creates / calculates
the present value of the lease payments expected as defined in addition to all of the special
parameters identified in the lease. A number of software programs are available to provide
the analysis.
NNN Lease – A lease agreement that designates the lessee (the tenant) as being solely
responsible for all of the costs relating to the asset being leased in addition to the rent fee
applied under the lease. The structure of this type of lease requires the lessee to pay for net
real estate taxes on the leased asset, net building insurance and net common area
maintenance. The lessee has to pay the net amount of three types of costs, which how this
term got its name.
The actual charge amounts for the three categories are usually defined by the % of the
tenants leased space compared to the total leased space of the property. Additional
elements may be considered based on the special requirements of the lessee, i.e additional
utility usage, parking, security, etc. Actual CAMS charged will most likely be a
significantly greater number then the NNN designation suggests.
Overage – A circumstance when a commercial tenant has been charged and made
payments on an estimated CAM that were greater then the actual. This situation would
normally be resolved during the CAM reconciliation process unless the overage was
substantially above the norm.
Sales CAM - A CAM established based on monthly sales of the commercial tenant. It is
designed to account for both a dramatic increase or decrease in sales activity. It does
require monthly reporting and substantial administration when minimums or maximums
are encountered. Seasonal sales activity tends to complicate the tracking and application of
minimums and maximums.
Minimum – Maximums – The qualifiers associated with the Sales CAM. The minimums/
maximums relate to sales dollar volume. The use of this CAM calculation is usually only
found in the largest retail centers.
Office Facilities –
Multi Story Business – The traditional “skyscrapers” associated with the downtown
business district. Originally established as land costs increased but the developing
infrastructure deemed multi story office development feasible. In recent years multi
story office has become more common in the suburbs and former farmlands. Good
examples of that circumstance are in the University City in San Diego and Orange
County North of the I-5 and I-405 split. Portions of those areas went from grasslands
to 12 -16 floor buildings.
Office Parks – Usually a larger footprint of single and two story office spaces. Newer
facilities are now being built with elevators based on the introduction of ADA (
American Disability Act).
Mixed Use – See mixed use above. Mixed use involving office space would most
often be above the retail space at ground level. In some cases the same tenant may be
using both retail and office space in the same property.

Note: CAMS are less often an element in office leases. They may be present in regards to
the common areas associated with the building.
Medical Office -
Generally – Same Basic Structural Facilities as Office with the following additional issues
–
Special Considerations -
Security based on presence of drugs and expensive Equipment -
Specialized Services - Hazardous Waste Handling -
Higher % of Handicapped and Disabled – Special considerations and infrastructure -
Pharmacy - Medical Supplies facilities are often included in the larger properties –
Proximity to Hospital - Not a requirement, but very common as a convenience for
patients and for medical professionals and staff –

Research Facilities -
Generally – Same Basic Structural Facilities as Office with the following additional issues
–
Special Considerations -
Security is likely more of an issue - Pharmaceutical and medical equipment R&D
often entails millions in specific projects and is a major target for corporate piracy.
Additional infrastructure often required based on the potential dangers of lab
research, i.e. virus’s, bacteria, radiation, toxic materials, etc.
Research facilities tend to have a significantly larger footprint then many medical
office properties and often will be leased by a single research entity.
Research facilities do not share the same general population visiting their facilities as
medical buildings. Note: See Security above - Therefore they do not have the
additional Handicapped / Disabilities infrastructure, pharmacy / medical supplies
services or hospital proximity that usually exist in or near medical buildings -

Industrial –
Industrial Parks – Leases tend to be longer based on space accommodations are more
customized for the business. Industrial leases / space is split between warehouse /
manufacturing and office operations.
Standalones – tend to be larger spaces based on zoning and characteristics of
industrial tenants. Metal buildings are common.
Multi- Unit-Industrial / Parks - Properties may include large parcels and ten plus
individual units and some assigned parking spaces.
Special Issues / Elements –
Dock operations are common –
OSHA Issues – Hazmat Operations potential –
Extended Hours – Multiple shifts –
Security – Less of an issue with multi-unit properties based on increased traffic,
and less potential losses due to theft/ burglary. Security fencing and services are
often in place with single use facilities involving high tech design and
manufacturing,
Short to Long Term Use / Agreements –
Vehicle Access to all Units in multi-unit properties -.

Note: The above categories of commercial properties may involve leases created and
negotiated by agents employed by the management company or by commercial leasing
agents associated with a commercial brokerage, i.e Coldwell Banker, Grubb & Ellis, etc. A
common site at both shopping centers and office buildings is that of signs identifying the
management company and of leasing agents of commercial brokerage firms advertising
available space at the site.
A relatively new development in commercial leasing is the commercial brokerage that
only serves to negotiate a lease on the lessee’s (tenant’s) behalf. I have no knowledge of
this leasing option is statewide,( I suspect it is) or active in other states.
Mini-Storage - Has a number of operations that can be used in a traditional property
management system, but also requires features not generally available. Mini storage space
will generally involve monthly storage rates but may include weekly and daily rates.
Amenities may include climate control and access to water. Paying on-line is available
with some storage operations. Renting of multiple units is also fairly common.
Mini- storage systems do exist, but a system with some customizable features system
should be able to account for and manage a mini-storage property or properties.

Residential - Other –
Homeowner/ Condominium Association Management - One of the more popular / .
common niches often usually found with traditional residential management
operations. Our observations suggest that one out of every five/ six small to mid size
residential management companies are also managing HOA’s. There are also
companies that only provide HOA management services,
In California the DRE does not have an audit / oversight authority on HOA’s. HOA
oversight is the responsibility of the Department of Corporations –
Management is usually compensated via a fixed monthly fee for management
services and may also include other management/ maintenance services on a contract
basis –
Major challenge / issue in managing HOA’s is the necessity to meet with and to
maintain good relations with a diverse group of Home Owners who are also HOA
Board Members.
Accounting and budgeting for property reserves is a major consideration and
requirement in HOA management. Accrual accounting is common as is fiscal year
ends other then December.
An additional significant issue is that of the management and accounting of CC&R’s,
(Covenants, Conditions and Restrictions) violations. Our experience and observations
seem to suggest that the larger the association the more stringent the rules and their
enforcement.

Older systems usually did not have the flexibility or routines to effectively document or
establish an effective means to account for or collect the fees associated with CC&R
violations.
A further significant issue relates to the additional issues of CC&R violations created by
tenants of HOA owners. Newer systems often provide additional routines available for
more detailed documentation and management of CC&R violations including charges and
their collection.
Another important element for HOA systems management is the ability to provide a
means to identify homeowners from homeowner tenants. This would allow the
management company to define HOA communications and policies between homeowners
and homeowner tenants and provide appropriate communications for both categories of
residents.
This status option is also a benefit in those condominium properties that were constructed
and initially operated as apartments, but have since begun to be sold as condominiums.
During the interim two accounting systems will be active; rentals and HOA.
Note: It has been stated that HOA Management is a “Love – Hate” niche; managers either
love their HOA operations or hate it. HOA management is generally recognized as a
volatile management niche involving significant turnover among HOA Management
companies.
Note 2: The condominium concept has been applied to other properties both residential
and non-residential, In addition to commercial HOA office space other condominium
properties include:
A 644 foot yacht with 165 privately owned on-board residences that almost
continuously is at sea.
A 20 unit non-residential artist colony of work spaces.
A live-in artists colony of 62 units.
Park condos are actually parking spaces for RV owners.
An entrepreneur in Wisconsin has created 16 locations in Wisconsin that has
provided large condominium storage facilities with residential type amenities.

Short Term Rentals – Reservations Usually

Hotels – Motels – Special Hotel/ Motel Management Systems are usually used based
on the need for extended reservations requirements. Reservations are often handled
by a centralized system on-line to the individual hotels/ motels.
Vacation / Resort / Time Share Rentals – More Services - Location / Attraction
Oriented-
Major hotel chains have assumed the market share of the largest of these properties
which may provide additional services and amenities –
Bed & Breakfasts – entails a smaller numbers of guests with reservations. On-line
systems have become very popular for this niche based on size of operations.

A relatively new and increasing STR is the rental of SFR’s and condo’s near popular
locations providing special events and attractions. AirBNB is is an Internet based STR out
of San Francisco.
Locally AirBNB has received a lot of press based on their involvement with San Diego’s
Comic-Con, Del Mar Racing and beach rentals. Other press copy included the issue of
non-stop partying of renters among nearby owners. AirBNB also recently agreed to
include the collection of San Diego city taxes as a function of their services. A number of
local companies have been providing short term rentals for years. AIRBNB however, has
established its operations and success on the Internet with a completely different set of
operating procedures. Additional information is provided in Chapter 14 .
Note: Vacation Rentals & Bed & Breakfast operations usually require significant deposits
to be applied as a requirement for a reservation. This results in large deposits in place for
long periods in those short term rental operations, Additional precautions are justified to
minimize the likelihood of embezzlement. Often various hospitality taxes may be included
in addition to the daily/ weekly room fees.
Note 2: Hotel – Motel accounting operations are usually identified as Front Office and
Back Office operations denoting the differences in the front desk accounting functions and
the various accounting maintained by the Hotel / Motel departments. i.e. housekeeping,
restaurant, landscape maintenance, etc.
School Housing – Colleges & Universities
Dormitories -
School Owned & Operated -
Privately Owned Dormitories - Certified by university/ college –
Private residences and apartment buildings that are student oriented. but not certified
-
Private Residential – Off campus – SFR’s – Condos & Apartment Units –
Other Issues -
Seasonal Occupancies – Semesters and / or quarters – other then Summer -
Student Behavior – Conflict with neighbors – Drinking, loud music, frequent parties -
Zoning Issues - San Diego has created new regulations related to the use of modified
SFRs in the area of San Diego State University. SFR owners were customizing their
properties by creating additional bedrooms, converting lawns to parking spaces and
significantly changing the local community by converting SFR’s into small
dormitories.

Military Housing –
Contracted – Locally – Lincoln Military Housing – Maintains prominent operations
and facilities in multiple states and military installations. Websites promote the
additional benefits and services available in their housing locations.
 Private – May or may not have special government oversight or requirements –
Special Issues – Contracted Housing Paid for By Government up to rate defined by
military rank & marital status –
Other Special Issues – Deployment overseas or to another military base in some
states negates lease expiration agreements –

Affordable Housing - Federal – State – Local Programs

Section 8 – Best Known – Directed at privately owned housing - Rent paid by HUD
and Tenant -Benefits - Rents usually at market rates plus defaults are minimal and are
covered by HUD-
Brickbats – Requires substantially more government forms & regulations.
Completely contrary to private management policies and procedures. –
Taxpayers HUD Buildings – Properties owned by HUD and managed by private
owners with long term Lease / Purchase arrangements – Requires even more forms &
regulations related to prospective tenancies - Also Completely contrary to private
management policies and established procedures –

Note: Our observations seem to suggest there is a lower percentage of HUD Buildings in
San Diego County compared to other urban areas.
New Construction With Mandated Section 8 Units - Some local governments are
promoting construction projects with 10 to 15 % of mandated S-8 units as part of the
project.
Taxpayers may question why subsidized rent should be available in beach and other
high rent locations which government pays a premium to subsidize –
Cost of new HUD building construction is often greater then private construction.
Logic suggests that more subsidized housing could be built if lower costs were
maintained.

Mobile Home Parks - AKA Manufactured Housing -Various MHP programs / options –
Rental of space / mobile home –
Rental of mobile home including space –
Lease / purchase of mobile home and rental of space –
Utilities Billing routine highly recommended – The billing of utilities is a major
administrative task for MHP management . A number of separate support programs
and some systems modules to automate this task are available. A few developers who
provide the utility routines have established a major market In Mobile Home /
Manufactured Housing Systems.

Other Issues
Seniors only MHP’s – Licensed age discrimination. Fair Housing not applicable in re: to
age discrimination in Senior Mobile Home Parks - Rent Control MHP’s are the only Rent
Controlled properties in San Diego County –
Marinas – Issues – Although it is obvious that marinas and private air ports are of a
significantly different nature then the property niches above, they often require less
capabilities and special accounting routines then other niches such as short term rentals.
Boat Slips - Small to Large
Rivers - Lakes – Bays – Ocean locations -
Live Aboards Vs. Recreational use -
Commercial Services -
Fuel and marine / sports equipment – Food & drink -
Boat Rentals
Classes –
HazMat Issues – Trash

Often very seasonal and in some locations are constantly rented based on shortage of
marinas. A negative related to new development could be the long delays in planning,
permits and actual construction.
Air Parks –
Air Strip –
Hangars / Outside Tie Downs –
Residential Option – Air Park Community where most or many of the high end
residences have their own aircraft and hangars and direct access to the runway(s).
Additional services –
Control tower, fuel, maintenance and repair services, food, schools, air taxis.
FAA Control / Regulations –

Other – Parks
Federal – State – County Parks possibly licensed to private contractors –
Privately Owned Parks
RV Parks –
Camp Grounds –
Hunting Grounds – May offer short term housing – Major liability consideration -
Nudist Camps – Major sunburn liability – Grounds Security – OK, I did mention
them!

Summary
 It is apparent that there are many other types / niches of property management that
may either supplement or replace the highly competitive traditional residential based
management –
It is likely at some point every property manager / broker / owner-operator may have
the opportunity to own / invest / partner and/or manage a niche management
property.
Knowing of and understanding the basic benefits and caveats associated with the
many and diversified niches may provide a new career, new prosperity and additional
job satisfaction.
Note: California with its climate, many and diverse geographic elements, e.g. ocean,
beaches, mountains, desert, parks and special amusement parks, etc. provides one of
the most opportune locations for a multitude of niche property management
alternatives. Many other states also offer multiple special geographic attractions that
may accommodate niche management opportunities.

Note: The niches listed above is a relatively complete list, but in no way does it imply that
all of the variations of some categories are identified or established yet.
 CHAPTER 9
Property Management Systems & The Internet

For many people it is difficult to imagine the world without the Internet. For those of us
who are “wired”, the Internet is as commonplace as our vehicle, TV, and cell phone, all of
which are continuing to undergo change and innovation. Some devices and technology are
changing faster than others. The Internet is also displaying great changes in its
applications and capabilities while it’s use (time wise, frequency and number of
applications), continues to expand throughout business, government and the private
consumer’s activities.
The Property Management Industry has been displaying an awareness of the Internet for
the most part since the beginning of the millennium. The first Internet based Property
Management Systems began to appear just prior to the millennium and increased in
numbers throughout the first decade of the millennium. Internet websites identify about
160 property management systems with an additional 40 or so focused on the hospitality
industry. Currently it appears that a significantly larger number of property management
on-line systems have been introduced since 2000 then standalone systems and this is a
major and ongoing trend.
Note: We are referring to Windows and MAC based programs above. We are not including
Blackberry, SmartPhone, I-Phone, I-pad or tablet applications. (Apps) that may have a
property management function or support orientation. They are not to be considered as a
system. Those Apps are beginning to increase as additions to established property
management systems that are generally on-line/ Internet accessed systems. We discuss I-
Phones. SmartPhones and Tablets and their increasing use in the property management
industry later in this chapter.
Our goal in this article is to identify Internet based concepts and systems innovations
making their appearance in Property Management Systems today and in the near future.
Some current key definitions related to the Internet include the following:
ASP – Cloud – On-line - SaaS –
ASP or Application Service Provider is generally recognized as one of the early
designations for applications written for the Internet. ASP entails a concept involving
an Internet based application / program provided by a service provider. The
application is accessed and files are updated / processed over the Internet.
The traditional ASP, (it seems inappropriate to identify a high tech concept that is
only ten years old as traditional, but that is the state of much of technology today),
will tend to provide the same features and appearance as the standalone with perhaps
 some advanced features not generally available in the standalone. An on-line system
was introduced by Rent Manager in 1999 and Yardi Systems in 2001, both early and
very popular property management systems brands appearing early in the
millennium.
The service provider is providing the program and usually hosting (maintaining) the
program and the client’s data via one or more servers at one or more remote
locations.
The number of clients, and the average size of the clients database provides some
significant reductions in upfront systems costs when compared to the upfront costs of
a standalone system.
Note: The service provide mentioned above should not be mistaken for the ISP
(Internet Service Provider) that provides the Internet connection in which the ASP –
Cloud – On-line – SaaS system is available.
A major consideration with ASP / on-line systems in regards to cost is that the
monthly or annual fees are recurring. Other issues including cost factors and pricing
related to on-line and standalone systems are identified in our Technology Addendum
“On-Line Systems Versus Standalone Systems”.
Cloud - A somewhat more recent term that tends to be more generic and is often
thought as less technical and more user friendly. Initially it was used rather
extensively among IT professionals especially in marketing efforts focused on non-
IT audiences. Very recently it gained in popularity and prominence as a result of
Microsoft’s promotion of its cloud based Microsoft Office software.
On-line - A definition including the above designations, but also identifying all of the
Internet based applications and services.
SaaS - A somewhat newer acronym description for ASP’s is SaaS or “Software as a
Service”. Generally the same concepts and issues apply except that the SaaS
designation is more specific and more current. This terminology appears regularly on
the Internet in Intuit (QuickBooks) based blogs which are directed at CPA’s and
accounting professionals,

The differences in designations primarily relate to the time they were introduced and the
technical backgrounds of its users. ASP is becoming a somewhat obsolete term after its
use of about one decade. The SaaS acronym tends to be a bit more descriptive then ASP in
that it identifies a service instead of a product which was purchased. Some ASP’s provided
the option of the program and data being stored on the developer’s site or on a site under
the control of the user/ company.
Property management systems ASP’s/ SaaS/ Cloud and on-line applications are usually
billed on a monthly basis, and often include the option of a discount if paid annually.
Pricing is generally a fixed amount based on number of concurrent users, or by some
measure such as number of units or a combination of the above for the base system plus
additional optional features. Usually support and upgrades are included in the monthly
fees. An initial set up fee for each concurrent user may also apply. We will use the generic
on-line terminology for the rest of this chapter.
As indicated since the millennium most property management systems developers appear
to have decided that an on-line system is the only offering they want to bring to the
market. California appears to have a number of newer on-line systems that have made
significant gains in market share in the last few years.
A distinct benefit to the developer is that fees associated with on-line systems are
recurring fees providing the likelihood of greater income over a long period of use then
standalone systems over a long period of use. A distinct benefit to the prospective user is
the lower cost of start up operations and generally a fixed monthly cost of the software
even though most likely the total cost over the active use of the system will far exceed the
cost of a comparable standalone system.
One of the earliest features that appeared in both on-line and standalone systems with the
growth of the Internet was the inclusion of e-mail operations. Initially it was generally
programmed to work with a word processing function within the property management
system but in some systems could be used without activating the word processor portion
of the program.
Another use of the Internet was the updating of the standalone system using the Internet.
This replaced the prior function of using mailed CDs for the purpose of providing updates
to the program. Current procedures now often involve downloading the program initially
for standalone systems in addition to upgrades for the system.
Back ups of a database or a whole PC using the Internet is a well established service with
a number of regional / national companies marketing those services, On-line property
management systems generally include back up functions ( generally their own ) with their
on-line system and are frequently scheduled. Backup services and backup software also
includes routines to restore the backup when required.
Standalone systems usually have a back up/ restore routine which generally provide the
option of selecting the type of storage media in which the data is stored, i.e. CDs, DVDs,
thumb drives, and/ external hard drives. Tape drives for the most part are no longer used
based on the availability of more reliable high volume storage media and a failure rate
based on the mechanics of tape back ups. Shared personal experience with a number of
clients involving tape backups allows me to state my negative experience regarding that
back up media.
While most property management software would be categorized as full or complete
systems significant variations exist in the features and market that the system services.
There is also a category of limited independent follow on functions/ services that are
available as standalone and on-line routines.
Note: Property management operations currently entail so many diversified elements,
some of which are not conducive to encompassing completely within the system.
Examples include Background Checking, d ACH/EFT Processing, and Payroll.
Background Checking requires huge databases of personal financial data maintained by
other companies and government agencies. ACH/EFT Processing requires access to
hundreds of financial institutions. Payroll is another support application based on its
elements including tax tables and is best utilized as an integrated support program or
having the capability to provide its calculated results as an imported file.
Most newer property management programs and independent support programs have
migrated to the Internet while others are available as both standalone and on-line versions.
In either case the property management program that provides a significant integration
option including import/ export formats for support programs is a major benefit and
feature in the property management system. It would normally be considered a major
feature benefit when evaluating property management systems.
Market elements associated with the property management systems market include the
following:
Size of property portfolio - i.e. number of properties and units –
Type of properties managed -
Availability of city, state, regional, and national regulations and mandates –
Owner / operator or fee managed properties or both -
Remote sites – i.e. Large apartment properties with resident managers and Large
Commercial Properties with on-site leasing agents -
System configuration – On-Line versus Standalone –
Pricing / support and training options -

We discuss the differences in additional detail in chapter 15 “Shopping for Software”. It

must be understood that states have major differences in the laws, mandates and
regulations associated with property management and ownership. It must also be
understood that very few software developers have the time, staff and financial resources
to create universal management software that is capable of satisfying all government
mandates including Federal, State and Regional for both owner/ operators and fee
managers. Additional issues and requirements may be in are in place when managing one
or more of the niche property types identified in Chapter 8.
Newer property management systems, whether standalone or on-line are unlikely to be
able to release a system including availability of all government regulations initially.
Doing so would require an extremely lengthy development effort and costs with no
offsetting income. The newest systems would generally take a few years to be able to
provide a widely acceptable product. New systems tend to offer special concessions for
their earliest users based on initial limitations of their offering. Another element that has
been effective for a relatively few newer systems is a gigantic marketing budget.
Based on the advertising of some developers it would seem that their systems were
universally capable. A relatively brief review of those systems would confirm they were
much less capable then advertised and certainly nowhere near a universal system. Such a
system was the source of our article that morphed into the contents of Chapter 15.
Support Software - The on-line independent support routine may be utilized on-line or in
some cases may offer the option of being downloaded to the users site. Based on the
amount of usage, it may be a financial decision as to its configuration for the potential
users of the routine. An example would be the on-line or downloaded routines for Work
Order operations. Another generic support program we recently discovered was that of a
PDF to MS Word converter program. This program was available as a download
standalone option or on-line depending upon the amount of usage. Minimal use operations
were free.
Most often however, the support on-line routine integrates with the established core
program and enhances some aspects of the core program or provides a whole new function
that supports property management operations, such as:
ACH/EFT (Automatic Clearing House/ Electronic Funds Transfer processing –
Background Checking –
Commercial – CAM operations – Chapter 8
Maintenance Management & Accounting – Chapter 6
Payroll processing –
Report Writer -
Tenant Prospecting – Chapter 2

The above applications are now integrated with some property management systems
offering additional benefits including increased productivity as a result of their integration.
Integration may be real-time or may require the overt act of importing the data into the
property management system, ( a process that may take a minute or two based on the
volume of data).
The ACH/EFT application entails the creation of paperless transactions that move
through the banking system. ACH/ EFT processing is growing rapidly in popularity
and use although still a long way from universal acceptance. ACH capability is either
provided in the base program or can be integrated with a support on-line ACH/ EFT
service.
PayLease is a San Diego company that provides ACH/EFT on-line services and
integrated services for a limited number of property management systems. It also
offers an import option for some popular property management systems. Paylease
 compared to some other ACH/EFT services is California BRE/DRE compliant which
may also be of importance in some other states.
Note: My company was instrumental in providing information to the developer we
serve as a dealer for improving their BRE/DRE compliant Trust Accounting and
establishing PayLease as a BRE/DRE compliant ACH/EFT service. Their prior
service was not California DRE compliant.
It may also be offered by banks that service among their on-line services. Banks will
provide the ability for their customers including management companies to initiate
their ACH/EFT transactions, but would tend to be less integrated. There also appears
to be major variations in transaction pricing among banks. Pricing is important in that
higher cost ACH processing would normally reduce the services the bank provides or
increases the charges to its property management customer.
ACH/ EFT processing provides a number of key benefits. It levels and reduces
staffing requirements during the monthly PM cycle. It will usually speed up the time
to get the receipts into the bank thus increasing the daily average bank balance and
improving the banks reserve analysis of the trust account.
Additional and optional ACH/ EFT features provide for:
ATM/ Debit Card processing
Credit Card Processing
Internet E- Check transaction processing.

Note: Additional ACH/ EFT information is available in our Technology Addendum.

Other Internet property management support services are:
Background / Credit Checking entails Internet access of established financial/
criminal databases for qualifying applicants for vacant rental properties. Most often
the background checking which may include criminal checking also, and may be
offered as an integrated support service.
Commercial – CAM operations were defined in Chapter 8. The need for this category
of software is based on the number and sophistication of the commercial leases.
Some systems may be capable of basic CAM operations assuming the CAMS are
established as “estimated CAMS” and reconciled usually with a spreadsheet program.
A few property management programs have a true CAM capability. There are a few
high end commercial management programs and a few programs that offer a
commercial module. A Commercial- CAM module that may have an additional cost.
Maintenance management and accounting most often is part of the core property
management system. Work Order processing and reporting is now generally
considered as a basic feature/ routine in most systems. Some systems do provide
extended maintenance features including invoicing, projects maintenance, inventory,
conversion of work order data to tenant charges and vendor payables, asset servicing
 and depreciation and reserves accounting. Some basic systems, (mostly those
designed for owner/ operators) do not include maintenance management &
accounting routines.

There also appears to be a market for this application for managers and owner/operators
with a system already in place that does not include a work order capability. It may also be
of value where a small property portfolio manager or owner/operator has no property
management system, but believes a basic maintenance / work order routine is deemed a
benefit.
This independent on-line or standalone routine would most likely be of greater interest for
an owner/ operator then a fee property manager. We often find that a husband / wife team
with investment property management areas of responsibilities would usually entail
property maintenance responsibilities to the husband. My parents were investment
property owners and that was the activities which my father assumed and enjoyed.
That was the circumstances with my parents when they owned and managed a 36 unit
apartment building and a smaller set of units later. It was also the case I observed later
during my 4 year stint as a property manager primarily managing apartments. I often
found that male owners wanted to assume some maintenance responsibilities. We
generally recommended against their presence on the property site with the possible
exception of working in a vacant unit incognito.
One major experience highlighting the problems of owners visiting their properties took
place with new property owners of a 64 unit apartment building. A day or two after we
assumed management of the property the resident managers called and indicated that the
owners were on-site and introducing their selves to many of the tenants. They were also
handing out their business cards which indicated they were involved in Bible sales. It took
about 3 months to get the tenants not to call the owners, but instead to contact the resident
managers with any tenancy issues.
Traditional “Mom and Pop” residential management has undergone a significant change
based on the presence of the computer savvy generations and technology. In the past
senior citizens with years of resident management experience were in demand. Often little
or no knowledge of computers was the norm. With the growth of property management
systems and then on-line property management systems many of the traditional
experienced resident managers were no longer comfortable with the new responsibilities
and requirements the systems entailed. In larger properties computer savvy assistant
resident managers took over the system operations while the resident managers slowly
adjusted to the changes the systems promoted.
In general however, the independent on-line and standalone property management support
routines of lesser interest with some exceptions appears to have a reduced market share.
This appears to have occurred based on the availability of many fuller featured property
management systems priced for smaller property portfolio operations.
Other support services that may be available via the Internet:
Report Writers – All property management programs to my knowledge provide some
level of formatted reports as a component of the core program. They may differ
greatly in the number and reports content. Report writers are available for larger
property portfolio managers who require additional report options and formats.
Payroll processing if available is almost exclusively an integration option. It may be
available as download which is then imported into the system. I am not aware of any
small to midsize property management system that includes a basic payroll capability
as part of the core property management system. At one time a number of systems
offered payroll modules or integration with an independent payroll program.
I am aware of a number of programs which offered those options. With the number of
payroll services now available it probably appears that developing a payroll module
is not a high priority. Payroll is a high maintenance application involving frequent
changes for the federal, state and municipal payroll tax tables and miscellaneous
requirements. Internet payroll operations are generally now accepted as a better
solution compared to maintaining an in-house payroll program.
Some national payroll companies promote their ability to integrate with a number of
popular property management systems.. Data is often entered over the phone or on
the Internet, the payroll is run and then exported / imported into the clients property
management system. I have provided assistance in recent times to one of my clients
in this manner using a well known payroll service.
Another well known payroll service was initially being used off-line and an attempt
was made to provide exported data to the property management system. That service
could not provide an acceptable exported file for the client’s property management
system after a significant effort. Take note if payroll integration is a future application
in your company. Maintaining an in-house payroll capability is a major ongoing
administrative effort subject to extensive changes and errors. There are better
solutions and integration if possible is one of them. .

Note: Many banks provide payroll services via regional or national payroll services and
may possibly provide special discounts on payroll services and other bank or 3rd party
accounting oriented services based on account balances and “Reserve Analysis”.
Tenant prospecting operations were identified briefly as to its use and importance in
our earlier chapter/ article on marketing, Currently there are a small number of tenant
prospecting on-line services and routines providing vacancy information, tenant
applications and application fees, security deposit receipt processing, plus tenant
prospecting routines/ reports that may integrate associated with specific property
management systems. Tenant prospecting operations probably offer one of the most
diverse group of techniques including the Internet in providing tenant prospecting
 and advertising functions.
A variation of tenant prospecting application is present in the form of a property
management web site, that merges a number of routines and services into the web
site. Unit vacancies and other property/ unit / tenant based information is exported or
imported from the on-line or standalone property management system data y
updating the web site and/ or database. An on-line property management system most
likely would be likely programmed to update the company web site in a real time
mode. A standalone program would most likely be programmed to update the
company web site late in the day or early morning. A web site that provides
interactive abilities such as those above is identified as a portal.

The use of independent on-line support services provides new abilities, and often reduces
regular production costs / time, based on its use and generally real time Internet
characteristics. Pricing variations are based on a number of elements usually related to the
size of the portfolio and may offer the ability to distribute costs to participants receiving
benefits from the service other than the management company.
Supplementary type functions of this sort, can when necessary, be replaced with
traditional manual operations. The survival / continuity of the basic application is not
dependent upon these operations in the short term. Over the mid / long term the cessation
or slow down of these supplemental functions will diminish the integrity of the system,
but overall the partial on-line service provides new levels of functionality and
performance when paired with older systems. This is a general consideration with any
Internet based software service.
Another support property management system only uses the Internet for the distribution of
key receipt data after it was captured. It automates the receipt processing functions and is
promoted by some banks and a number of PM systems. It utilizes OCR, (Optical
Character Recognition) statements or bar codes on statements or coupons to identify and
process tenant rent receipts (or homeowner fees for Homeowner Associations). The
process starts with the bank receiving the homeowner/ tenant receipts via a bank lockbox.
Bank Lockbox operations are common in which condo homeowner receipts are batch
processed with bank check readers. The receipt data is then directed to the Management
Company for the updating of the property management system. The Lockbox system
usually is faster and is usually very cost effective for larger volumes of receipts and
money orders. Lockbox operations are also used for tenant receipts but to a lesser extent
then homeowner receipt processing.
Another established group of Internet applications is provided by Citrix an early Internet
developer and innovator. Citrix developed and markets a popular set of communication,
collaboration and training system called GOTOMEETING.COM and can be used in
multiple ways by property management companies. The software can be used for the
training of staff at various remote locations and t can also be used for owner meetings and
training in lieu of on-site sessions.
GoToMeeting allows a change of presenters and 2 way both verbal and written
communications; emulating the more sophisticated on-line classroom type training. It
negates the need of the additional costs of time and travel. It is a special value for out of
area owners where travel is problematic and phone conversations are inadequate,
especially when reviewing reports.
Companies that provide products and services to the property management industry are
also increasing the use of the Internet for training purposes. The training can consist of
instructional on-line videos available to users of the systems. A few property management
systems developers are making extensive use of this type of training. At least one
developer maintains a library of more than 150 videos in their library.
Standalone systems for a number of years have utilized a variety of communication
programs to allow data at a main office to be accessed from a remote site using the
Internet as a key element A number of communication applications involve the accessing
of programs and data from one system to another. That is the basic capability of on-line
property management systems and hundreds / thousands of other business/ government
programs,
Three of the most popular programs used by standalone system users are Remote Desktop
Protocol (RDP), LOGMEIN and GOTOMYPC. RDP is a routine that has been added to
Microsoft’s operating systems, beginning with the XP operating system. RDP allows a PC
to host access to its programs and data by another PC, usually a remote PC. LOGMEIN is
a free basic remote communications program also providing a PC hosting routine.
GOTOMYPC is an on-line, monthly service that also allows a remote PC to access the
users host PC. This provides the ability to access the host PC be at the office or at home
while the user may be on vacation, at a convention, conference or are traveling for
business purposes. GOTOMYPC provides the additional benefit of spontaneity in that a
minimum of time and effort is necessary to activate from any PC or Mac. The other
programs require additional efforts to activate the remote system.
Another popular although dated routine is Microsoft/s Terminal Server which provides
one or more remote users to access and update a shared database from the standalone
systems server. The Terminal Server is one of the older program routines associated with
standalone multi-user networks. I have had a number of clients that used Terminal Server
to access apartment sites and resident management.
A relatively recent development is the availability of I-Phones and other IOS/ Apple
devices, Android/ Google SmartPhones and tablet Apps which can provide can access to
office / home PC”s. Unless additional programming is available limitations exist based on
screen and keyboard size of the remote devices. We direct additional attention to those
devices later in this chapter.
For small to midsize offices using a standalone system and with minimal need for remote
operations the communications products above may provide an excellent alternative to
transitioning to an on-line system. The cost savings can be very significant. A limiting
factor however, is the number of current standalone advanced features and technology
systems is declining. The majority of newer systems are on-line configurations.
Wi-Fi - Is an important technology allowing computers, SmartPhones, tablets and other
devices to connect to the Internet or communicate with one another wirelessly within a
particular area. Many devices can use Wi-Fi, e.g., personal computers, video-game
consoles, Smartphones, some digital cameras, tablet, computers and digital audio players.
These can connect to a network resource such as the Internet via a wireless network access
point. Such an access point (or hotspot) has a range of about 20 meters (66 feet) indoors
and a greater range outdoors. Hotspot coverage can comprise an area as small as a single
room with walls that block radio waves, or as large as many square kilometers achieved by
using multiple overlapping access points. It is Wi-Fi that has turned Starbucks and other
coffee shops into laptop, SmartPhone and tablet centers for personal and business remote
operations,
An ongoing increase in public Wi-Fi services provides and promotes the increasing use of
laptops, SmartPhones and tablets in public locations. It may also add to additional
concerns re: data and device security concerns. Wi-Fi can be less secure than wired
connections (such as Ethernet) because an intruder does not need a physical connection.
Some Web pages are secure but unencrypted internet access can easily be detected by
intruders. Because of this, Wi-Fi has adopted various encryption technologies, although it
is possible some Wi-Fi service locations may not be using the newer more secure
technology. Wi-Fi provides an important support service for remote devices based on its
access to the Internet.
Wi-Fi can be less secure than wired connections based on the age and design of the
service. Some web pages are secure but unencrypted internet access can easily be detected
by intruders and in the past because of this, Wi-Fi has adopted various encryption
technologies. Not all Wi-Fi locations however, are completely secure. Wi-Fi information
provided by Ask.com - .
As indicated in Chapter 5 a significant time and cost savings function is the increasing use
of batch reporting integrated with Internet e-mail operations. Traditional programs are
being updated to provide e-mail addresses and operations for vendors, clients, tenants, etc.
Newer programs are providing the ability within the property management program to
batch multiple documents and / or digital reports and e-mailing them to multiple recipients
with one click of a mouse after initial setup.
The Internet has also promoted the development developed another category of special
applications called portals. Portals are websites that allow interactive on-line functions.
Some web site portals are of immense proportions such as Google. Google provides a
large number of special functions in addition to searching for information. Google
provides a suite of online generic applications including word processing, spreadsheets,
maps, calendar, etc., in addition to many other special applications via the Google web-
site. Google, Microsoft and others now provide replacements for the generic office suites
that were generic programs, (word processing, spreadsheets, publishing and presentation
programs) available in most offices.
Property management companies are expanding existing web sites to web portals and in
some cases initially creating web portals with the assistance of web designers. The website
portals are displaying their unit vacancies, accepting applications, allowing rent payments,
and providing maintenance requests. Portals continue to increase within the property
management industry based on their ability to provide multiple property management
functions and services 24/7. The above innovations provide many new capabilities.
A trend is developing that some companies are becoming totally dedicated to online
applications and orientation. The shared data, which in the past was maintained on the
company servers are now moved to an on-line server and accessed by company staff from
company locations. To some observers that is a somewhat radical level of on-line
commitment. Considering the increasing level of costly and illegal cyber activities there
appears to be reason for doubt; in effect” placing all your eggs in one basket” may have a
significant level of risk.
Google and other on-line multifunction services, (Microsoft’s Cloud is one) that would
allow a company with some possible exceptions to move into a completely on-line
environment if so inclined. Sharing of other files, documents and generic programs by
company staff would take place on-line. Converting company files currently on a
company networked server and individual PC’s could be a major undertaking which
probably limits the number of companies from going completely on-line.
Other Internet applications include:
Hand Held Wireless Access – The original Hand Held devices were known as PDA’s,
(Personal Digital Assistant) with the Palm Pilot being the most popular. Cell phones were
introduced at about the same time and quickly morphed into phones with additional
personal tools and features. Internet access was then introduced and cell phones morphed
into Smart Phones, and tablets. Apple introduced its I-Phones, and I-Pads and has been
able to maintain a steady release of new versions emphasizing with a number of major
innovations and features.
Google created and released its version of Smartphone software (Android) matched to
numerous Smartphone devices and became a significant competitor with Apple. These
devices are relatively new but has acquired super trendy status with major “wireless”
companies and communications equipment fighting for market share with new technology
including devices and innovations appearing almost monthly. In some cases some of the
devices are replacing PC’s and Mac computers based on applications that favor device
portability.
Portability is a very relevant factor for property managers requiring systems access and the
need to add or update property management data while in the field. Property managers and
maintenance staff can determine property / unit and/or tenant status, request maintenance,
review maintenance status, materials inventory, maintenance scheduling and many other
important functions by the creation of inquiries with Hand Held / Remote communications
type devices.
The heavy hitters in industry, banks, computers/ software, and retail operations are
beginning to exploit the SmartPhones as another major medium for acquiring consumer
goods replacing Debit and Credit cards. They are also replacing traditional phones in
homes and to some extent in Business offices. They are providing a multitude of mobile
communication aids including texting, attachments and audio records as both benefits and
caveats in addition to allowing access to their computers in the office and at home.
In an earlier Internet article I authored in 2003 very little content was prepared in regards
to remote devices, i.e. notebooks, tablets and Smartphones since for the most part they did
not exist. Since then numerous portable communications devices have appeared and seem
to be taking over our lives. Sitting in a medical office, commuting on a bus or train or even
walking in a mall the number of people focusing on their I-Phone or SmartPhone may
exceed more than 50% of the people encountered. This is especially true of our young
people.
A new development is the dangers that arise when the remote devices assumes all the
attention of its user while on the move. Driving and even walking while using a remote
device is not only endangering its user, but also passengers in the users vehicle and in the
people/ object it hits. YouTube, another Internet innovation, has provided a number of
videos showing I-Phone and SmartPhone users walking into mail boxes, fire plugs, and
mall fountains.
The Smart Phones, i.e. I-Phones, Android devices and Blackberries, in a relatively short
time have far exceeded the status of the Swiss Pocket Knife in terms of multi-use
functions. These devices are establishing some dramatic changes and providing many new
alternatives to more traditional electronic devices and activities in both our business and
personal lives.
Recent releases include products from Amazon, Dell, Google and Microsoft and are
generating some impact on what has generally been an Apple and Android and Blackberry
Smartphone and Tablet market, There is no question as to the popularity of the
Ssmartphone phenomenon.
Access and updating of real time property management data from remote devices are
features of some on-line systems. Specific property management operations involving
remote devices, (Smartphones and tablets) are increasing in their use and in their number
of applications. Specific operations now available include:
Access & updating of tenant data including reports -
Accessing and updating of owner data including reports -
Accessing and updating of work orders including reports –
Manage and update vendors and modify / approve bills -
Establish unit inspections and provide details -–
Taking property / unit / tenant pictures and importing them directly into the property
management system –

Standalone systems may provide remote access and updating but not in real time.
Internet / Remote Site Access via various software, hardware, operating system
alternatives are available. It is important to note that remote access to property
management systems data is not limited to on-line systems. Standalone systems for a
number of years mayhave utilized a variety of communication programs to allow data at a
main office to be accessed from a remote site using the Internet as a key element.
Generally these systems have been developed originally as communication devices but
have developed the capacity of providing hundreds or more of additional uses based on
“Apps” recreated for the devices and the Internet and providing both new and substantially
improved convenience, features and functions specifically designed for the devices. A
significant new concern however, is the increased dangers of loss, theft, and hacking.
Their portability automatically entails new risks of damage and loss. The huge increase
and demand for new “Apps” entails less security as “Apps” are written with less oversight
and security. Since some “Apps” are used to “synchronize “ with some applications on the
PC’s and MACS and/ or to access and possibly update company or private PC’s and
MACS the security issues are magnified and must be considered when the remote devices
interface with the office systems.
The Internet provides an exciting, innovative environment for business including the
property management industry, It also provides a new set of challenger in implementing
the innovations and technology the Internet has introduced. We discuss future technology
and innovations that may play a role in property management systems operations in our
“The Future” Addendum.
THE INTERNET – PRO & CON
Some observers will question why any company would not be inclined to use the Internet
as a basis for their property management system. Others will question why any company
would consider the Internet as a basis for their property management system, or even a
partial support basis. Both positions have strong pro and con observations and opinions.
The trend definitely favors on-line systems. Events associated with the Internet in recent
years may be having some effect on the trend. We have provided our analysis in an article,
(On-Line versus Standalone Systems) presented as one of our Technology Addendums.
Companies that have directed their recent development and processing efforts to include
the “World Wide Web” (WWW) are riding the Internet Wave. The availability of the Web,
the relative ease of access and use, along with a significantly lower set of start up
infrastructure costs and requirements indicate to these true believers there is no other real
option then to use the web for the promotion and operation of their business. .
On-line systems developers however, have not impressed all facets of business and
government. They have made inroads into the traditional software application purchase
and use market, but still seem to have difficulty providing all the right answers to some
prospective on-line users. Part of this reaction no doubt is from the “but we’ve always
done it this way“ crowd.
For larger companies part of the resistance is derived from the concerns of the prospective
in-house IT, (Information Technology) staff who recognize that many IT responsibilities
and budget $’s will be re-directed to the on-line systems company. We have observed and
are aware of a number of scenarios where the IT department resisted the use of an outside
company assuming a large role in systems development and operations.
In addition, management may be uncomfortable with the concept that company files may
now be buried under a mountain somewhere North of their home office and system
security and control is now shared with an outside company. With the on-line system
security confronts a world of international hackers in addition to the malware and virus
developers. The main threat to the standalone system security is local. An employee,
current and/or former employee is usually responsible for the theft of data or materials and
the embezzlement of funds. The threat while still present does not usually entail the
totality we observe in the millions of records involving the Fortune 500 and government
entities.
Our own experience plus that of a number of our clients has entailed some level of
Internet down time. Property management operations are highly cyclical and some
operations, receipt processing, owner check processing, payroll processing are more
critical than others. A shutdown of some duration at a critical time could have a
devastating effect upon the business whether it is using an on-line or standalone system.
The standalone system user however, would normally have more control and options in re-
establishing operations.
Some companies have determined an external power supply is a means to continue to
operate even when the lines are down. Many companies in the North East coast states
have already experienced conditions during the winters of 2013 and 2014 which involved
power outages for two to three weeks based on down power lines. An external power
supply does not necessarily mean the Internet is up and some external power generators
are incompatible with computer operations based on fluctuating voltage.
Bob Bly is a successful Internet marketer and copy writer who operates out of his home in
the North East. He discovered that his external power supply damaged his computer
equipment when he attempted to continue his operations during a severe power outage
during a major storm. Caveat emptor! If an external power supply is a consideration for
your office confirm the equipment is computer systems compatible.
One other situation that I have observed a number of times is the problem/effort of
acquiring a fast and reliable Internet capability. Some rural areas or locations may lack
access to an upgraded c ISP (Internet Service Provider). One company operating in a small
commercial complex when attempting to upgrade their Internet speed discovered the cost
to the office was going to be more than $5000. For some companies that dollar amount
would have to be evaluated carefully to justify its cost. In this case after a couple of years
an acceptable service became available.
Another concern is that for some reason or other their on-line systems provider, their ISP,
(Internet Service Provider) or the Internet may not be available for some time seriously
effecting their ability to provide the necessary operations for the management of the
properties under contract. Another company that managed the office building they
operated in and the Internet access they provided to the tenants discovered major problems
with the building’s Internet access and interruptions during wet weather. In Southern
California and a few other states severe weather may only occur every three or four years.
A significant effort and cost was required to correct the periodic problems and assure
continuity of Internet use.
The major concern re: on-line systems and the Internet is the ever increasing frequency
and magnitude of international hacking and compromised personal data. The list of mega
companies that have been hacked continues to grow. In addition to the concerns of
hacking and compromise of systems data the threat of viruses and malware also continue
to increase. Some maintain that “climate change” is also a factor. Increases in major
storms, (remember Sandy), tornados, hurricanes, wildfires and floods destroy power lines
and prevent access to the Internet. Those events have established a major recognition that
currently there is still no backup for the Internet.
If the on-line system is hacked the likelihood of the confidential data of the business and
customer data such as bank accounts, Social Security Identification numbers, credit card
data and the associated contact information will be at risk. In recent times the business
news appears on what seems to be almost a monthly event another hacking event
involving millions of customer records. Both government and private sector accounts are
involved, including companies that have been Internet and computer industry leaders, i.e.
Google, Microsoft, FaceBook, in addition to major retail companies including Target,
Home Depot, TJ Max, Neiman Marcus, etc.
It must be stated however, that to the best of my knowledge there has not been any
hacking or significant downtime events of on-line property management systems data yet.
One could generate a number of observations as to why there has been no property
management on-line systems data losses or compromises yet considering the potential
value of a property management systems database. It is also noteworthy that
embezzlements or data breeches of property management companies are rarely identified
although in the past they occurred more often than most property managers know.
Anti-virus software is available and relatively inexpensive. It does however require
supervision to be sure it is used and updated frequently. Additional security techniques
include passwords and “firewalls” which are designed to prevent illegal access into the
system by hackers. One major problem still pending is the lack of criminal penalties to be
applied to hackers and the creators of the viruses that periodically ravage systems linked
to the Internet. Currently, only major hacking efforts and the worst viruses entail some
federal government response, and that is often limited based on the absence of laws in
many countries re: Internet use and abuse.
Although the Internet is faced with serious concerns re: continuity of services and integrity
of data it must be stated that on-line systems operations in general have significantly more
security in their service centers then the average standalone property management system.
The offset to that reality is that they are therefore a bigger target of the big time “hackers”
then the relatively small local property management company. Even so these
circumstances mandate that a company must acquire, install and maintain the best security
programs and procedures it can for its standalone system in order to keep their system
healthy and secure.
Property Managers and Owner/ Operators should consider Internet connectivity features /
options as a new and important addition to the PM System evaluation process. Those
features will likely be the most significant additions to PM Systems during the first two
decades of the new millennium. Specific mini applications likely to become very popular
will involve Wireless SmartPhone access to property/ unit maintenance, rent-ready status,
/ materials and tenant management. Mobile applications tend towards “read only” type
information based on the remote device data entry limitations and security. This could
change however based on the growing use and value of voice recognition as an input
medium, plus the increasing use of tablets and increased security options.
It is also likely that the virtual “walk-through” will become the standard and preferred
method of showing the unit to tenant prospects, and “E-commerce” will be the usual
means in which security deposits, first month’s rent, etc. will be processed. It is expected
these innovations are likely to become common much faster than other key technological
innovations that have occurred in the past.
In the mid/ late “60’s IBM demonstrated the retail Point of Sale wands and bar code
scanners while a number of other companies demonstrated bank ATM’s in the 70’s.
Popular commercial use of the bar code technology however, did not take place for almost
20 years. The bar code technology was challenged by unions, consumer groups and both
state and federal legislators delaying actual implementation by up to 20 years.
ATM’s transitioned from demonstration’s to operational status sooner based on banks
motivation in minimizing the additional need for more tellers. They also were not
challenged bu unions. One could accept that the Internet also took one to two decades of
evolution. It is however, wildly popular and generally accepted for many key applications.
Extensions to those activities and functions that are truly economical, effective, and
efficient continue to appear. In some respects however, the Internet is the “Wild West” of
technology and of commerce, and as indicated earlier, provides an exciting and somewhat
challenging environment where “Caveat Emptor” is still the rule.
There is a large segment of the PM software market currently available which does not
recognize the growth or special opportunities that is now within reach through Internet
integration. They are facing obsolescence at a much quicker rate then was thought
possible, and will now be forced to upgrade or succumb to those programs that have
welcomed the Internet with both its benefits and baggage.
Windows applications integrated with the Internet continue to increase in number and
diversity. Some will offer powerful incentives to evaluate their true value and potential
productivity to a current property management operation. The current effectiveness of
older standalone Windows applications will continue to decrease without the use of
selected Internet services. New standalone applications are lessening for a variety of
reasons.
Using appropriate evaluation and due diligence standards it is my belief that the vast
majority of the 160 plus programs identified on a web site in would not satisfy detailed
evaluation and a due diligence review. In addition it is likely that at least 20 to 30 % of the
property management systems of the 160 plus property management systems are not using
Internet connectivity at any level and not intending to upgrade will no longer be
considered viable systems within 3 or 4 years.
Note: We have identified 10 of the most popular systems in our Technology Addendum –
Property Management Systems offering.
Even with the issues related to Internet continuity and data security there are property
management scenarios which generally mandate an on-line systems solution. Management
companies that are managing numerous large properties, i.e. apartments, commercial
properties, etc. are best managed by resident managers and resident staff requiring access
to the management system. The systems cost will generally be significantly less and most
likely have a better “up time” compared to a company based server providing a large
number of remote services and users.
For property managers and owner/ operators of a large portfolio of properties, Internet
based systems will provide a myriad of new capabilities, capacities, conveniences, and
extended communication considerations. Integration will tend to expand the current range
of activities associated with property management systems operations and extend the
number of options available to enhance the operations in very significant ways.
Smaller portfolio managers may find that currently the benefits of an on-line system are of
a lesser value and higher cost and may choose to continue or initiate the use of a
standalone system. They may want to consider the option of a future conversion to an on-
line version within the same product line if available.
Note: As indicated earlier very few developers are providing both standalone and on-line
compatible systems versions. The release of Microsoft 10 may have an effect on the
current ratio of standalone versus on-line systems.
 CHAPTER 10
Property Management Contracts & Records

Introduction - An important element of property management is the ongoing efforts of

creating and maintaining the many and diverse contracts and records mandated as
components of property management activities and operations. Automation and
technology is playing a larger role in working with the increasing number of documents
and records that must be maintained and accessible. Technology now provides those
requirements at lesser cost and faster methods of access. In addition there are an
increasing number of diverse record formats.
Report formats have increased based on the potential need to integrate data and/ or to
provide a number of other options now available via current technology. Examples
include:
Reports which cannot be easily modified increasing the likelihood of their validity.
Scanning formats allow documents to be stored as a word processing document or as
a picture of a document.
Digital records in lieu of printed reports including spreadsheet formats.
Audio records providing documentation of phone conversations and phone messages.

Generally current property management systems entail significantly larger volumes of data
requiring increased levels of mass storage and a multitude of new input and output
devices.
Increases in the number and complexity of contracts and business records are a major
element of property management operations today associated with the demands of mass
storage devices. Multi-function machines, (copy- fax – scan –e-mail) are readily available
and continue to provide lower prices as the competition increases.
The sources of the record keeping requirements are many. They include:
Federal, state and local laws and regulations in addition to BRE/ DRE compliance
requirements –
Risk Management elements -
BRE/ DRE compliance – (Note: The California BRE/ DRE is specifically responsible
for overseeing California Real Estate operations). -
General Accepted Accounting Practices – GAAP
Landlord/ Tenant Law -
Good Business Practices -
Changes to the above, new or revisions, are usually initiated by legislation and/ or
litigation. Ongoing legislation and litigation therefore requires that periodic review of
business contracts, records, policies and procedures is necessitated in order to assure that
those documents are updated appropriately within the company. Some changes may apply
to systems documents, reports, routines, and/ or operations.
Federal changes receive additional exposure from a number of sources and are likely to be
placed in the system by the systems developer. State and regional laws are less likely to be
noticed by the developer ( unless the developer resides in that state) and may be updated
accordingly. This is another good reason to maintain a strong relationship with a state
trade association, or a legal firm focusing on the housing / building industry. It is likely the
level and importance of many changes maybe greater than the exposure generated by
government agencies resulting in a lesser company response to the changes then
appropriate. Numerous negative possibilities may result. We identify a few actual negative
results in Chapters 12 and 13 – Risk Management and Systems and The BRE/ DRE –
Note: In January 2011 I reviewed the forms offered by the San Diego County Apartment
Association (SDCAA) . I determined that 60 of their forms were revised as of the
beginning of 2011 identifying the possible level of contracts and property management
forms changes that may be necessary for local fee managers and owner/ operators that
year.
Since the sources of the mandated changes are generally legislation and litigation based it
also suggests that systems which can tend to automate, integrate and minimize the
associated administration of those required changes are beneficial. Actual experience
however, suggests the possibility that the programming to support those changes may or
may not be incorporated into the property management system assuming the developer is
aware of the change and determines its importance to the program and its users.
The programming change by no means is a given. Many issues and questions are in play.
Are the mandated changes a Federal, State, or Local item? What is the general history and
policy of the developer re: systems enhancements and updates? If it is a state or local item
is it also identified as an important element in the developer’s market?
We have in a number of our writings identified a number of diverse agencies, laws,
practices and regulations associated with the property management industry through-out
the USA. That diversity also dictates that many property management systems may not be
inclined to create the new routines for the mandated change. They may not even be aware
of it. Due diligence in evaluating and selecting a system is required by company
management in order to assure the likelihood that the systems developer will provide the
most important mandated government routines.
Due diligence in maintaining the program is also required. Systems users should
communicate the need for system changes when new legislation mandates changes
effecting your state or local operations. Do not assume that your systems developer/
management is automatically aware of the changes effecting your business. This is
especially true if the developer is located in a different region of the country.
Note: A local systems consultant may be a valuable resource in regards to the issue of
systems changes and updates. My company has assisted a large out of state systems
developer in a number of California mandates involving the California BRE/DRE and
Franchise Tax Board. As a systems consultant and dealer I represent a contingent of users
and therefore provide additional influence in re: to the implementation of key local / state
systems mandates and requirements relating to that system.
The implementation and remediation of policies and procedures should become a regular
process for both fee property managers and owner/operators. In many states fee property
management has additional mandates that do not include owner/ operators. This is very
true in California, but owner/ operators are also affected by the major increase in federal,
state and local regulations
Property management of private property is a business and as such it is subject to potential
oversight and audit by federal, state, and local agencies and government and as such many
laws and mandates also relate to small business in general. As government creates and
modifies its regulations and regulatory functions it mandates those changes to the
regulatory agencies whose responsibility is to inform and enforce the regulations upon the
various applicable entities.
Legislation, especially laws and regulations of marginal popularity, does not always entail
the enforcement elements necessary to establish major compliance. Enforcement requires
that the government agency management, personnel and systems responsible for
enforcement are available, competent and inclined to enforce the laws / regulations in
place.
A few agencies may unofficially agree that a number of laws are rarely enforced based on
higher priorities based on safety and security issues. Other government agencies recognize
they do not have the staff or systems in place to properly regulate some legislative
mandates.
Note: Specific laws and regulations are identified in Chapter 14.
As indicated above a difference of degree of regulation and oversight is apparent between
private property management by owner/ operators and fee property managers managing
for clients. The degree of regulation and oversight varies greatly among the 50 states of
the union. It is also noteworthy that state Landlord – Tenant Law (applicable for both
owner/ operator and fee manager also varies greatly among the states.
Note: We identified an Internet Web site in Chapter 2 that provides the state laws related
to Security Deposits requirements. It is - http://www.landlord.com/security-deposit-law-
guide.htm -
Changes of a positive nature may include the implementation of systems innovations and
technology which can provide significant assistance and improvements in organizing and
reducing the effects of increased regulations related to contracts and recordkeeping.
Property management systems that maintain a policy of continuous development of
routines and technology that accommodate the changes in regulations are an important
element in the selection and evaluation of property management software.
Contracts & Records – Property Management operations require a large number of
contracts, records and documents to properly document and implement the many
government and legal requirements, policies, and procedures involving contracts and
record keeping. Current Property management systems provide many features and
capabilities that enhance document creation and maintenance while reducing costs and
time.
Conversion of stand alone contracts and forms are now being converted to systemization,
i.e. prepared, accessed and maintained within the system. Some systems now provide the
ability to prepare a contract or form, print it and file a copy with the appropriate owner,
tenant or vendor record all within a few seconds.

Contracts and forms include:

Owners –
Management Agreements -
Property Insurance Policies -
All correspondence & Miscellaneous Documents –
Partnership Agreements –
Vendor Contracts in force –
Periodic property status – request for funds –
Copies / Originals of Invoices / Work Orders -

Tenants –
Tenant Application –
Background / Credit Checks –
Move In Documentation –
Lease / Rental Agreement –
House Rules / Addendum -
Condition of Unit / Walk Through -

Other
Renters Insurance Policies –
 Notice of Denial Form -Credit Report –
Holding Deposit Agreement and Receipt –
Pet Deposit Agreement –
Section 8 Forms –
Lead-based paint disclosure –
Smoke detector agreement –
Tenant Ledgers –
Copies of Rent Receipts - ( California BRE/ DRE Requirement) -
Tenant Notices –
Lease Expiration Notices –
3 Day notices –
30/ 60 Day Notices –
Perform Covenant or Quit –
Maintenance Requests –
Move Out Documentation –
Condition of Unit / Walk Through –
Disposition of Security Deposit and Refund
Tenant Ledger/ Statement

Vendors –
Maintenance / Service contracts
Warranties –
Inspection reports –
Proof of Workmen’s Compensation Activation -
Proof of Insurance -
1099 Information if non-corporate -

Employees –
Application –
Background / Credit Check –
Bonding -
Employee Policies –
Payroll Records –
W-4 -

Financial Reports & Transactions –

 Cash Flow and Profit & Loss Reports –
Owner Statements –
Miscellaneous Reports –
Deposit Slips/ Reports –
Trust Accounting Reports – California and a few other states –
Payroll – A number of options are available in re: to in-house payroll processing -

They include –
Outsourcing via a number of Payroll Services – ( Your bank may provide a special
customer service at a reduced price) –
An on-line service - (Intuit – The developer of QuickBooks has a service –
In addition there are national , regional and possibly local payroll services -
Note: Do not assume your Payroll Service can automatically integrate with your property
management system. One of my larger and more diverse property management clients
discovered that their large and well established payroll service could not provide the
integration of payroll records into their client’s property management system. Another
well established payroll service could provide the integration quickly and with a
professional flair resulting in their takeover of the payroll services and a very satisfied
client.
Generally, it appears that very few property management systems, and those tend to be
high end developers. offer Payroll as a module or as an integrated support service. I am
aware of a number of property management systems that provided a Payroll module (
software written and maintained by the developer ) or offered a separate payroll program
that integrated with the property management system in the 1990’s. Most likely the cost to
maintain the payroll updates and integration with major changes taking place in the
property management system could not be sustained. Those payroll options were not
retained.
Note: The above items are not a complete list and will vary greatly from state to state and
even from cities within the same state. California is a prime example of the variations and
diversity of laws and regulations within municipalities and counties.
Note: Automating the lists provides significant savings in time, and materials. Once a
form is in the system it can be prepared with appropriate data, including mail merge
addressing and other information in the system, printed or e-mailed and even a copy
attached to the recipient’s (tenant, owner, vendor) record. Some systems offer a library of
letters and forms with an ability to modify and use those letters and forms within the
system. Some systems also provide the ability to prepare documents and reports and e-
mail them to their recipients, (after initial set up) with a click of a mouse providing major
savings in time, materials and postage.
Office Procedures & Policies – Identifies the Who, What, Where, Why and When
Specific Company Procedures & Policies are to be utilized during company property
management operations. Most systems currently provide the ability to create documents
and possibly forms plus integrate those documents and forms with data from the property
management system.
Legal Procedures
Small Claims - Unlawful Detainers - Eviction
Abandoned Private Property -
Security Deposit Handling –
Federal and some state reporting is identified in Chapter 14 – Government & Issues
in Property Management Systems -

CURRENT OPERATIONS – Reports and Forms – The preponderance of contracts and

forms, most mandated by law, or good business practices, have for a number of years been
created /prepared via word / form processing programs or most recently by routines in
many of the more up to date property management systems. Many forms are also available
through the various housing trade associations, Board of Realtors and other associations
focused on real estate. They usually provide forms that have been updated by legal staff
and are recommended based on their legal status.
The benefits of the contracts, letters and forms created in the property management
systems is that they use, (mail-merge) the owner/ tenant/ vendor information already in the
system while other programs require that the mail-merge data is maintained as a second
database required by the non property management program. Some newer systems also
includes the option or standard of automatically placing a copy of the communication,
report, etc. in the owner, tenant, vendor record for future review.
Maintaining duplicate content databases has long been established as a less than
satisfactory systems technique concept based on the need to keep the data up to date and
synchronized. Only limited data is actually duplicated. The rest of the data in the separate
databases has have content with a different focus and purpose. Using core data within the
property management system to create the contracts, letters and forms as a function in the
property management system negates the requirement of maintaining multiple databases.
Note : Significant time and efforts will be saved by using the Letters/ Forms routine which
usually accompanies most newer systems. Lack of integration among support programs
and functions associated with property management operations creates the following
issues:
Redundancy
Inaccurate data
 Reduced productivity
Necessity of additional training

Traditional Files – In many property In management companies and the offices

maintained by owner operators of investment properties huge paper files are maintained in
the same manner as they were originated ten, fifteen or twenty years ago, It is most likely
the greatest change in traditional records keeping is the move to “The “Paperless Office”.
It is difficult to achieve but is a very worthwhile goal. Most documents, and reports do not
have to be maintained in paper format, but should be able to be accessed digitally and
converted to paper if needed. I heartily recommend that a program to phase out the bulk of
your paper files begin as a future project. Benefits will be forthcoming.
The Future – It is unrealistic to believe that all paper will be done away with. It is not
always convenient to record notes in a digital fashion. Documents may be signed in the
field, invoices received in the office, a newspaper item clipped out of the paper. A key to
moving toward the ‘paperless office’ is a speedy conversion via scanning, voice
recognition, or digital reporting, i.e. PDF reports. The vast majority of traditional reporting
and distribution operations will be replaced or / supplemented with the increased
availability and use of scanning equipment and document formats resulting in far fewer
paper copies and traditional report printing and file storage. In addition to the “Greening”
aspects and benefits to the environment there are also many significant time and cost
savings and major benefits in the implementation of paperless operations.
Cost savings will be realized in copier equipment, toner, paper and forms. Postage/
shipping costs will be reduced, along with filing equipment, files space, and the many
costs associated with off-site storage. Companies may be pleasantly surprised when they
determine that additional staff and / or new office facilities can be accommodated and /or
office space reduced by replacing traditional file storage space and operations with
implementation and integration of scanning technology.
Scanning Operations and document distribution -
Check / Money Order Receipts
Invoices
Owner Reports
Company Reports
BRE/ DRE Receipt Copies

Note: scanning may take place with a number of scanning devices. They include:
Desktop scanner
Floor multi-purpose copier/ scanner
Desktop Multi-purpose copier/scanner
 Check reader/scanner
Mouse scanner

Scanning Benefits - Time & Cost Savings –

Materials – Paper – Toner – Envelopes
Postage / Delivery
Labor
File storage on-site
Off-site storage
Periodic On-site and Off-site Records Destruction

Requirements for Records Retention – State and Federal requirements vary based on
State and Federal agencies involved. Considerable fines and penalties may be applicable
based on degree of non-compliance.
Consolidation Of Operations – A/R’s -
Copying or Scanning (Preferred) of checks & money order receipts -

A bank scanner will create detailed records and a bank deposit that is sent via the Internet
to the bank. The scanned check or money order is available on-line as a function of the
bank’s scanner operations negating need for traditional bank deposit activities. A systems
check reader /scanner (if available) will post receipt & scanned item to tenant record in
P/M system.
Consolidation – A/ P’s -
Scanning of Invoices
Stand alone operation – Copy of Document
Data Entry option – OCR + copy of Document are provided in single operation -

Replacement – Reports and documents distribution.

Replacement of traditional paper reports and their distribution with exported report
formats (DOC, PDF, XLS, CSV, HTML) via e-mail operations –

Reports formatted as above in addition to scanned documents can be distributed via e-mail
or other means at significantly less cost and in significantly less time for delivery. One
relatively new method is that of using the property management’s company web site as a
portal. The term portal, also referred to as a gateway, is the entrance for Internet users to
acquire access to groups of resources and services. Examples of public web portals are
AOL, Google, MSN and Yahoo.
Portals have grown more capable and powerful, (Google comes to mind) and they have
also grown in the number of portals that focus on specific offerings in a specific area of
interest, whether it be government, industry, sports, etc. Initially they tended to be their
own entities which provided information and grouped services of a specific nature. Further
developments in Internet based portals introduced new features and functions allowing an
increased flow of data and associated services in both directions.
In the case of property management we have observed the development and discussion of
portals by property management systems developers and programmers that provide
support systems such as tenant prospecting, background checking, and ACH/ EFT
transaction processing which are either stand alone systems and / or integrated with some
property management systems.
A further development we are observing in property management operations and
technology is the evolution of company web sites from a basic “brochure” web site to that
of a multi-purpose interactive portal. The portal may provide many new services to
applicants, tenants, vendors, and owners with the goals of providing new capabilities,
reduced costs and increased income and services.
A fairly recent development is that of web site portals being offered as major extensions to
on-line property management systems by the developers of those systems. Some earlier
developments were smaller support programs promoted by some established Internet
developers of property management support systems.
One of the most successful developers not only provided a very powerful and popular
internet based tenant prospecting system but also introduced web site portals integration
using their traditional interactive features integrated with the property management system
being used by the property management company. ( See our Technology Addendum for
more information on Portals )
The use of exported data from and the imported data to the company’s standalone system
via the portal is a key element in providing new capabilities and innovations in the
property management industry. Property management company websites are not only
advertising their business, they are doing the business.
Property management company websites can market their rental/ lease properties to
prospective tenants, by providing current and future vacancy information, floor plans,
directions, amenities, pictures of the units and grounds and other brochure type
information. In addition, they can provide and process applications, receipts and deposits,
schedule appointments, handle inquiries, and possibly rent or lease a unit possibly without
a phone conversation or an on-site visit ever taking place. They provide a 24/7 presence.
They can also initiate tenant maintenance requests, process tenant payments, distribute
owner reports and provide a multitude of other services plus a number of communication
alternatives resulting in better services and better management.
An additional form of documentation is just beginning to appear in the property
management industry which entails audio records of phone conversations with owners,
vendors and tenants/ homeowners. These records can then be attached to the individual
owner, vendor, tenant /homeowner records as additional documentation where deemed
appropriate.
Audio record use has been introduced in a few Home Owner Association Management
systems and in at least one general rental property management system. The audio records
can be used in a number of ways. The HOA systems use pre-recorded audio messages to
provide community oriented phone messages to its homeowner members. They can also
record homeowner messages related to maintenance, accounting and other operations.
A recent announcement of a popular and well established property management system
recently announced the integration of a VOIP phone system with its management system.
A multitude of features provide major efficiencies and improvements in communications
while lowering traditional communications costs. A combination of capabilities that is
likely to be very well received within the housing industry. It is also very likely this
technology will play an increasing role in re: to property managers Contracts and Records
Management plus Risk Management Policies and Procedures.
The property management system using audio records in a number of ways including the
integration of its phone system with its property management system is Rent Manager.
Voice communications can be recorded and stored in the history portion of the owner/
tenant / vendor records. Audio records can also be created and broadcasted to groups of
owners, tenants, HOA homeowners and/ or vendors as reminders, special notices,
emergency notifications and other announcements.
Additional information can be found in our Technology Addendum – The Future
 CHAPTER 11
Property Management Systems and their Security

Our three plus decades of working with property managers, owner-operators and their
systems have produced a number of important and disturbing observations. More often
then I want to admit much of our clientele our woefully insecure in regards to their system
and their operations. Their insecurity can be classified in the following operational /
systems categories:
Login / Password Security Operations / Policies –
Handling/ Storage of Confidential Data –
Backup / Restore Procedures/ Operations –
Audit/ Internal Controls Policies & Operations –
Lack of Anti-Virus Anti-Malware Software and Policies –
Lack of Staff Policies re: E-mail operations and use of Internet –
Lack of appropriate background / credit checking and hiring / bonding procedures &
policies–

One of the most basic and ever present aspects of system security is the Login/ Password
Security routine of the computer’s operating system and property management system.
Too often it is unused or so basic it is all but useless. A minimum basic password should
be a combination of letters and numbers with no association between the two if created by
staff. If management creates the password a mixture of letters and numbers is still
appropriate but they should be random. A few times I have discovered that a systems
initial default login and password was still being used long after the system was
implemented.
The staff created password requires less maintenance and resetting because the letters and
numbers are significant to the staff member. Preferably the significance is not known to
the rest of the staff. If a random password is used there would generally be a higher level
of maintenance / resets based on the likelihood of lost / forgotten passwords. Management
must have knowledge of the password and periodically supervise changes. Passwords and
user IDs must be removed when staff leaves or is terminated.
In 2012 I discovered an Internet Marketing Report / List of the 500 most used Passwords.
I was amazed at how many of these specific passwords or generic passwords, ( user’s first
name, pet’s name or the software’s initial user ID and passwords) were in place among our
clients. It appears that based on the commonality of use of the 500 it is now used by some
hackers as their initial attack upon a company’s system. A basic knowledge of the
company and staff in addition to the list of 500 most used passwords provides a possibility
that the property management systems records may be hacked and stolen by a
knowledgeable local hacker.
Generally, the small to mid-size property management company is not a target of
established international or US hackers. They will generally be working on the Fortune
500, banks, and some government agencies where thousands/ millions of records can be
found containing Social Security numbers, bank accounts and, credit card numbers, etc.
and can be stolen. Every month or two some announcement is made identifying the name
of the company, bank or government agency that has been hacked with millions of records
potentially at risk.
Note: The current trend in property management systems is the on-line system which
generally involves multiple property management company databases sharing the same set
of servers. A hacker with familiarity of property management would be aware of the
confidential data including the balances of the properties and the bank accounts that
maintain the balances. Although I am not aware of any property management on-line
systems being hacked at this time the potential is present. Generally newer systems have
improved upon password security routines and the features and functions they secure.
They do however, require more time to establish and maintain.
An increase in frequency of large database breeches is apparent over the last 3 or 4 years
There also appears an element of selectivity involving additional confidential customer
data including social security identification, bank, credit and debit card account numbers
along with other personal identification data. Most recently a number of large medical
insurance company databases have been breached involving millions of records with
additional confidential data. A number of specific recent hackings is identified in the
addendum.
Breaches of databases may involve a number of criminal uses. Embezzlement is one
possibility, identity theft is another and some hackers sell the data to criminals who will
then use the data to acquire goods and services via the debit and credit cards or bank
account information they have acquired. Confidential medical data provides other
potential criminal activities. Although medical data is not a concern for property
management security it does indicate that the criminal element is broadening their efforts
and their targets.
A minimum basic password should be a combination of letters and numbers with no
association between the two if created by staff. If management creates the password a
mixture of letters and numbers is still appropriate but they should be random. The staff
created password requires less maintenance and resetting because the letters and numbers
are significant to the staff member.
If the random password is used there would generally be a higher level of maintenance /
resets based on the likelihood of lost / forgotten passwords.
The use of a specific set of appropriate user logins and passwords provides two separate
security benefits. The first is that only the actual user should have the specific access the
password allows. The second is that for many systems the user actions are then tracked via
audit routines providing details as to who, how and when information is entered , modified
and/ or deleted. This detailed information can then be used to determine the need for
additional counseling, supervision, training, and termination/ prosecution if required.
Note: In some cases the audit may even identify the time the data is added, deleted or
modified.
Some studies have indicated that more then half of the embezzlements in small business
take place outside of regular office hours.
In addition I have observed three other common inadequate practices for those companies
that have implemented password security. They are:
System access is too general for the individual user. It is a necessity to establish
specific access based on the staff’s actual job description. This includes the key
functions, i.e. receipt processing, payables , maintenance services, etc. Access should
be provided if the staff job description includes those associated functions.
Too few levels of access which is related to the issue above. In one situation I was
aware of both the broker and the senior staff person had the capacity of creating /
modifying their own password. This allowed the senior staff person to modify their
password which was then unavailable to the broker which meant that broker control
was negated. Older systems may establish Systems security levels based on level of
responsibility, i.e. three levels of password access; junior staff, senior staff and
management with the users individual password being linked to the level. I
recommend a minimum of three levels of password access.
Current systems tend to require specific passwords for each user which allows access
of a specific set of functions. The specific set of functions may be available to other
users with, their specific password .

A policy identifying the need for regular maintenance of logins and passwords includes
the following mandates:
Passwords need to be re-issued periodically even with long time staff.
Passwords need to be maintained rigorously. Passwords belonging to staff no longer
employed, located in the office or using the same database remotely need to be
deleted/ immediately.

The Handling / Storage of Confidential Data is also a very important security issue
currently based on the crime of identity theft. Basic confidential information such as
Social Security numbers are required by property management operations for Background
/ Credit Checking for tenant prospects and for owners and vendors for IRS 1099 reporting.
The increased use of current property management technology introduces additional
confidential data, i.e. bank account, and credit/ debit account numbers. This data is
required for the use of ACH / EFT (Automatic Clearing House / Electronic Funds Transfer
) processing. Those transaction types continue to increase in volume and have begun to
approach the status of semi-normal transactions.
In some systems the majority of the confidential account numbers are encrypted in order
to maintain them in a secure fashion, but it appears that most systems do not have any
special methods of hiding the information from systems users that have access to the
records other then Login/ Password security.
A written policy identifying the confidentiality procedures to be followed for Background
/ Credit Checking and other functions utilizing confidential staff, client, tenant and /or
vendor data is required. Inadequate or ignored procedures create major risk and liability in
re: to identity theft.
Red Flag procedures must be established and maintained. Additional discussion of Red
Flag operations is provided in Chapter 12.
One of the most common system security failures relate to PC and Network based
(Standalone) Systems is in lack of a rigorous Backup / Restore procedures. Backups
should be done in the same manner as voting in Chicago; early and often. Note: I grew up
in Chicago and can attest to my comment above based on my tenancy in an apartment
across the street from a Chicago polling place.
Backups & Restore Procedures - Our observations and experience locally have
identified three separate issues. They are:
Backups not scheduled adequately –
Backups not periodically tested in order to validate backup and restore functionality –
Restore procedures not in place and unavailable to staff - Note: Too often a Restore
requires IT on-site or on-line support - “Sorry, he is at Mammoth snowboarding”

On-line systems users do have significantly less concerns re: Backups / Restore
procedures since most Property Management on-line services do have solid backup
policies. One criticism that can be identified is that the property management data which is
the property of the management company is usually not available as a separate storage
media, i.e. CD/ DVD/ Thumb Drive,, etc.
Arrangements should be made to resolve this gap in disaster planning/ preparation.
Another very problematic issue of the on-line system is that of the dependence on the
Internet and the challenges in securing its continuity of operations. See Chapter 9 –
Property Management and the Internet -
One of the most obvious limitations of the Audit/ Internal Controls Policies & Operations
element in many small to mid-size property management companies is that they don’t
exist. It is possible that the broker, a principal or a senior manager may periodically verify
that bank reconcilements are up to date and the Trust Account Reports are correct and
indicate compliance, but those functions are only part of what needs to be evaluated and
more often do not involve management.
Many property management systems currently have audit report options, systems logs
and/or other capabilities that identify the who, what and when of systems activities. A
couple of recent client / staff situations involved the use of a property management
systems utility program used by staff contrary to management’s specific directions.
Staff used the utility program to delete a number of transactions which provided a
significantly less apparent transaction trail then the appropriate reversal of the
transactions. Indications were that the staff involved wanted to hide the evidence that they
had made some mistakes.
Note: If the property management system being used does have a utility module or routine
that does provide additional database support routines that may be used to modify or
delete preferences, records, settings, totals or transactions the routine needs password
access or removed from general use. Utility programs are one of the likely elements
involved in wrongdoing including embezzlement, inappropriate transaction processing and
the negating of internal controls.
In another office an experience staffer used journal entries to transfer funds from a savings
account to the cash account to cover special rehab expenditures. The individual journal
entries however, were then ignored in the reconciliations except for a balancing journal
entry to provide an Account In Balance result. The broker stumbled upon a number of
years of un-reconciled JE’s by accident. Lack of management oversight, especially of the
bank reconcilement operations, extended the duration of this issue. Correcting the problem
would have taken an extensive effort and expense. The broker opened a new account and
terminated the employee.
In the scenario above there was no criminal intent. That is not always the case. Three
separate property management companies that we know of, (there are many more) in
which criminal intent was the motivation involved direct losses of $17,000, $60,000 and
$90,000. All involved the lack of appropriate systems security / audit / internal controls
and management oversight.
There are five general categories of criminal or unethical activity involving company or
client losses. They are:
Embezzlement – is the illegal use or acquisition of funds by person or persons who
controls or has access to the funds. One fairly common method is the creation and
forgery of checks with the employee, relative , boyfriend, or other payee participating
in the embezzlement.
 Internal Theft – Stealing of company or client assets by employee or employees.
Assets could include office supplies, inventory/ materials or special services which
would normally be charged and receipted. We have also observed services such as
staff rent theft or other charged services taking place by applying a tenant’s payment
being applied to a staff member’s rent of a managed property.
Theft and illegal use of confidential data, i.e. social security numbers, bank account,
credit card and debit card account numbers, etc. This information would then be used
by the employee or sold to a thief specializing in identity theft.
Payoffs & Kickbacks – An employee accepts cash or other benefits in exchange for
access to company business or company assets, One example would be sex in lieu of
rent. Another would be cash from a vendor for maintenance assignments, which
could include actual or bogus work orders.
Skimming – Employee takes some of the cash from receipts while not recording the
proper amount. Resident manager creates special charges and pockets the cash.
Resident staff rents vacant unit short term and pockets rent.

It is readily apparent that office and resident management staff have opportunities to
participate in all or most of the above activities if they are criminally inclined. It is also
possible that personal misfortune, a major family illness, loss of spouse’s job, or personal
behavior, such as gambling, drugs, new car, etc. may be the motivation for criminal
actions. Criminal activity may only involve a single person or could involve a conspiracy
of multiple staff members, vendors or tenants or a staff and a vendor or tenant.
Some of the specific client situations involving criminal actions that we have knowledge
of, and in some cases detailed involvement in the events follows:
The creation of two dummy vendors and $17,000 in checks by the staffer were on
behalf of her boyfriend. The boyfriend established vendor bank accounts and then
deposited the checks over a period of time. Vendor creation / validation should have
the oversight of management. Be wary of vendors with P.O. Box mailing addresses
and multiple vendor records for the same vendor.
The $90,000 loss (initially) was a “hit and run” embezzlement mainly based on the
brokers initial reaction and lack of follow on supervision of her new bookkeeper/
accountant. “He was such a nice young man”. The nice young man gained access to
the broker’s account and forged $90,000 in checks and was gone at the beginning of
the third month before the bank statement arrived. One element I still don’t
understand was the $10,000 check to the IRS, Why would you embezzle and forge a
check going to the IRS? Did it resolve a current tax obligation even if it was a forged
check? Of course, activities and accountability of the IRS is still a major issue
currently.
The $60,000 embezzlement involved an eight year employee who gained access to a
 senior staff’s password after the staffer left for another job. The password was not
changed and no inspection / clean up of his desk was done after he left. The $60,000
was the total of additional checks the employee created and forged out of two
accounts over about eight months. The complete losses over about 18 months
including direct and indirect costs totaled about $250,000. I cannot speak to the
judgments on the litigation directed at the insurance company, but I suspect they were
found to be negligent as a minimum.

Note: The clients insurance company added to the clients grief by delaying and
minimizing the checks directed to the client after the office was set on fire and the client
created an office out of a downstairs recreation room at his home which involved
significant costs involving computer and communications equipment and power upgrades.
Additional funds were required to provide owner distributions and vendor payables based
on the delay of re-establishing the system after the file.
Note: This last situation has become a case study in our Protect Your Assets Security
Seminar based on the many issues and security lapses that took place related to this system
disaster.
Check processing requires time and access to a computer including the software, a printer
for the creation of the payables and printing of the checks. Check stock should be kept
under lock and key. In the situations above the checks were accessible for over six months.
Additional criminal activities included modification of the software preferences,
destruction of the systems server (sabotage ) and finally arson. The deletion of the check
records also required time and opportunity, As reported in another chapter some studies
have indicated that up to 50% of embezzlements take place after hours, weekends or
holidays. Control system access and minimize system vulnerability.
These were not sophisticated accounting scheme embezzlements. There was no attempt to
cover over the losses with additional accounting techniques. They were the equivalent of a
“smash and grab” jewelry robbery and for the most part they were successful. The means
to avoid or at least minimize the damage is fairly apparent.
The lack of anti-virus / malware software currently in itself should be a crime. It not only
puts your business operations at risk but also those of your employees, your clients and
your tenants. More often the security lapse is that the security routines are not used or
renewed leaving your files open to damage, destruction or accessible to hackers or
malicious felons intent on identity theft. Office policies should identify that employees
should not add or install any programs, documents, pictures, etc. without permission of
management. CD’s, Thumb Drives or other storage media devices are only to be used with
managements agreement and supervision.
Note: I recently discovered that thumb drive use can be curtailed by IT personnel. This
should be a serious consideration. The program should also be under lock and key. The
combination of the program on a separate PC at a location other then the company office,
and a thumb drive or CD holding the data and minimal user ID and password provides all
of the opportunity needed for a criminally inclined individual to embezzle and/ or acquire
confidential data for criminal purposes.
Note: On-line systems provide a number of elements ( remote location – lack of
supervision) which may allow a somewhat greater opportunity for criminal activities. We
recommend additional precautions. Some time ago during a conversation with an on-line
system user, the broker indicated that system security only consisted of a user ID and
password at any PC with Internet access. Which translates if true that a criminal in China,
Russia, Romania or in any one of our 50 states only needs the user ID and password of a
legitimate user to access the program and database.
System security specialists could most likely enumerate a number of ways that the user ID
and password could be acquired illegally. An ex-employee might still have a valid user ID
and password for some time after he was no longer employed. It would seem appropriate
that any time access to the system is from a new location/ PC additional security
procedures should be enacted.
Your system, software and data needs to be protected 24/7. Good anti-virus /malware
software and firewalls will help do that as long as they are kept up to up date and active.
However, the current sophistication of hackers, (both US and International hackers) has
for the most part has allowed the hackers to pick and choose what government and/ or
private agency is their next victim. Reality for property managers and investment property
owner/ operators indicates that they are likely way down on the list of new hacking
victims. The on-line property management systems servers are only hosting a fraction of
the tens of millions of records that currently appear to be a general target of the hackers.
As indicated elsewhere the standalone property management system user major threat is
not a sophisticated hacker. Someone associated with the management company, staff,
friend or relative of staff, or vendor with criminal intent is more likely the perpetrator of
an embezzlement or scam.
A recent hacking of a major medical insurance involving eighty million customer records
may initiate a new standard requiring encryption as a new minimum requirement.
Encryption is a security technique that is the process of encoding messages or information
in such a way that only authorized parties have the encryption key to translate and read/
update the data. Encryption does not of itself prevent theft of the database, but denies the
usable data content to the thief. In an encryption scheme, the specific data information, or
message, is encrypted using an encryption algorithm/ key generating a result that can only
be read if decrypted.
For technical reasons, an encryption scheme usually uses a pseudo-random encryption key
generated by an algorithm. It is in principle lmpossible to decrypt the message without
possessing the key, but, for a well-designed encryption scheme, very large computational
resources and skill are required. An authorized recipient can easily decrypt the message
with the key provided by the originator to recipients, but not to unauthorized recipients.
Note: Encryption definition provided by Wikipedia -
A few property management systems have already begun to encrypt a small number of key
confidential data items, i.e. social security number, bank account numbers, date of birth,
etc. We can expect an increase in encryption routines will be implemented throughout
current and future business and government systems.
There is a growing awareness that even small business need e-mail and Internet usage
policies. Small and mid-size business owners and managers are discovering that too much
time and too much risk is being incorporated with uncontrolled Internet activity. Staff is
discovering the multitude of non-productive and possibly destructive activities and
addictions that the Internet offers. Those Internet activities include:
Games –
Gambling –
Pornography –

In addition staff is tending to spend more time with web sites associated with home/
personal use such as
News and Sports –
Travel arrangements and information –
On-line Shopping –
Personal Banking and Investments –
E-mails to friends and family –
Miscellaneous non business projects and tasks.
Social Media Networking -

Some Internet activities may motivate employees to begin activities such as gambling
which may lead to criminal activities in order to afford the costs of their Internet
inappropriate activities.
Some may suggest that the use of the Internet during business hours for personal use is a
form of embezzlement based on the theft of labor, which could be considered an asset of
the business. The new and additional presence of social media in the workplace, especially
among the younger staff, is a relatively new phenomenon in the workplace and on a
personal level should be restricted.
The casualness found in e-mails directed to family and friends is now migrating into e-
mails with clients, tenants and vendors creating new problems and liabilities. The general
casualness that is now prevalent in many business e-mails establishes risk at two levels:
 The casualness may initiate litigation based on the tone and sloppiness of the e-mail
text and content. The same inappropriate tone and sloppy content may also invalidate
litigation (small claims) initiated by management.
E-mails may also contain confidential information without appropriate security. i.e.
encryption or other routines designed to protect confidential data.

Risk Management issues are inherent among so many elements associated with regular
systems functions and operations. A well written policy related to the above issues should
be implemented at the earliest possible opportunity. It should be reviewed by legal counsel
in order to satisfy both risk management and security concerns associated with the Internet
an e-mail operations.
Our final security issue relates to the lack of or less then appropriate background / credit
checking and hiring / bonding procedures & policies for staff and contractors. In
California, not complying with some BRE/DRE mandates relating to staff bonding and
broker supervision may initiate BRE/ DRE disciplinary actions involving license
restrictions and / or other punitive measures. An immediate and potentially greater danger
is that a bad hire can result in business and financial ruin.
The use of proper hiring procedures while no guarantee that one or more employees may
destroy your business the procedures y will reduce the likelihood of that possibility. Those
procedures should include:
An extended background and credit checking process should entail –
Contacts with former employers –
An interview in depth re: past jobs, job descriptions, academic and business
achievements, special projects, and avocations –
A new hire agreement that includes a 60/90 day conditional / probationary clause
which provides the option of termination of a new employee without cause –
A detailed list identifying the responsibilities of the job is highly recommended –
Bonding of the employee subject to job description –
Consider the possibility of drug testing –

There are a number of future possible scenarios in regards to new staff. They include:
A good honest hardworking loyal staff member which earns complete trust –
Initially a good employee but acquires a negative element/ influence, alcohol, drugs,
gambling, medical bills, etc., creates the potential of criminal actions within the
company –
An employee with the intention of criminal actions and waiting for the opportunities
to embezzle, scam and or steal from the company –

In any case all three of the above applicants that may be hired should continue to be
monitored and two precautions maintained. The first involves additional regular contact in
order to determine the possible presence of negative influences which may motivate an
employee to initiate criminal actions. The second entails a solid ongoing set of security
procedures to minimize the many opportunities in which the company, clients, tenants and
or vendors can be e victimized through criminal activities.
One of the ongoing observations we have experienced over the last three decades with our
property management clients is the almost always inevitability of system degradation .
The degradation takes place as staff is replaced and the training on the system is not
renewed or updated. The procedures including the system security elements that may have
originally been implemented will also more then likely regress.
In addition the newer technology that has been added around the system, such as the
Internet , the operating system, and peripheral devices create new challenges and threats
while providing opportunities to establish new security options. Allowing the security
elements and associated procedures to diminish is one of the most likely means to
diminish the company and its clientele.
Lax security places the company, clients/ owners, tenants, vendors and staff at risk. It also
places the broker and company principals at risk based on the financial and fiduciary
liability associated with the property management industry. A prudent recommendation is
to initiate a security audit as soon as possible. This chapter outlines a general agenda of
concerns and issues for review.
 CHAPTER 12
Risk Management – A Property Management Systems
Perspective

To the new property management trainee risk management is most likely some esoteric
function associated with financial manipulations. It may be an established major subject in
a business major currently, but I never heard the term during the time I was completing my
two majors at San Diego State University years ago.
A simple definition would be the policies and procedures focused on minimizing risks and
the associated potential costs that may occur in the business operations. When considering
the diversity of business operations, it should become apparent that property management
provides an abundance of risks based on the properties, tenants, vendors and staff involved
in management operations. Compare the scope of property management to a retail
business such as an art supplies store. It is obvious that property management’s many
locations, involving both interior and exterior diversified operations entails significantly
greater risk and liability compared to an art supplies store.
To the established property management office staff, risk management is most likely
perceived basically as the content and quality of the insurance required by property
management companies and its clients. Obviously risk management entails a much greater
set of elements other then the insurance. It is less apparent that the property management
system may be a major component for improving the organization and operations success
associated with risk management policies and programs.
Risk Management should also include a pro-active ongoing effort minimizing the physical
risks to tenants, vendors, company staff and others who may find themselves on a property
that is part of the managed portfolio. Establishing and maintaining Risk Management
operations, policies and procedures should be an ongoing effort and involves all members
of the property management team,
Successful Risk Management results in a minimum of financial losses due to litigation and
or non-litigant costs, i.e. personal property losses and/ or, medical expenses as a result of
some event such as a leaky roof or an unsafe .staircase. Costs however, are secondary to
events involving injuries, permanent disabilities or death.
The elements above and their interaction with current property management systems
include:
Record Keeping & Documentation – The record-keeping function must be carefully
managed and, the greater the level of detail, the better the likely results. This function
involves:
the marketing & financial function requires records of expenditures and income, as
well as tax records, advertising invoices and more –
applicant documentation including date/ time stamping of background / credit
checking processing and results -
tenant management involves records of all their requests, rental payment history and
rules violations plus documentation of tenant communications -
HOA management involves record keeping, processing and reporting of homeowner
payments, CC&R violations, and HOA financial and reserves accounting plus the
tracking of all board and homeowner meetings.
Facility maintenance & repairs require maintenance schedules, repair records for
warranty, and employee and subcontractor personnel records -. Time and dates of
initial maintenance requests, start and completion times should also be documented
in order to satisfy Fair Housing and company based maintenance evaluation and
review.

Current property management systems may offer expanded capabilities to document the
record keeping functions above. New capabilities include:
multiple data formats and additional screens of data –
scanned receipts and documents –
pictures of properties. infrastructure, units, and appliances –
e-mails and attachments and auto logging of owner, tenant and vendors –
automatic logging of letters and e-mails –
audio records from phone calls – A relatively new capability with a few systems.
reminders and “to do’s” associated with property management operations –

Physical characteristics of Property and Units – Familiarization of the property,

including the grounds, the individual units, and the facilities and infrastructure are
mandatory. This knowledge is necessary in order to gauge risks and determine how the
risk will be handled.
The risk can be insured –
Controls and improvements can be applied –
The risk can possibly be removed or minimized –or a combination of the above-

Current property management systems may offer expanded use of pictures, site maps,
schematic, and audio records to be used for evaluation of the properties, common areas,
units and infrastructure. Cost factors need to be analyzed in order to provide minimum risk
at minimum cost, which can include insurance, controls, training and/ or removal costs.
Location and geographic characteristics & consideration of property facilities – Risks
associated with natural disasters must also be determined. Earthquakes, fires, floods,
hurricanes and tornadoes all have the potential of major damage and destruction. Plans
and preparations must be prepared to deal with the natural disasters common to specific
geographic regions as a basic component of the risk management plan in order to
maximize staff and tenant’s well being while minimizing property damage.
Resident staff and residents can quickly be informed by e-mail or a phone call of potential
natural or man-made disasters and the recommended actions staff and residents that need
to be initiated. Some current systems provide the ability to automate voice
communications with all or selected groups of tenants, HOA homeowners, owners or
vendors (after set up) with a click of a mouse.
Plans should provide the description and location of water, gas and power shut offs. A
property map identifying the location of the shut offs plus underground lines and pipes can
minimize damage during a disaster and assist some maintenance and improvements
projects.
Association Management = Additional Risk Issues must be considered in dealing with
the numerous Federal, State and Local Laws specifically directed to association
management and operations. Association directors have many responsibilities mandated
by their CC&R’s. These include adopting a budget, authorizing year-end disclosures,
pursuing delinquent assessments, conducting proper elections and enforcing the governing
documents, especially the CC&Rs (“CC&Rs”) and Operating Rules.
Attorney General. The Office of the Attorney General has jurisdiction over Corporation
Code issues involving California incorporated homeowner associations.
Additional content is available via from Davis-Stirling.com by Adams Kessler PLC.
Landlord & Tenant Law - Provides many of the regulating laws in the rental industry.
State Landlord & Tenant Laws vary greatly among states. A useful guide available on the
Internet is http://www.nolo.com/legal-encyclopedia/state-landlord-tenant-laws -
In addition Federal Laws and their agencies are thoroughly involved with many of the
major property management functions. T he key laws and agencies include:
Federal Law –
American Disability Act – ADA
Environmental Protection Agency mandates & requirements Including -
EPA Mandatory RRP Rule Certification for disturbed Lead Paint surfaces –
Fair Housing - Discrimination – Age – Gender – Marital Status – Race – Sexual
Orientation
OSHA -
Our comments and observations in this portion of this article are focused on the Risk
Management policies and procedures related to the above Federal, State, and Local laws
and regulations. Lack of understanding or awareness of the laws create major potential for
government fines and penalties based on non-compliance. Note: The above bulleted items
are a sampling of legislation.
Additional opportunities exist for attorneys that specifically seek out properties not in
abeyance with ADA or EPA regulations. In numerous cases there is no plaintiff, just an
attorney who has determined an instance of non-compliance, not necessarily associated
with a tenant or applicant complaint at that time. Other than a human victim the legal
actions in most respects are similar to those established by the traditional “ambulance
chasers” of some notoriety.
Fair Housing issues and complaints seem more often to be shared by tenants and
applicants along with Fair Housing “testers” that may initiate a Fair Housing complaint
after experiencing one or more Fair Housing violations while applying for housing. More
recently, the advertising of rental housing is being reviewed to determine if discriminatory
or leading terminology is being used to promote a category of renter over others. Some
will argue that the advertising issues and the complaints are well outside the realm of
common sense.
Recently a fatal accident involving OSHA and other laws occurred in a San Diego
suburb involving a tree trimming operation. The property was owned by a real estate
company that buys and improves properties for resale. The victim was a construction
laborer killed by a 25 foot limb that fell from a 60 foot tree. Cal/ OSHA has issued 13
citations including 8 serious violations against the real estate company based on various
safety regulations and Federal and state laws.
The company so far has been fined $91,000 and both the labor practices and a criminal
investigation were still ongoing as of the last reporting. In addition of course additional
litigation is likely initiated by the family of the victim. It is quite likely the real estate
company will not survive this tragic event. (Information source was the San Diego U - T
newspaper) –
Background and credit checking are one of the sub systems that reduce the financial and
behavior risks that may be associated with tenant prospects. Current systems generally
lower the administrative costs, enhance the documentation related to tenant applicants and
Fair Housing inquiries, and decrease the potential for identity theft.
The FTC Red Flag Rule mandates that a reasonable fraud prevention ID theft policy
must be in place to assure that confidential data not be compromised. The use of the
applicants Social Security number during background / credit checking creates an instant
liability in re: to risk management. Applications and credit checking reports therefore must
be secured and paper copies properly destroyed. Fines may range up to $3500 for
violations.
At least one Credit Checking company has initiated an on-line credit checking service
which removes the property management company from the requirement of ever needing
to acquire the applicants Social Security number. That information is provided only to the
credit checking company in a secured on-line session between the applicant and the credit
checking company.
The results of course are forwarded to the property management company minus the SSA
identification. Another innovative element of this specific service is that there is also an
option for the credit checking fee to be paid directly to the credit card company further
reducing the costs of applicant processing administration. Contact information is available
at the end of this article.
Owners and Vendors however, require an SSA or Tax ID in order that property
management can prepare 1099’s at the end of the year. Some newer systems encrypt
confidential data increasing the security of owner, tenant and vendor data.
A relatively new confidentiality / security risk factor is the increasing use and capabilities
of mobile communications devices, i.e. PDA’s, I-Phones, Blackberries, Smart Phones,
Tablets, Notebooks and Laptop computers. These devices are easily misplaced, lost and
stolen which provides immense opportunities for the criminal element to acquire vast
amounts of confidential data. The data is then either accessible via the device storage
medium or via access of the server storing the data.
Based on the portability of these devices and the associated security risks additional
security measures should be established and maintained. There have been numerous
reports of government and corporate management and staff involving the loss of laptops
and other mobile devices which stored tens of thousands of employee and customer
records including confidential data. Social
Security numbers, bank account information, credit card information plus the associated
names and addresses were all included in the databases that were no longer secure.
Additional tenant and HOA homeowner based risk management issues include the
following:
Accidents –
Lead Paint –
Mold -
Pest Control –
Pets -
Criminal Behavior –
Cigarette and cigar smoke -
Property accidents are one of the more visible risks and can generally be minimized by
vigilant staff and concerned tenants. Careless construction/ maintenance operations are
often the cause of accidents along with the results of inclement weather. Staff needs to be
especially aware in those conditions, in addition to daily activities that may create and
immediate hazard, i.e. gardening activities.
Another potential risk issue is present with tenants (usually immigrants) that may not be
familiar with the operations and caveats of some unit amenities, such as garbage disposals,
stoves, toilets and balconies. Young children are also at risk around balconies, open
windows plus common area facilities that may be especially hazardous for children, such
as pools and Jacuzzi’s.
In contrast with accidents mold is initially an invisible danger potentially acquiring toxic
capacities while still appearing to be little more then a minor maintenance issue. Both
tenants and staff need to be aware of its potential dangers and its major role in risk
management policies. Remediation must be both quick and complete.
Pest control issues focus on two elements, the property and the tenants. The property is
affected by termites with generally little or no effect on the tenants. Repairing damage to
the property is a long term process which may require some tenant inconvenience during
termite control treatments.
Rats, mice, cockroaches, etc. are often associated with careless food handling by the
tenants and therefore require pest control treatments and tenant management / monitoring
activities. Fleas and bedbugs may be a carryover from a past tenancy or as a result of
current tenants pet. It should be noted that mold, fleas and bedbugs may have very diverse
levels of reactions by tenants.
Apartment owners are in a Catch-22 situation,” said Bob Pinnegar, the former Executive
Director of the San Diego County Apartment Association. Pinnegar pointed out that
landlords legally cannot use the information on the Megan’s Law Web site to evict
registered sex offenders or deny them from renting an apartment. On the other hand,
landlords can be held liable for not protecting tenants from a known risk. “Your duty is to
protect the residents, but the state has not given us the tools to protect residents in the case
of sex offenders,” Pinnegar said. It is suggested that a property manager or owner/operator
contact an attorney if it is known that a sex offender is a current tenant prospect and is
interested in a managed property.
Note: It appears as if the above status is still an issue in California. If readers are
confronted with a similar situation we recommend they contact their local or state housing
industry trade association.
Training of staff – One of the most important factors in reducing risk is a well crafted
training program. The program should inform staff as to what to look for, what actions to
take when and if a risk management event takes place. It also entails communicating the
risks and potential hazards to the tenants and visitors to the properties being managed.
Risk management policies and documents. – Well written risk management policies and
documents require a detailed evaluation of the properties in order to identify the risks that
need to be managed. The property management system can provide the appropriate
records and the documentation that can be used to log events, and communications
associated with risk management operations, policies and procedures. The existence of a
policy manual may lessen complaints of negligence in matters of potential litigation.
The policy on e-mails is a key element of an office Internet policy and Risk Management.
We identified concerns associated with e=mail communication with owners, tenants and
vendors. Specific limitations and restrictions are also required in order minimize the
improper use of other Internet activities. Studies have indicated that major abuse of the
Internet is taking place in both the private sector and in local, state and federal
government.
Inappropriate use includes games, gambling, private correspondence, pornography, private
projects and personal activities. Some of the Internet activities and websites may also
increase the likelihood of cyber attacks and security breeches. Another activity that needs
to be monitored is that of Social networking. It is of some value in the business world but
is running amuck among some of our young people and may present both positive and
negative aspects that may apply to the business environment.
Systems Issues - The major aspect and system function is the documentation and
validation of the many and diverse mandates and requirements. General information re:
the applicable mandates and requirements should be established in the Policies and
Procedures documents. Owners, tenants and vendors associated with applicable specific
mandates and requirements must be clearly identified within the system. Use the system to
document and organize in order to minimize the many Risk Management hazards,
liabilities and regulatory compliance issues.
Examples include:
Owners - Out of state residents with California investment properties managed by
California Fee Managers –
Owners may also be companies managing their own properties – See below –
Tenants – With service dogs and disabilities –
Vendors - With appropriate certification(s), equipment Liability Insurance and
Workman’s Comp insurance –

Risk Management and Insurance

Based on the obvious importance of risk management in the property management
industry it is also obvious that a serious due diligence evaluation should be directed in
acquiring the insurance by property management managers and owner-operators of
investment properties. The nature of property management operations automatically
entails an extremely large and diverse set of insurance requirements.
Generally for fee property management operations there are two basic categories of
insurance to be acquired. They are:
Business Insurance –
Commercial Property Insurance –

More specifically business insurance may include:

General Liability –
Commercial Auto –
Commercial Property –
Professional Liability –
Directors & Officers Liability –
Business Owners Policy –
Workers Compensation –
Commercial Crime –
Employee Benefits –

It should be noted that the property management company should also be identified as
“additional insured” on the clients commercial property(s) and should review those
policies when initiating a management contract. A Certificate Of Insurance is inadequate
in re: to the legal protection provided by it versus an “additional insured” clause naming
the management company.
In almost any litigation involving properties and /or tenants it is quite likely the property
management company will also be sued in addition to the owner.
Liability coverage should be provided by the following:
The owner’s policy –
The business/ property management policy –
And preferably the renter’s insurance policy -

It should also be noted there is an increasing level of expanded tenant based insurance
options which generally provide an improved risk management environment for the
management company, investment property owner and the tenant. Those insurance options
in addition to the Renter’s policy include:
Eviction Insurance –
Security Deposit Insurance –
Various other insurance offerings may be available. Contact an insurance broker.
Renters Insurance is a valuable addition to the Risk Management tools. It provides
coverage of major damage and liabilities resulting from tenant negligence, malicious
action or just plain bad luck. The classic situation is the waterbed or fish tank, (not
acknowledged or approved by the management) that floods the tenants unit and possibly
the unit below.
The property’s insurance does not cover the damage and the tenant is liable. The tenant
does not have the funds which then requires litigation in order to recover the costs of the
restoration. Renter’s Insurance covers the tenant damage liability. Renter’s Insurance is
rapidly gaining in popularity and actual use. Property managers are beginning to mandate
its use for their residential properties. In California landlords are allowed to mandate
renter’s insurance as long as all tenants must participate.
Note: This is less of an issue than might be expected in a low vacancy period. An
explanation of the coverage and tenant’s liability also minimizes a likely negative reaction.
Eviction Insurance provides the funds necessary to cover the rent, late charges and most
miscellaneous costs associated with a tenants eviction not covered by the security deposit.
.
Security Deposit Insurance provides the funds that the traditional security deposit would
provide if it was needed during or at the end of the tenancy. It is funded by the tenant via
small monthly payments. It may cover additional charges that might occur that exceed the
designated security amount.
It is not our intention to identify all of the caveats and contents associated with business
and investment/commercial properties, but to highlight the multitude of entities that
comprise appropriate insurance coverage. Our experiences with our property management
clients have reinforced our belief that too often business and property insurance does not
receive the attention and due diligence by management and owners. The following
scenarios serve to identify the far reaching aspects of risk management and insurance. .
Two of the three studies highlight major problems with the funding process that is so
important when circumstances result in lost income and /or unexpected expenses.

A property management company endured a number of staff actions entailing systems

sabotage, arson, and embezzlement. The insurance company to say the least, appeared less
then helpful in assisting the broker and his company in dealing with the various assaults
on the company.
The insurance company required that the broker undergo a lie detection session based
on the arson.
They provided minimal funds on a significantly delayed basis to the broker while the
 broker was attempting to re-establish his business operations after his office, his files
and his computer system were destroyed by fire delaying both receivables and
payables including monthly owner draws and mortgage payments.
The insurance company’s refusal to cover the losses appropriately and in a timely
fashion finally led the broker to initiate litigation against the insurance company.

A commercial retail center owner had a similar delay in repairing / replacing the roof of
his property. A homeless person established a sleeping space on the roof of the retail
center. His bedding was washed into one of the roof drains during a series of storms. The
rain water backed up on the roof and initiated a major roof leak. The cost of the repairs
continued to increase while the insurance company delayed payments which would
reimburse the contractor for the labor and materials required to pay the contractor.
The leaks worsened which finally resulted in a partial collapse. The two main businesses,
a liquor store and a grocery severely limited their operations and initiated litigation against
the owner in addition to not paying their rent. The end result was that the owner and the
commercial tenants all lost income, while directing a lot of time and energy in correcting
the problem. Quick funding by the insurance company would have resolved what would
have been a relatively minor roof repair project instead of the major disaster it became.
The anchor tenant and the tenant with the second highest foot traffic at the center were for
the most part no longer functioning which resulted in less traffic, sales and services for the
other tenants. This resulted in additional losses and delinquent rental income for the
owner. .

The final scenario was a tenant based personal safety event. It took place while I was on-
site with the property management broker at her office in one of the broker’s apartment
buildings. As I was leaving the first floor office at the apartment building the broker and I
heard some noises above us. I then saw a young woman tenant at the top of the concrete
stairs near her second floor unit.
She was holding a leash attached to at least an 80 pound dog while preparing to come
down the stairs while on her “blades”. Based on my expression, and the noise, the broker
stepped out to see what had captured my attention. She immediately shouted to the tenant
to stop and hold her position. The broker then climbed the stairs and confronted the tenant
re: her apparent death wish.
It is likely that if the tenant had prevailed and had been dragged down the stairs be her
large leashed dog both the building owner and the property management company would
have been sued. It is possible the plaintiff’s attorney or her family would maintain that the
owner / property management company should have posted a sign warning that tenants
should not use the stairs while on blades and tethered to a large dog. A worse possibility is
that a judge or jury would have a similar finding.
I never determined if the large dog was acknowledged in the Rental Agreement. It was a
large dog.

The first two scenarios identify unacceptable delays in dealing with extreme
circumstances involving a system or property disaster, lost income, and increasing the
potential for additional business losses or additional property damage. Delays of the
insurance payments to cover the losses or replacement of equipment, infrastructure,
personal property endangered the business and potentially the financial status of the
property owner/clients. Perhaps it was an anomaly, but the fact that it was an issue in two
of the three most prominent risk management / insurance scenarios that I can recall and
experienced with our clients.
Based on those disturbing set of events I strongly recommend property management
principals and owner/ operators initiate a conversation with their insurance brokers re: a
similar hypothetical disaster as above and the insurance company’s response including the
commitment parameters for funding. It can be argued that property management
companies are even more time dependent upon a regular income stream then most other
companies and therefore a quicker response to a business disaster.
The monthly cycle of receipt processing, payables processing (based on receipts
processed) and report processing based on the processing of receivables and payables does
not allow significant delays without major fallout. Without receipts processing mortgages
and vendor payments are not made, owner checks not processed and owners may initiate
and forward a complaint to the BRE/ DRE in addition to possible litigation.
With the exception of a potential BRE/ DRE audit the investment property owner
experiencing an event that causes a lack of receipts will also remove the abilityfor the
management company or property owners to make payments to their lenders and vendors.
Tenants not making rent payments based on leaking or collapsed roofs also can initiate
litigation based on breach of contract issues. Loss of income is usually a feature in most
business and commercial property insurance policies. What may not be present is the
guaranty of speedy and continuous funds to offset the disastrous loss of income.
The third scenario is one of the most troublesome in regards to property management and
the dangers tenants are to themselves, their family members and guests, plus other tenants
and their guests. Every property manager can narrate a tenant based event or two that
indicates the lack of judgment and common sense. What can be done to minimize the
potential self destruction, or damage / injuries to bystanders and the property?
A good set of “House Rules” and an attitude that promotes communications between
management and tenants plus a recognition and awareness by management in order to
minimize the likelihood of tenants placing themselves “in harm’s way”. In addition risk
management policies, staff training and constant attention to circumstances, events and
potential hazards will minimize the need to report and or experience an accident in or on a
managed property.
A relatively new set of capabilities that is available in a few systems is the use of audio
records as an additional communications medium. One system now integrates with Voice
Over Internet Protocol (VOIP) phone system and provides for incoming and outgoing
calls to be recorded. The systems provides many other features including automatically
recognizing the incoming caller and accessing the owner, tenant, or vendor record and
initiating call recording.
A second capability is that of ”Phone Broadcasting”. A call can be recorded by staff and
matched to a specific or a group of recipients in lieu of an e-mail or traditional phone call.
The call could be an announcement, an inquiry, or a reminder that will be initiated
automatically using the phone numbers in the system. .
The features above are invaluable tools in documenting the elements of Risk Management
communications and general property management operations. They are improvements
upon the individual notes, calls and e-mails used traditionally. The audio record features
are automated real time voice communications and automatically log the communications
that are made. Aggressive and innovative use of the property management system can
improve risk management operations and minimize the costs that may result when a risk
becomes a reality.
 CHAPTER 13
Property Management Systems and the California
BRE/DRE

In 2013 the California Department of Real Estate, (DRE) was renamed the Bureau of Real
Estate (BRE) and assumed new management. The BRE / DRE is responsible for
establishing and maintaining the rules and regulations that Real Estate Brokers and Agents
must maintain while operating in one or more of the specialized services under the
supervision of the BRE/ DRE. Property management is one of the services / specialties
that the BRE/ DRE is heavily committed to robust regulation and review. The BRE/ DRE
has audit and license restriction authority of California Brokers, Agents and staff involved
in fee property management operations.
Note: Even though the DRE has recently been renamed as the Bureau of Real Estate,
(BRE), we will use the new and traditional acronyms of the Department of Real Estate,
(BRE/ DRE) in this document except for events that preceded the renaming of the
department.
One of the most basic issues is the requirement that Trust Accounting routines be part of
the Property Management software being used in fee property management operations
here in California. It should be noted that real estate regulations and mandates vary
significantly from state to state and our observations indicate that the California BRE/
DRE regulations and audits are among the most robust.
The California BRE/ DRE identifies a basic recordkeeping format originally derived for
the maintenance of manual Trust Account Ledgers and uses this format as a comparison
for what they expect to see in Property Management Systems used by California Fee
Managers. We have provided an excerpt from the California BRE/ DRE Web Site.
Record of All Trust Funds Received and Paid Out - Trust Fund Bank Account
“This record is used to journalize all trust funds deposited to and disbursed from the trust
fund bank account. At a minimum, it must show the following information in columnar
form: date funds were received; name of payee or payer; amount received; date of deposit
amount paid out; check number and date; and the daily balance of the trust count.” Trust
Funds - A Guide for Real Estate Brokers and Salespersons RE 13 ( rev. 4/04)
Even though QuickBooks / QuickBooks Pro is often used by the broker to run the real
estate office accounting it should not be used for fee property management operations.
OuickBooks which offers significant capabilities for many small businesses does not
however, provide the additional routines and features to satisfy California BRE/ DRE
requirements for Fee Property Managers using a Trust Account for multiple properties.
Note: A few brokers have indicated that they have had successful audits which did involve
Quick Books and separate bank accounts / Trust Accounts for each property. It is also
noted that there are third party QuickBooks versions that claim to be BRE/ DRE
compliant and more compatible with the special requirements of rental property
operations. I question that response.
It should also be noted that It is not a given that all property management accounting
programs provide the Trust Accounting and other California BRE/ DRE compliant
routines that the department auditors requires or special requirements of some other states.
Our observations suggest that the majority of Property Management Software on the
market today are not California BRE/ DRE compliant even though much of the marketing
/ advertising is focused on Fee Managers. The marketing sometimes is even apparent in
Trade Association Journals directed at Fee Managers such as IREM and NARPM. In those
situations the system being advertised is not compliant in one or more states in which the
magazine is present.
Our “Shopping for Software” article in the May 2008 NARPM Magazine specifically
addresses this issue after a number of observations and experiences which confirmed that
a specific on-line property management system was not “everything a property manager
needs”. The company not only advertised in the NARPM Magazine, but it also
participated in the California NARPM Conference where they indicated a complete level
of ignorance related to the California then DRE and its Trust Accounting mandates.
By no means was the company above unique in its major lack of software compliance.
Considering the number of property management programs and the diversity of state and
local requirements it is likely that no more than 15 or 20 % of the programs satisfy the
vast majority of the major state and local regulatory mandates and requirements.
More recently another property management system (from the East coast) becoming more
popular in California, when asked whether the system supported California Trust
Accounting requirements replied in the following manner. “The system is not state
specific, seeing as the software is used nationwide.”
They did not really answer the question at that time. Possibly because they did not
understand what was asked. Their statement indicates they have not invested in the time
and efforts in programming specific state based regulations which would include the than
California DRE mandates.
Their statement seemed to suggest that just because they marketed their system nationally
they did not have to address state or regional mandated requirements. I know the DRE
would have had a significantly different response which would have serious consequences
for a California Fee Manager if audited.
Commingling -
Another serious non-compliance event takes place when the property manager prepares an
owner draw check before the rent check clears the bank, thus creating a negative property
balance and a commingling infraction on the owner draw. Commingling in some states,
(broker funds mingled with owner/ client funds or other owner funds) is identified as a
major infraction in some states.
Commingling also occurs when:
Personal or company funds are deposited into the trust fund bank account. Except for
what is provided in Section 2835 of the California DRE and Commissioner’s
Regulations as noted below, this is a violation of the law even if separate records are
kept.
Trust funds are deposited into the licensee’s general or personal bank account rather
than into the trust fund account. In this case the violation is not only commingling,
but also handling trust funds contrary to Business and Professions Code Section
10145. It is also grounds for suspension or revocation of a license under Business and
Professions Code Section 10177(d).
Commissions, fees, or other income earned by the broker and collectible from the
trust account are left in the trust account for more than 25 days from the date they
were earned. Property managers often are not aware of this requirement. Even when
they are aware, receipts are often received throughout the month at different times
occasionally resulting in a non-compliant event.

Note : Our company has had the opportunity in the past to work with management
companies and DRE Auditors in establishing compliance and resolving systems
accounting issues. In the past we have also, unofficially of course, been referred by then
DRE Auditors to Broker / Fee Management Companies needing compliant software,
training and/ or support.
Note 2: Our past experience with DRE and auditors in general suggests significant efforts
should be addressed to the creation of documented, detailed, organized accounting
procedures and well trained staff. Initially, unless a complaint is involved, an audit will
generally start with a quick overview of “form”. Form relates to the presence of the
appropriate procedures and reports and an organized business environment . The lack of
“form” above tends to increase the likelihood of a DRE auditor reviewing “substance” in
order to determine the level of compliance. Experience has identified a “form” audit
entails significantly less time, labor, cost and angst.
In addition, it is also necessary that BRE mandated procedures be understood and used
throughout all phases of management operations. Some of the most important policies and
procedures include the following:
Zero or positive balances for each property must be maintained within the Trust
Account at all times –
A complete and accurate “3 way” bank reconciliation is required each month –
A “3 way: reconciliation also reconciles the individual property transactions totals
with the bank statement total and the systems reconciled total –
Receipts are to be deposited within three work days of being received –
All commissions / service fees, etc. applied to a property must be stated and defined
within the management contract –
All data is to be kept for a minimum of three years –
The Security Deposit minus appropriate and reasonable move-out charges must be
directed to the tenant within 21 days of move-out along with an explanation of all
charges and disposition of their Security Deposit – Note: State requirement –
The Trust Account must be properly identified with the Brokers name as Trustee –
A daily Trust Account Balance for all properties is mandated –
A monthly Trust Account Detail Report for all properties is mandated –
Broker’s management fees cannot be retained in the Trust Account for more then 25
days – Fees retained for longer then 25 days are to be considered as commingled
funds.
A recommended procedure is to prepare & store monthly a complete set of DRE
oriented accounting reports ready for DRE review –
Check Registers should be in check number sequence and all checks are to be
reported including Void checks -
A review of management contracts should be established periodically to verify that
all commissions, service fees, administrative fees and other income derived from
property management operations are identified in the management contracts and
lease/ rental agreements –
It is highly recommended that written procedures be available for systems
accounting, reporting, and backup / restore operations –
It is highly recommended that Password Security be in place and maintained. Proper
Password Security procedures will entail a login for each user, specific access
established for each user based on job description and assigned property
responsibilities.
It is recommended that an internal or external audit / reports and procedures review
be completed on a periodic basis. This is especially important whenever staff
continuity is disrupted –
The audit / review should be the responsibility of supervisory staff not involved with
data entry activities or external resources, e.g. accountants , CPA,’s, or consultants
familiar with the software being used –
It is recommended that a list of the procedures focused on BRE/ DRE Compliance
 and Accounting be prepared, be promoted and posted with the monthly BRE/ DRE
reports–
In addition the procedures list should be initialed monthly by the responsible staff
and outside reviewers. Accountability and continuity are highly valued generally by
BRE/ DRE Auditors and adds value to both “form” and “substance” -
Debit Cards should not be issued / used within Trust Account operations–
Credit Cards if used must have specific procedures and documentation in order to
properly account for their use and compliance within Trust Accounting operations –

Preparing FOR A BRE/ DRE AUDIT - Senior management has to lead the way in
preparing for an audit. They share the majority of the responsibility in “getting it right”
and will most likely be penalized the most for not maintaining compliance. We often find
that new staff is ill-prepared to assume the responsibilities entailed in their new job
description. Both new and current staff may be unqualified, untrained, and ill-suited for
the detail and dedication required for the systems bookkeeping. There may be a lack of
procedures and/ or documentation to refer to, and no resources made available to bring
them up to a “working knowledge” of the system. This type of scenario can lead to the
following results:
Decrease of income based on inadequate/ inaccurate processing of receipts–
Inappropriate 3 Day Notices, Late Charges, Rent Increases, Maintenance Charges,
etc. –
Incomplete or incorrect Move-Ins & Move-Outs, etc. –
Delays in traditional operations schedules including reporting and check preparation–
Increased expenses due to late mortgage and supplier payments –
Loss of management contracts and management fees –
Increased costs based on increased hourly and overtime payroll –
A BRE/ DRE audit based on complaints initiated by owners, tenants, and/or vendors
based on inaccurate reporting, non-compliance, incorrect / inadequate internal
controls or indications of criminal activity –
Re-entry or loss of data based on a failure of maintaining proper back-up / restore
procedures –

TRAINING & SUPPORT - Proper systems / software training is one of the most
important elements in making the “system” work. Managements knowledge of the
“system” is required in order to evaluate, correct and improve performance of the system.
Lack of on-going management involvement with the system seems to be the most
common element associated with problem property management systems and one of the
most disastrous.
The BRE/ DRE designates that the Broker has the responsibility of supervising the
property management operations and failure to maintain compliance can result in
suspension or loss of the Broker’s license. The less the Broker knows about his/ her
Property Management System and its operations the more likely he/ she will at some point
be at great risk for major disasters such as embezzlement, a BRE/ DRE audit involving
major non-compliance issues and/ or a major loss of management contracts.
The broker therefore also has the responsibility to match the many mandates of BRE/
DRE compliance with the system capabilities and features within the system. With some
systems considerable additional customization may be required to accomplish compliance.
THE BRE/ DRE AUDIT - A few years ago at a DRE Seminar hosted by the San Diego
Association of Realtors, (SDAR) it was stated that scheduled audits in California were
then about every ten years. It was also stated at that time that it had increased from eight
years. Current statements from the BRE/ DRE identify that all California Fee Managers
will be audited, just not how soon.
In any case scheduling appears to be mostly subjective based on company age, exposure
and other factors of varying degrees. Non-scheduled audits however, appear to be more
specific in their organization and level of immediacy. The auditor will normally be on-site
in two to three weeks as a result of a complaint. They would normally call to schedule an
appointment. but it has also been reported that they have actually visited the office to
schedule an appointment with no notice. It may be that the complaint may have been of a
more serious level and the on-site visit was made to determine whether more immediate
action was necessary. ( See Note Below) –
Complaints may be received from owners, tenants, vendors and referrals are also
occasionally received from law enforcement agencies based on potential criminal activity
involving property management operations. The first appointment will entail a review of
reports, data and questions focused on the complaint.
Based on initial findings additional appointments may be made and/or initial disciplinary
actions taken. Depending upon the level of non-compliance and / or other inappropriate
findings the auditor will initiate a report and recommend fines and penalties plus possible
license restrictions be initiated. Non-compliance issues will probably require additional
on-site evaluation and review appointments until all issues are resolved.
Note: Sources associated with the BRE/ DRE have indicated that a significant increase in
the fines, and penalties now being applied to non-compliant management companies. It
has been suggested that the BRE/ DRE is now beginning to operate as a state profit center.
In addition to the potential fines, penalties and shortages that may need to be funded,
another significant issue is often the additional time demands required by the auditors
presence and ongoing requests for information. The time demands may continue for six or
more months after the initial appointment.
NEW AUTHORITY OF SPECIAL NOTE: - As of January 1st 2009 the California DRE
will have the capacity to suspend a license up to 36 months: (1) if suspension is in the
public interest and the licensee knew or should have known that violating a DRE rule
would cause material damage to the public; or (2) for committing any offense involving
dishonesty, fraud, or deceit, or an offense reasonably related to the qualifications of a
licensee, whether such offense was adjudicated by a criminal conviction, plea of nolo
contendere, final judgment in a civil action, or administrative agency judgment. A person
suspended under this law is prohibited from engaging in any business activity related to
real estate in a real estate office or certain related fields. Senate Bill 1737.

The following DRE document identifies the most prevalent violations

associated with Real Estate and Property Management operations in
California. Some of the following items may also apply in other states.

Department of Real Estate

Ten Most Common Violations Found in DRE Audits
The real estate industry has moved into a new millennium. New things pop up everyday
changing the way we do business. New terms, such as E-Loans, Internet Marketing, and
E-Form have become jargons of the trade. Yet, certain things have not changed - the most
common violations found in DRE Audits. In this regard, the top ten common violations
are listed below. The purpose of this article is to call your attention to these common
deficiencies and to provide you with procedures that you can follow to ensure compliance
with these laws and regulations.
B & P Code Section 10148 - Retention of Records
Business and Professions Code Section 10148(a) states that a real estate broker shall retain
for three years copies of all listings, deposit slips, canceled checks, trust records, and other
documents executed by him or her or obtained by him or her in connection with any
transactions for which a real estate license is required. This section requires that, after
notice, the books, accounts, and records shall be made available for examination,
inspection, and copying by the commissioner or his or her designated representative
during regular business hours; and shall, upon the appearance of sufficient cause, be
subject to audit without further notice, except that the audit shall not be harassing in
nature.
A broker who fails to keep transaction files, canceled checks, deposit slips or other records
prepared or obtained for a period of three years may be cited for violation of this section.
Some brokers cited for violation of this section have simply failed to provide records after
reasonable attempts by the Department to examine them. Other brokers cited have lost
control of or destroyed records that should have been maintained. Formal legal action can
result from a broker’s failure to provide records. You should review the record retention
policies for your office to make sure you are in compliance with this code section.
Regulation 2731 - Use of False or Fictitious Name
Commissioner’s Regulation 2731 states that a licensee shall not use a fictitious name in
the conduct of any activity for which a license is required under the Real Estate Law
unless the licensee is the holder of a license bearing the fictitious name. Brokers should
periodically check their license status with the Department to be sure that their license
bears the fictitious name(s) they are using. Many brokers cited for violation of this
regulation believed that having the dba registered with the county was sufficient to allow
them to use it in their real estate business. Other brokers who are cited for this violation
state that they had the fictitious name on their license at one time but may have had their
license lapse for a brief period of time and failed to add the dba back on to their license.
Regulation 2831 - Trust Fund Records To Be Maintained
This regulation requires the broker to maintain, in columnar form, a record of all trust
funds received and deposited by the broker. At a minimum, the following information
must be indicated in columnar form in, chronological order: date funds were received;
name of payee or payor; amount received; date of deposit; amount paid out; check number
and date; and the daily running balance of the trust account. If any of these columns are
not present, then there is a violation of Regulation 2831. The accurate use of DRE form
RE 4522 fully
When this regulation is cited, most of the time it is for one or more of the following
reasons:
The broker did not maintain any trust fund records.
If trust fund records were maintained, they were either not in columnar form or a column
(noted above) was missing. We have seen many brokers utilize a standard checkbook as
trust fund records. These records do not comply with Regulation 2831.
In some instances, columnar records were maintained by a licensee but he/she was still
cited because the items posted were not accurate, e.g., when posting a check, it was the
wrong amount; or, for a deposit, “the amount” was wrong and/or “the date of deposit” was
the wrong date.
A broker maintaining columnar records can still be cited if a daily running balance is not
maintained or is inaccurate. Brokers must always keep a daily running balance of the
aggregate amount of trust funds in their bank accounts.
(For trust funds not deposited into a trust account, the columnar record should show the
date trust funds were received, the form of the trust funds, amount received, description of
the property, identity of the person to whom funds were forwarded, and date of
disposition. The accurate use of DRE form RE 4524 fully complies with this part of the
regulation.)
It should be noted that records maintained under an automated data processing system in
accordance with generally accepted accounting principles should be in compliance as long
as they contain the elements previously noted.
Regulation 2831.1 - Separate Record for Each Beneficiary or Transaction
This regulation requires the broker to maintain, in columnar form, a separate record of
trust funds for each beneficiary or transaction accounting for all funds which have been
deposited into a trust account. This record identifies which beneficiary has funds in the
trust account. This record must indicate the following in chronological order and in
columnar form: date of deposit, amount of deposit, name of payee or payor, check number,
date and amount, and running balance of the separate record after each transaction on any
date.
This regulation is cited mostly due to one or more of the following reasons:
The broker did not maintain separate records for each beneficiary.
Separate records were maintained, but the broker was cited because information was
missing.
Separate records were maintained, but the broker was cited because the items posted were
not accurate, e.g., when posting a check, it was the wrong amount; or for a deposit, “the
amount” was wrong and/or “the date of deposit” was the wrong date.
Separate records were maintained, but a daily running balance for each record was not
maintained or it was not accurate. Brokers must always keep a daily balance for each
separate record.
It should be noted that records maintained under an automated data processing system in
accordance with generally accepted accounting principles should be in compliance as long
as they contain the elements previously noted.
Regulation 2831.2 - Trust Account Reconciliation
Regulation 2831.2 requires that the total of all Separate Beneficiary or Transaction
Records maintained pursuant to Regulation 2831.1 be reconciled with the balance of the
Record of All Trust Funds Received and Paid Out required by Regulation 2831, at least
once a’ month except when the bank account did not have any activities. The requirement
is that the accounting records be reconciled to each other. This is not only a legal
requirement, this is also part of a sound internal control for trust fund handling.
In order for this procedure to have a reliable result, the Record of All Trust Funds
Received and Paid Out must be reconciled first with the bank account statements as of a
certain cut-off date. This procedure is commonly known as bank reconciliation and is
performed basically to determine the accuracy of the records. A cut-off date is the calendar
date (usually end of the month), when no transaction or activity thereafter is considered.
This process is completed once all adjustments and corrections of any reconciling items
have been made to the ending balance on each record to arrive at an adjusted cash balance.
In other words, the balance of the record of all trust funds received and paid out has to
equal the adjusted cash balance.
The next step is to compare and reconcile the total of all beneficiary or transaction records
with the adjusted cash balance as of the cut-off date of the bank reconciliation. The main
objective of this procedure is to determine, based on the records, whether all trust funds
held on behalf of others are on deposit in the corresponding trust account. Another
purpose of this procedure is to ascertain that there is no unidentified overage or broker’s
funds in excess of $200 in the trust account. Any discrepancy must be corrected
accordingly. The broker is required to maintain a record of the trust account reconciliation
showing the name of the bank account and number, date of the reconciliation, account
number or name of the principals, beneficiaries or transactions and the amount of trust
funds held by the broker for each of the principals, beneficiaries or transactions. Failure to
comply with this Regulation could result in substantial loss of trust funds and disciplinary
action .against the broker by the Department.
Regulation 2832.1 - Trust Fund Handling for Multiple Beneficiaries (Trust Fund
Shortage)
Regulation 2832.1 requires the real estate broker to obtain written consent from every
owner of the trust funds in the bank account prior to each disbursement if the
disbursement will reduce the balance of the funds in the bank account to an amount less
than the existing trust fund liability of the broker to all owners of the funds. A trust fund
shortage therefore exists when the following conditions are present:
The balance of the bank account is less that the total trust fund liability of the broker
to all owners of the funds; and
There is no written authorization from all owners of the trust funds allowing this.

The most obvious reason for a trust fund shortage is the intentional misuse (conversion) of
trust funds. However, simple record keeping errors that remain undetected could result in
trust fund shortages and an actual loss of funds. Failure to record a disbursement, or
understating the amount of a check disbursed, or overstating the amount of a deposit on
the beneficiary ledger/record will cause the beneficiary ledger to show a balance that is
larger than the true amount owed to the individual beneficiary. This overstated balance on
the ledger is more likely to be paid and, consequently, the beneficiary will be paid more
than what is due. The end result is a trust fund shortage.
Performing the proper trust account reconciliation pursuant to Regulation 2831.2 should
enable the broker to detect such causes of a trust fund shortage.
Regulation 2832 - Trust Fund Handling
The most common violations of this section found in audits relate to Commissioner’s
Regulation 2832(a), which requires that a broker place funds accepted on behalf of
another into the hands of the owner of the funds, into a neutral escrow depository or into a
trust fund account in the name of the broker, or in a fictitious name if the broker is the
holder of a license bearing such fictitious name, as trustee at a bank or other financial
institution not later than three business days following receipt of the funds by the broker or
by the broker’s salesperson. Two of the most common problems related to this regulation
are:
A broker’s failure to designate accounts receiving trust funds as trust fund accounts in
the name of the broker or broker’s DBA as trustee; and
Failure to deposit trust funds received by a broker or broker’s employee into a trust
fund account within three business days of receipt.

Other violations of this section relate to a broker’s use of an improper interest-bearing

account {Regulation 2832 (b)}, a broker’s failure to place checks received from an offeror
into a neutral escrow depository or trust fund account in a timely manner following
acceptance of an offer {Regulations 2832(c & d)} and failure of a broker acting as an
escrow holder in a transaction in which the broker is performing acts for which a real
estate license is required to place trust funds received as required not later than the next
business day following receipt of the funds {Regulation 2832(e)}.
Regulation 2834 - Trust Account Withdrawals
Commissioner’s Regulation 2834(a) states that withdrawals may be made from a trust
fund account of an individual broker only upon the signature of the broker or one or more
of the following persons if specifically authorized in writing by the broker:
An employee of the broker with fidelity bond coverage at least equal to the maximum A
salesperson licensed to the broker.
A person licensed as a broker who has entered into a written agreement pursuant to
Section 2726
with the broker.
An unlicensed amount of trust funds to which the employee has access at any time.
Regulation 2834(b) also states that withdrawals may be made from a trust fund account of
a corporate broker only upon the signature of:
An officer through whom the corporation is licensed pursuant to Section 10158 or
10211 of the Code; or ​
One of the persons enumerated in paragraph (1), (2) or (3) of Regulation 2834(a),
provided that specific authorization in writing is given by the officer through whom
the ,corporation is licensed and the officer is an authorized signatory of the trust fund
 account.

Regulation 2834(c) states that a broker or broker-officer is-responsible or liable for the
handling of trust funds
regardless of the existence of any authorization given regarding signature authority.
The most common violations found in audits related to Regulation 2834 are:
The failure of the broker or designated officer to be a signatory on the trust account,
(this may indicate a supervision problem).
​Presence of an unlicensed signatory on the trust account who does not have fidelity
bond coverage.
Fidelity bond coverage inadequate in amount and/or has a deductible.
The failure of the broker or designated officer to give specific written authorization
permitting a salesperson, broker or unlicensed person to sign on the trust account.

B &. P Code Section 10145/ Regulation 2835 - Commingling

A broker shall not commingle with his or her own money or property the money or
property of others which he or she receives and holds. Common causes of this violation
are the deposit of trust funds received into the broker’s general business account or
maintenance of over $200 in broker funds in a trust account holding trust funds.
A common example of this violation is when a broker deposits credit report fees and/or
appraisal fees received into his or her general bank account instead of a trust account when
he or she has not yet paid the bill. Often, the reason for this violation is that the broker
does not maintain a trust account or the broker was not aware that credit report fees and
appraisal fees are trust funds.
B &. P Code Section 10240 - Written Disclosure Statement
Another often-cited violation is Section 10240 of the code which requires brokers to
provide a borrower with a mortgage loan disclosure statement within three business days
after receipt of a completed loan application or before the borrower becomes obligated on
the note, whichever is earlier. Real estate brokers often fail to provide the Mortgage Loan
Disclosure Statement (Borrower) or, in a federally regulated residential mortgage loan
transaction, fail to comply with Section 10240(c). Other brokers fail to maintain
completed copies for their files.
In conclusion, as you race to keep up with the ever-,changing opportunities that present
themselves in business today, take a moment to stop and ensure that your business is
operating in compliance with these and other important real estate laws.
Note : The content above uses the term columnar on an extended basis referencing a
manual approach to property management accounting and operations. Realistically any
significant property management efforts will entail a software system and maintain
compliance by matching the columnar format within the Trust Accounting routines and
reports. In California and some other states.
The wrong property management software may result in serious penalties and an extensive
ongoing intrusion in your business by a state agency as a result of a non-compliant audit.
It should be apparent that a significant due diligent effort is required when evaluating
property management systems for your office. Verify that the software selected for your
company’s operations does satisfy state and regional mandates and requirements.
Note: Periodically earlier DRE mandates and requirements no longer match the actual
operations in the banking system or other agencies involved in property management. An
example is the DRE requirement B & P Code Section 10148 - Retention of Records states
that a real estate broker shall retain for three years copies of all listings, deposit slips,
canceled checks, trust records, and other documents. Deposit slips and canceled checks
most likely are no longer physical documents. The content of those documents however
are most likely found in various reports within the system.
 CHAPTER 14
Government Entities & Issues in Property Management
Systems

An increasing element confronting both fee property managers and owner/ operators is the
further encroachment of government in the property management industry. Based on the
current economy and the current status of federal and some state agencies, there is a strong
indications that there will be future additions of private property taxation and legislation
directed at investment rental housing and commercial properties.
Property management software developers will be tested as legislators expand both new
Taxation and regulatory controls through out the property management industry. New
taxation requirements and regulatory controls will most likely require new software
routines and system innovations to minimize the administrative costs and time that will be
mandated as part of the future legislative additions.
Note: There is no standard set of system requirements for the inclusion of federal or state
mandated regulations for property management systems although voluntary inclusion for
1099 processing is common for many popular systems.
An example of recent government intrusion is the 2010/2011 California Franchise Tax
Board’s Out of State Owner Withholding Mandates which requires that California Fee
Managers collect funds from the managed properties and then distribute those funds to the
FTB on a quarterly basis. This is done with out compensation or reimbursement for the
additional administrative cost or effort required by this mandate. It is focused on out of
state residents owning California investment properties but not filing California income
taxes.
Another related issue that may be specific to California or other highly regulated states is
the status of regulations that receive a minimum of exposure and enforcement by the
government agency. These regulations tend to establish an aura of ambivalence or lack of
awareness in regards to management initiating and performing the designated
requirements. An appropriate description of the above in my opinion is “stealth law”.
California has a number of regulatory programs that have had a minimum of regulatory
notification and minimal enforcement. Both the FTB Out of State Resident Income
property Withholding mandates and the California 542 1099 requirements are notable in
their lack of government exposure and marginal enforcement.
One result of the above circumstances is a lack of an aggressive software developer
system policy re: future legislative program additions. Another result is that a management
company may determine that they will require extensive administrative efforts to satisfy
the requirements manually or that they can choose to ignore the requirements and possibly
confront the penalties when and if the laws are enforced. Some companies may not even
be aware of the requirements based on a lack of promotion and enforcement of the
“requirement. The California 542 is a prime example. See EDD 542 below.
Due diligence in the evaluation and selection of the system will minimize the likelihood of
acquiring a system lacking in current key government regulations. Federal mandates are
likely to be recognized and implemented in established property management systems.
State mandates and requirements less so, and especially if the software developer resides
in another state or region of the nation. Otherwise the most likely source of program
routines for state requirements would be a systems developer operating in that state.
Another source or influence in promoting the programming of specific state or local
government mandates would be a systems consultant or representative of the system
operating in the state or region where the regulations originate. My company has a number
of times provided state mandates and regulatory details in the past to an out of state/
region systems developer on behalf of our clients.
Only additional due diligence by the potential systems user will establish the likelihood
that a system provides the mandated routines currently or in the future. Note: Get it in
writing! However, for many new prospective users there appears to be an assumption that
any property management system that markets their system is compliant on all
government regulations and mandates. That is not a reality.
Federal, California State, County & Local Laws & Regulations that may be
programmed in some current property Management systems - They include:
Federal – Major Requirements for Property Managers and Owner/ Operators –
1099’s – Owner & Vendors – Tax Info - $600 or more in Gross Income for owners
and $600 or more in payments for non-incorporated vendors –

Note: Some states also require a copy –

1099’s - Owners & Vendors – IRS download requirement – If the management
company or owner/ operator have either 250 or more owners or vendors receiving
1099’s then a special IRS mandated download format is required.

Note: Even though IRS has received downloads from companies in past years there
appears to be no indication of notification of IRS changes in format or procedures until
after the current download is attempted.
IRS Schedule E – Information provided in Year End Income / Profit & Loss /
Operating Statement of – Income / Expenses per Property –
IRS Schedule K – Partnerships – Individual Investor Reports provided in Year End
 Income / Profit & Loss / Operating Statement of – Income / Expenses per Property
calculated by Investor’s percentage of ownership—
Payroll – Federal Income Tax – Social Security – Etc. - A fewhigh end systems
provide a payroll module or an option for payroll processing integration.

Other Federal –
ADA – Americans with Disabilities Act – Originally enacted in 1990 with
extensions in 2008 and 2010, The law prohibits discrimination and ensures equal
opportunity for persons with disabilities in employment, State and local government
services, public accommodations, commercial facilities, and transportation. It has
been a benefit to the disabled while also benefiting some non-disabled attorneys who
seek litigation technical non-compliance of residential and commercial properties in
order to initiate cash settlements in lieu of expensive litigation. No specific mandates
involving property management systems, but maintenance management and
accounting routines would be important in creation of required ADA property
improvements.
Employee Payroll - Withholding Taxes & Liabilities - Included in property
management systems that encompass payroll or systems that allow importing or
integration of payroll transactions. Payroll is one of the more difficult accounting
sub-systems based on all of the government entities and payroll tax changes.
EPA – Environmental Protection Agency – New! – Mandatory RRP Rule
Certification related to lead based paint hazards created by Renovation, Repair and
Painting maintenance – Note: Major fines & possible jail time are associated with the
enforcement of this regulation – Management and owner / operators should verify
and document certification of vendors that may provide Renovation, Repair and
Painting services. - Work order systems and routines may assist in the tracking of
RRP operations.
Fair Housing – Original law was established in 1968. The law was updated and
expanded in 1988.
FTC – Federal Trade Commission - Red Flag Regulation - New law enacted as of
January 1 2011 directed at business practices and providing additional security
procedures directed at Identity Theft. They are extensive and penalties for non-
enforcement are significant. Actual incidents involving customer losses are likely to
result in more serious penalties.
HUD – Department of Housing and Urban Development - The Federal
Department that enforces Fair Housing and HUD rental housing programs, The most
well known program being Section 8. Major urban areas have local Housing
Authorities that are responsible for building and purchasing of HUD properties and
overseeing Section 8 rental operations.
A few developers have provided HUD systems software for HUD properties. The HUD
routines are notable in that they are nothing like traditional private rental housing routines
and associated regulations. HUD properties require additional significant qualification and
many supporting documents. HUD properties only house HUD tenants who must qualify
via HUD qualification rigorous requirements.
Most systems are capable of processing the HUD Section 8 tenants which entails a HUD
payment and a Section 8 tenant payment plus government inspections. HUD generally
supports higher market rents. Section 8 units may be available in SFR’s, condo rentals and
apartments.
OSHA - Occupational Safety & Health Administration - Under the 1970 OSHA
Act, employers are responsible for providing a safe and healthful workplace. OSHA’s
mission is to assure safe and healthful workplaces by setting and enforcing standards,
and by providing training, outreach, education and assistance. Employers must
comply with all applicable OSHA standards.

Note: The term workplace needs to be construed in its most generic form. In Chapter 12
we identified OSHA involvement in an accidental death at a worksite where tree-trimming
was taking place. OSHA had identified a number of OSHA violations during the lengthy
investigation including lack of training and improper use of equipment which was going to
severely impact the landscaping company and the real estate company that owned the
property,
President Executive Order 13224 – Background Checking / Terrorist Screening –
Prohibits Landlords for leasing or renting housing Specially Designated Nationals
(SDN) or Blocked Persons. The Treasury Department’s Office of Foreign Assets
Control (OFAC) maintains the list and must be used by landlords. A landlord that
actually leases or rents to a SDN or Blocked Person is potentially subject to huge
monetary penalties.

Does not appear to be generally acknowledged or rigorously enforced among property

managers or owner/ operators and some companies offering Background / Credit
Checking services. This appears to be another case of “stealth” law.
California State –
California Resident Manager Payroll – Withholding Taxes & Liabilities – With
California law, a manager, janitor, housekeeper, or other responsible person must
reside at a rental complex in which there are 16 or more apartment units - (California
Code of Regulations Title 25, Section 42).

The maximum monthly rent that an owner can charge a resident manager who is required
by law to live on site is 2/3 the value of the unit to the general public. In cases where the
rental value is used by the owner to meet minimum wage requirements or is used as a
credit against wages, the monthly rent as of July 1, 2014, and again on January 1, 2016,
the minimum wage will increase and so too will the lodging credit. Here are the increases:
Minimum Wage Lodging Credit Lodging Credit
(One Person) (Couple)
July 1, 2014 $9 $508.38 $752

Minimum Wage Lodging Credit Lodging Credit
(One Person) (Couple)
Jan 1, 2016 $10 $564.81 $835.49California
Franchise Tax Board – 2010 Out of State Resident Withholding on California
properties – We are aware that only a very small number of property management
systems have been updated to prepare the calculations, and prepare the reports. It is
an unfunded tax collection service provided by property managers on behalf of the
State of California.

It involves quarterly reporting plus funds distribution and for any company managing a
volume of out of state owners it is a significant administrative burden. There are various
indications that some management companies may still be unaware or are ignoring the
mandate. We are also aware that enforcement is marginal.
One of our clients had 30 plus out of state residents and owners of California investment
properties when the law was initiated . Shortly after completion of the first year of
operations the management company received two letters indicating that old forms were
used for those two clients. Actually the same wrong forms were used for all 30 plus
clients.
BRE /DRE – The Department (now Bureau) of Real Estate has auditing and
enforcement responsibilities for real estate brokers and agents active in fee property
management operations and other real estate activities. California has some of the
most robust mandates for fee property management operations. We address many of
those issues in our Chapter / Session 13 of this book. A Power Point seminar is also
available as supplementary instructional content. Most of the book chapters have
Power Point presentations (some need updating) to accommodate additional company
oriented instruction.

Note: Some states require specific certification of property management software for its
use by fee property managers. Two states that have been mentioned in the past as
requiring certification are North Carolina and South Dakota.
EDD 542 – This was a special 1099 type report on vendors designed to notify the
state of a more recent address of fathers and mothers participating in child support
and who may be delinquent in their payments. As soon as the $600 limit is reached
 by a non- incorporated vendor a 1099 type report is to be directed to the state with
possibly an updated address.

This requirement was initiated in 2002-03 with a minimum of exposure and publicity. At
least one California property management software developer however, created a 542
routine update for their system.
Most property managers were either not aware of the requirement or only activated the
542 routine for a year or two based on it’s presence in their system. A lack of initial and
ongoing enforcement and exposure by the state agency seemed to promote a rather
minimal response by the property management companies that were expected to report.
On its face this regulation has good intent. Realistically however, only a very small
percentage of the reports received relate to delinquent Child Support of contractors/
workers. In addition most likely the address provided in the 542 report is old, a P.O. Box
or that of a friend or relative. The agency responsible for collecting and enforcing the state
requirement presumably recognized the shortcomings of the law and established a low
priority for its implementation and ongoing operations.
No initial contact or mailings were directed to the property management businesses or
owner/ operators of investment properties that would presumably be providing the 542
reports. Fee property managers and to a lesser extent owner/ operators, were subject to the
542 regulations. The 542 information was disseminated by CPA’s, consultants, trade
associations and word of mouth. Calls to the agency when answered, tended to promote a
rather casual attitude related to 542 operations and enforcement by the agency and the
reporting companies. Within a couple of years, the interest and involvement of the agency
and the participating companies appeared to end.
The 542 law is still on the books and revisions of the forms have been established as
recently as 2014. The reporting now also includes new employees. I suspect this will be a
surprise to most California fee property managers and owner/ operators. It was a complete
surprise to this author when I attempted to research the California 542 using Google and
discovered a number of recent updated forms.
The current website also indicates that the state is receiving thousands of 542’s each
month. It appears that property managers are not a significant portion of those forms.
California Property Managers seem to be in either a “what’s a 542” or “542’s are no
longer required” status. It is possible we will be hearing more about this regulation
sometime in the future once the state government determines it is generally being ignored
by California property managers. Another concern is that serious enforcement may be
introduced and possibly serious fines and penalties enacted retroactively.
I do not know whether California Fee Property Managers and their lack of attention to the
542 regulations are the norm among businesses in California or unique among business
based on the large numbers of 1099 vendors used in the rental management industry.
Possibly it is a regional issue. Northern California may be participating, Southern
California not so much!
It would be a great deal more efficient for the state to post Child Support slackers and
have companies match their vendors and workers to the list. I believe most companies
would be inclined to support the spouses and kids not getting the Child Support they are
due.
State Board of Equalization Sales Tax - Must be applied on many maintenance
services within a maintenance services profit center/ company. In those cases where
the company acquires materials and products for resale they then must charge sales
tax which is invoiced and collected from the property owner via the rental income
receipts or a separate owner contribution and then distribute the sales tax to the
agency. Some systems have provided the routines to accommodate the extended
requirements of a maintenance profit center and/ or company.

California Regulations & Mandates - Variations and Modifications of Federal Laws

Fair Housing – Federal Law - 7 Protected Classes – Race – Color – National
Heritage –Religion – Gender – Disability – Familial Status ( one or more children
less than 18 years old ) – Original law was established in 1968. The law was updated
and expanded in 1988.
California Law – It’s unlawful for a landlord, managing agent, real estate broker or
Agent to discriminate or harass a person because of the person’s race, color, religion,
sex (including pregnancy, childbirth or medical conditions related to them), as well as
gender and perception of gender), sexual orientation, marital status, national ancestry,
familial s tatus, source of income, or disability. California Law preceded the Federal
Fair Housing Law by a number of years.

The Reality - As a property manager and owner/ operator of a 12 unit property in the
early 80’s my resident manager and I were accused of racial discrimination. The plaintiff
was a single mother and a member of a minority class. She had a boyfriend who was
primarily the cause of the 30 day notice that we finally chose to serve. He often visited
late at night in a very loud vehicle which announced both his arrival and early AM
departure. He also often parked in a non parking location adjacent to the 8 unit building in
which the plaintiff and other tenants, including other minority tenants resided. The other 4
tenants were in small studio type cabins near the 8 units.
I had instructed the resident manager to document the events and occasions when either
the tenant and her guest/ boyfriend ignored and violated the “house rules” and rental
agreement. Verbal complaints were stated by the resident manager and as I recall he had
about 25 pages of documentation re: the unacceptable behaviors. Iin addition he had
written complaints from half of the other tenants, which also include minorities.
We were required to appear at the California State building in downtown San Diego to
respond to her claim. After about two hours in a waiting area we were brought in a room
in front of a small panel of state employees. After the complaint was read we were asked
to respond. It was especially irksome that the plaintiff/ complainant was not present. We
were told she was then in Phoenix.
The detailed documentation and the written complaints from half of the other tenants
seemed to have some import upon the panel. (Most likely none were investment property
owners), but even so a notice of vindication was received about 4 weeks later. As expected
no apology was provided in response to the waste of my time, my resident manager’s time
and the time and cost to California tax payers.
Take note: the whole process appeared as if we were both considered guilty prior to the
hearing. The state panel did not particularly seem pleased (disappointed is a better
description) with our extensive documentation and tenant statements ( especially from
other minority tenants). The documentation was impossible to ignore and supported our
actions. Note: Regarding problem tenants – Document – Document – Document!

The importance of detailed documentation related to tenant issues cannot be stressed

enough. The availability of system routines that can log e-mails, letters, notes, pictures,
phone calls and possibly audio records are a major resource when problem owners, tenants
and vendors are involved and litigation is a distinct possibility.
Discrimination Issues in Advertising and Renting – California-
Advertise – Non-Neutral Statements - i.e. “Great Family Environment” is considered
discriminatory –
Qualify – Background / Credit Checking Procedures - Ignoring sequence of
acceptance would likely be a factor in Fair Housing complaint –
Rental Procedures – Non-Preferential Agreement –
Service – Maintenance – Other Accommodations - No preferential treatment -
HUD - Section 8 Tenants - Non HUD Buildings – In California property owners still
have the right not to accept Section 8 tenants as a right of private ownership –April 4,
2010 – Santa Monica California - “In what was hailed as a victory for landlords, a
state appellate court ruled recently that property owners have the right to not accept
Section 8 vouchers from low-income tenants.”
HUD Buildings – Owned by Feds –Leased to Investors who will acquire ownership
at lease end and reserved for S-8 Tenants –
New Buildings – In some areas, San Diego included, there may be a 10 to 15%
 requirement for designated units to be reserved for S-8 units.

Note: Federal Law and California in the past were in conflict re: Owner Mandates related
to Section 8 Tenants - i.e Federal Law required owners to rent to S-8 Tenants - California
Law allows owner to choose to rent to S- 8 Tenants. I am not aware that this conflict has
been resolved. I suspect it has just been ignored.
Other State & Municipalities –
RUBS - Utility billing - Ratio or Resident Utility Billing System – not a state
mandate or regulation,. but is an accepted practice that can be applied to rental
housing tenants directed to the sharing the cost of cost of utilities, i.e. water, trash ,
etc. on a non- discriminating basis. Each state and municipality sets rules regarding
what criteria can be used for RUBS billing. In general, there are six basic RUBS
formulas used throughout the industry.

A Rubs system can be maintained by an owner/operator , a fee management company or a

RUBS company that provides a complete set of RUBS services including set up and
monthly billing services. Consulting services related to the establishing of a RUBS system
may also be an offering of a RUBS company. Considering California’s 4 year drought
RUBs systems should proliferate over the next decade assuming California Property
Managers and owner/ operators become aware of RUBS and benefits of implementation .
Sales Tax on Rent - Is a requirement on rent and other rental associated items is in
place in a number of states. Well established sales tax states include:
Arizona - Phoenix and Surrounding Communities –sales tax on rent and other
potential rental services - Tucson - sales tax on commercial rent –
Florida - sales tax requirements associated with rental income –
Minnesota – If you own rental property and rent living space to other persons,
youor your managing agent must issue a CRP (Certificate of Rent Paid ) to those
persons if property tax was payable in 2008 on the property, or you were not
required to pay property tax, but you made payments in lieu of property tax –
New York City – New York City’s rental market is very diverse, and includes
many rent regulated and subsidized apartments, as well as unregulated “market-
rate” apartments.
Commercial Rent Tax – This tax is charged to tenants who occupy or use a
property for commercial activity in Manhattan, south of 96th Street. You are
subject to the Commercial Rent Tax if you rent space in this area for any trade,
business, profession, or commercial activity, and if the annual or annualized
gross rent paid is at least $250,000; and no other exemption criteria, such as
short rental periods, residential subtenants, use for theatrical productions, and
not-for-profit status are met Did you get all that?
Other taxes - Other taxes and requirements are present among property management
niches especially in the short term rental categories. Licensing and inspections are
common. State, county and municipal laws should be reviewed before finalizing
operations in the short term rentals niche.
Landlord / Tenant Laws – Generally state laws provide the majority of the laws and
regulations associated with Landlord / Tenant law. They are rather diverse.
Tenant Security Deposits – California State Law mandates that the Security Deposit
refund is to be returned with a disposition on the refund identifying any deductions
from the security deposit within 21 days. California law also dictates the maximum
amount of the security deposit required by the landlord.

Many variations exist among the other states in regards to Landlord / Tenant Laws and
Tenant Security Deposits. The Internet provides a website identifying all of the states
Landlord / Tenant Laws including Tenant Security Deposits. The link follows:
http://www.nolo.com/legal-encyclopedia/state-landlord-tenant-laws -
Apps also exist for both the Apple remote devices and Android devices related to
securitydeposit laws.
Local / City – County Laws Rent Control –Rent Control Boards –
Rent Control -Rent Control Boards - Including Major Cities LA- San Francisco –
Santa Monica – San Diego – New York – San Diego is clear of Rent Control with the
exception of some senior mobile home parks primarily in Oceanside and Escondido.
The last serious effort in establishing Rent Control in San Diego took place in 1980
which was identified as Proposition O.

The other locations above do have rent control operations that are known for a collection
of large and confusing regulations that place significant limitations on the owners of the
properties. A common claim by property owners is that the regulations tend to discourage
property maintenance and upgrades on the multi-unit residential properties. Supporters of
Rent Control maintain that it limits exorbitant rent and rent increases.
One of the key issues related to Rent Control is that it is a regional / municipal based
tenant oriented regulatory set of procedures. Future rent control mandates will most likely
be more complicated and more difficult to manage and maintain. In some locations there
are claims that rent control regulations are reducing the number of rental housing units, i.e.
San Francisco, based on extensive anti-property owned mandates and restrictions.
San Diego - Specific Municipal Housing and Zoning l Laws -
Dormitory SFR Restrictions – San Diego –
In a relatively recent action the San Diego City Council enacted building restrictions
limiting modifications directed at increasing the number of bedrooms and parking on
 single family residences near San Diego State University. Conversions prior to the
restrictions were converting many SFR homes to dormitories creating major changes
and problems in the community. Issues of special note included parking, noise and
trash. Local residents complained that the community was no longer family oriented.
San Diego Short Term Rentals - This is a current issue generally in the beach areas,
San Diego Gas Lamp area, and Del Mar based on rentals involving weekly tenants
and their loud parties and activities contrary to a family oriented community.
A relatively new Internet oriented short term property management company out of
San Francisco has entered the short term market focusing on high end SFR’s and
condos. They are offering STR’s in 190 countries and major cities in the US. The
company (Airbnb) markets their services via an informative and innovative web site
portal.
They recently agreed to collect San Diego sales tax as part of the negotiations
associated with the special issues that are part of their operations. They are impacting
established STR companies based on their sophisticated website portal features and
operations. Owners who choose to host sign up and provide information about the
property and its attractions via the web site.
Most likely new regulations and new enforcement operations will be enacted this
coming year. Some of the issues duplicate those in the San Diego State University
locale; noise, overcrowding, trash, and excessive partying.
Zoning -Some of the local communities maintain zoning restrictions which limit
mixing of property types, sizes of properties and number of units based on parcel
size. In addition parking requirements are based on the number of units and
bedrooms. Other communities have minimal zoning which tends to create a muddle
of property types involving major differences in appearance, tenants and uses.
San Diego “Just Cause” - 60 Day Notice – Law requires explanation as to the “cause”
justifying tenants receiving a 60 day notice. Resident managers, owner/ operators and
some tenants are reluctant to initiate or support a 60 day notice based on their
personal wellbeing, and threats from the tenant(s) being served with a notice.
San Diego 3 Day – Pay Rent Or Quit – 14 Point Font - The 3 day notice require the
phrase “Pay Rent or Quit “ in a minimum 14 point font.
San Diego Case Law - Pet Deposits - A separate Pet Deposit Agreement may entail
separate judicial review of the potential review. The original case involved a tenant
who claimed that he was responsible for the damage to his apartment and not his dog.
The management company initiated charges against both the Tenants Security
Deposit and the Pet Deposit and acquired the funds from both deposits. The judge
agreed that the Pet Deposit was incorrectly acquired and was to be returned to the
tenant and in addition declared a penalty 3 times the amount of the Pet Deposit.

Note: Information provided by a local attorney at a San Diego County Apartment

Association legal update presentation.
Health & Welfare –
”Jacuzzi Law” – Special Jacuzzi safety features that are required to minimize the
potential of hair being caught in the drain.
Mold and Lead laws – Mold has been a somewhat recent issue of primary interest to
tenants and attorneys and a major concern of property managers. A more recent set of
regulations and penalties for OSHA non-compliance is that of the RRP Rule
Certification for disturbed Lead Paint surfaces. These issues have been identified
earlier in Chapter 12.
Carbon Monoxide Detectors – Various state laws are in place in regarding to the use
and placement of these devices. California has mandatory placement of one or more
detectors for all housing units including SFR’s.

Note: Information provided by local attorney at an SDCAA legal update presentation.

Note: By no means are the laws, mandates and regulations above anywhere near a
complete list. The content above primarily serves to indicate a sample of government
requirements and regulations currently in force. This chapter primarily documents San
Diego County, and California plus includes some other better known state and city
regulations .
Note: SDCAA appears to maintain an extensive list of rental property forms approved by
California Apartment Association lawyers which are updated periodically.
Well defined and enforced regulations will usually be recognized and converted to systems
routines by the major national property management systems developers. Less defined,
exposed and enforced regulations are likely to receive a lesser response. In any case, the
current economy and some government entities are more likely to be providing new
mandates and regulations for the property management industry and business in general.
Other states, not so much.
As indicated above acknowledgement and enforcement of many of the laws is marginal
and only acted upon based on a complaint. The complaint however, whether by a citizen
actually effected by the law or a lawyer attempting to extort based on a technical violation
can generate actions resulting in major company disruptions, business losses and even
bankruptcy plus cessation of the business.
Property Management companies and owner/ operators must maintain awareness of the
current laws and the new laws in order to appropriately satisfy their mandates and avoid
the significant costs of non-compliance. Further improvement of systems can play an
important role in maintaining compliance and reducing operations cost.
It is recommended that the regulations and mandates for your state, county and the
municipality’s in which your company manages properties or as an owner/ operator be
available in hard copy and/ or a computer file for staff review. As indicated elsewhere in
this book we highly recommend association with a trade association specializing in the
management of property types including the niches being managed. Trade association’s
are a major source of the education and information re: the government mandates
regulations that must be implemented and maintained .
 CHAPTER 15
Evaluation & Selection of Property Management Software

Top Ten Concerns

Our company’s specialized and lengthy experience in providing software, training and
support for property managers and owner-operators in Southern California and the
Southwest is often the basis for general questions related to evaluation of other fee
management and owner/ operator management software. Key questions from past and
current property management clientele and new property manager contacts is often
focused on recommendations related to the who and what of acquiring property
management software.
The following observations and recommendations relate to the search, evaluation and
selection of prospective property management systems. Special emphasis should be
applied to the initial steps since they provide the foundation for successful selection and
implementation. Too often minimal time and effort is spent on proper preparation resulting
in a poor to disastrous selection, which for some management companies has necessitated
the replacement of the software based on BRE/DRE mandate, lack of systems training and
support and /or software “not ready for prime time”. The steps in making a selection
should include:
1) Prepare a list of “must haves”, “ nice to have” requirements and a budget
estimatefor the program, training and support. The list should include a solid set of
accounting, regional and technological requirements appropriately matched to either
fee management or owner/ operator current and potential future operations. The
availability of both a “standalone” version (runs on users PC / network) and an “on-line
hosted” version of the system provides additional options / alternatives to match to the
users needs. See Chapter 9 re: standalone & On-line systems.
Establishing requirements should probably begin with the following company inquiries
regarding current management operations, its inefficiencies and shortcomings :
Fee management (usually requires real estate broker or agent status) or
owner/operator operations? The list should include a solid set of accounting, regional
and technological requirements appropriately matched to either fee management or
owner/operator current and potential future operations.
Type of property(s) Residential management is usually the starting option for most
fee property and owner/ operator managers. Other niche management operations
usually requires additional training and/ or experience to create most other niche
management scenarios. Some niche management may require additional systems
 capabilities based on their special requirements. – see niche management – chapter 8.
The number of properties and units? A start up or small portfolio would normally
entail a smaller budget. Some systems however, require higher costs that are difficult
to justify for small portfolios especially for an on-line system requiring ongoing
monthly or annual fees.
Usually the upfront cash or financing available for a standalone system may be
significantly greater than the start up costs for an on-line system. It is important to
understand however, that the on-line system costs will tend to be a constant for the
life of the system with the exception of cost increases based on company growth
(more units, additional niche management requirements, major new technology, etc.).
We provide additional details re: pricing issues in item #7 of the 10 concerns in this
chapter.

Most developers do not provide both standalone and on-line systems with similar features
which tends to negate meaningful financial analysis comparison. Generally as mentioned
earlier the newest systems tend to be on-line systems only. In five years are you still going
to be satisfied with your monthly fees? It is likely a standalone user may at the end of five
years paid only half of the costs of the on-line user or less. The on-line user however, may
have a few additional mobile options.
I know of at least one developer that does provide the ability to compare the two costs. In
general that system usually provides calculations which indicates the costs of the two
comparable usually match within two years. At that point the on-line costs continue while
the standalone system costs are reduced to upgrades and general support which are a
percentage annually of the software costs.
Note: Budgets may limit some systems from serious review and will depend on the pricing
and cost structures that are present within the system products and services being
reviewed. Do not be surprised by the major variations in pricing, features, and support and
training services as you begin an evaluation process. As indicated elsewhere there are well
over a 100 property management systems that are being marketed. Most likely a proper
evaluation would most likely reduce that number to ten or less.
Location of properties, state and municipality, plus the mandates and special
requirements associated with that state and the local area.

Note: A common mistake is the assumption that most/ all property management systems
include the necessary routines to satisfy the varied and special requirements of state and/
or regional government. They don’t! The various state BRE/DRE/ consumer agencies vary
greatly in the extent and procedural requirements to satisfy BRE/DRE / consumer
compliances in the states where they exist. Some states apply sales tax to rental income
which may entail lengthy sales tax routines based on the number of tax authorities, (city or
county of property to be taxed) and the rental charges/ receipts to be taxed. Three states
have rental sales taxes; Arizona, Florida and Minnesota. We identify other key Federal,
state and regional (county – municipality) mandates and regulations in Chapter 14.
Note: A number of years ago my company assisted a fee manager in Arizona in setting up
the sales tax for her operations which included Phoenix and four nearby communities.
Based on the different tax authorities requirements involving the various added rental
items that were taxable, (garages, parking, storage, etc.) a total of more than 20 separate
sales tax settings distributed among the 5 communities and their tax authorities.
Other interesting variations relating to property management operations is that two states
have no licensing or even certification requirements for the practice of fee property
management. The two states are Idaho and Maine. Let me further validate my statement. A
national NARPM officer who spoke at the San Diego NARPM meeting a few years ago
stated the following at the beginning of his presentation: “In Idaho there are only 3 things
that are necessary to be a property manager; they are a truck, a dog and a rifle rack.”
Obviously Idaho government regulations are a major contrast compared to California
mandates and regulations.
BRE/ DRE requirements and State Tenant –Landlord laws are also varied and volatile
requiring additional program routines to handle the variations. It is important to
understand the special issues that relate to the state(s) / regions your company is operating
in and the appropriate due diligence preparation in order to match those requirements.
Some of the software marketing and advertising however, tends to promote the somewhat
utopian view that “one size fits all”. The advertising and the associated products receive
an additional inappropriate benefit when they appear in magazines whose audience may
have more specific requirements and /or higher standards, i.e. for fee property managers.
The recipients/ readers of the magazines may assume some additional level of credibility /
certification when none exists. The traditional caveat, “Buyer Beware” should be
emphasized. The requirements list that has been created in Step 1 above will then provide
an agenda for the questions to be asked during the software presentations / reviews to
follow.
2) Obtain referrals in that they are important “second opinions’ derived from current
users, trade associations and other sources that have some awareness of the program,
developer and or dealer. Referrals may shortcut the search for programs and developers
/ dealers of interest as compared to searching the Internet which may provide thousands
of property management software hits many of which are not worth your time to
investigate.
Referrals however, need to be qualified in that the source of the referral needs to be aware
of, or working with software that has the same generalized requirements as the company
requesting the referral. Popular programs may be referred / recommended even when the
program does not match the potential user’s actual requirements, creating a mismatch of
capacity, capabilities, and /or cost. This scenario is often associated with the element of
“Branding”.
We have observed a number of times where well known systems have been chosen for
implementation even when the most basic evaluation of the software does not match up to
the requirements of the user. “Branding” inevitably entails greater costs for systems with
significantly greater capabilities then those needed. Branding is also a factor when a once
popular system undergoes major financial and/ or product development issues that may
significantly effect the future of the developer and its products. The popularity of the
“Brand” carries on to the general public while some negative issues may only be known to
consultants and specialists associated with the industry.
Lack of due diligence in the evaluation of the software and its developer are the major
factors in “Branding” type acquisitions. The inappropriate recommendation unfortunately
may take precedence over a proper investigation when abetted by a sales person willing to
take advantage of an uninformed prospect. Two specific instances of “Branding” and
inappropriate acquisitions we have observed as a result of training inquiries/ requests
received after the systems were acquired. The circumstances follow:
An owner of a small office property acquired a 2 user system at about $1400 a year to
“manage and account” for the 14 units in the building. When asked if additional
properties were likely to be added, it was indicated that none were planned at that
time. The user’s basic requirements could have been satisfied with a one time
purchase of a $500 or less program capable of managing and accounting for that
property. No BRE/DRE requirements were necessary since it was an owner/ operated
property.
A property management company acquired a $2100 a year system to manage and
account for properties which totaled about 3000 units. However, they were not
interested in detailed receipts, tenant ledgers, work orders and most of the many basic
and advanced capabilities of the system. An alternative program would have had a
one time purchase cost of less than a $1000 and minor annual support/ upgrade costs.
It was non-compliant, but it would have accomplished the tasks they had decided
they needed.
It also appeared that their limited accounting approach would not provide California
DRE compliance. To satisfy the DRE they would have to account for the detail
receipt and payable transactions that the 3000 units generates. The software they
acquired is DRE compliant, but management had decided to extend their traditional
“we have always done it that way” with software that would allow them to become
compliant if and when they ever decided to do so.
Meanwhile, they are one call away from a BRE/ DRE audit that would be a disaster.
In both cases management in effect is acquiring a Cadillac/ Mercedes / Lexus when a
golf cart would suffice. In both cases the “Brand” acquisition was enabled via an
 overzealous developer sales staff with integrity issues and a complete lack of due
diligence on management’s part in acquiring the system for their company.
We are aware of other major product sales for minor portfolio clients including that
of a “brand” system that was sold, but training /support withheld 4 months by the
developer. Their client contacted my office because Christmas was not when they
wanted to implement their system. We suggested they return the system to either get
their money back or at least get the training/support when they wanted it. It is
amazing what some sales people get away with.

In any evaluation of property management systems an appropriate due diligence effort

should neutralize or at least minimize the element of branding. Our experience and
observations however, have too often identified the “brand” of a system was the only
element in play in regards to a system selection. Too often the system involved pricing
way beyond actual requirements. Too often the brand was acquired as a result of
popularity no longer based on the developers actual financial status / stability / market
focus / or quality of service or support of the current product.
The “brand” remains but the contents change. GM no longer makes Pontiacs or
Oldsmobiles. Investors were dumped in the GM bankruptcy and the UAW acquired equity
in the company. The changes effected investors, dealers and GM owners, especially
Pontiac and Oldsmobile owners. Pontiac and Oldsmobile owners became orphans to some
degree in that many of the dealers shut their doors. Union members however, gained
equity in GM. The government changed the bankruptcy rules to accommodate the UAW.
A basic redistribution of income event.
Using brand as a key element in the selection of a property management system without
due diligence will likely create an overpriced, overpowered and underutilized system, or a
system with multiple issues including current support and questionable future. “Brand “
may also suggest more capabilities then the system actually provides. The “brand” may be
an excellent selection for the management company or owner/ operator, but serious due
diligence is still required in order to validate that the brand system is a good if not the best
choice.
This is t a scenario that not only relates to fee property managers and owner/ operators. It
unfortunately also relates to professionals who may be of influence to the principal(s)
making the decision of a system. This could include authors, CPAs and other property
manager with influence among their peers,
The author may be recommending a number of particular products based on his prior
authored recommendations without validating the current status, limitations and pricing
that may now be a major factor related to those products, The CPA may be of the belief
that any business can’t be wrong in using QuickBooks for its accounting services and the
CPA for his/ her expertise with QuickBooks. A property manager may be generating a
referral on a brand based on a popular (but obsolete) product and limited or no experience
on current products.
3) Review the program. This could be done by installing and then reviewing the system
using a demonstration version of the program. A more detailed presentation of the
program may be available at a scheduled live demonstration of the program or possibly
over the Internet provided by the developer / dealer. Both reviews are preferred. Look
for ease of use, required and enhanced functions. Examine the help routines and
tutorials, reports and presence of current technology.
Note: Ease of use is often apparent in a basic, minimal features program.
4) Check on the history of upgrades and feature improvements of the program.
Developers vary significantly in their policies and performance related to upgrades.
This is an important issue if the user intends to maintain a competitive edge and
lengthen the life of the software. Some well known developers in recent years have
received deserved criticism for their lack of upgrades and enhancements while still
requiring hefty annual renewal fees.
An additional element relates to the history of the developer. A developer with an
extended history of development most likely will have had the opportunity to create
additional features, innovation and use of technology. A number of the most popular
property management systems developers were begun in the 1980’s and still offer
extensive full featured product lines. Other popular systems may have less of a history but
share their popularity to some degree based on a huge marketing budget.
5) Evaluate the add-ons, modules, and integration abilities of the program. Many
specialized property management routines / enhancements of value currently are being
offered by other developers. They can be implemented much easier if the main
program design is integration oriented. This basically applies to 2 options. They are:
Import & export routines - This entails the ability to use formats which allow special
formats, (spreadsheet usually – comma separated value – csv – is common) and
others to bring data into the system without manual data entry. Exporting allows data
to be moved into other programs or support routines. An example would be exporting
vacant unit information into an interactive website or portal.
A relatively new concept appearing in the property management systems environs is
API, (application programming interface) which is a set of routines, protocols, and
tools for building software applications emphasizing the ability to customize current
programming and to integrate with other routines and programming functions.

6) Consider growth and expandability. What financial and systems issues are activated
when it is necessary to expand / upgrade the program? Consider costs and ease of
implementation. Evaluate past history of innovation and upgrades. This may provide a
competitive edge and extend the life of the program.
7) Review the pricing, policies and alternatives. Is the program for sale, lease or both.
The developer /dealer may have additional financial options and resources to assist in
program / training and support acquisition. Some leasing programs are designed to
discourage the purchase of the software and to encourage leasing of overpriced
software. A weak, minimal upgrade policy just decreases the cost to value ratio while
shortening the life and usability of the software.
Generally pricing will entail two significantly different options. They include:
Standalone systems entail a purchase of the license(s) and then an annual support and
upgrade fee. Normally a license is required for the system whatever the
configuration, i.e number of users , modules, addons. One company modified their
license definition from that of a PC to that of each login user. Another less popular
pricing method is an annual payment.
On-line systems are generally priced on a monthly basis based on number of users
and or units. Often an annual payment with a small discount is available. For many
prospective the on-line pricing is immediately more attractive based on the
significantly lower start up costs and monthly costs. They should be aware that over
the life of the system they may pay for an on-line system 4 or 5 times the cost of a
standalone system. Generally this is difficult to calculate in that very few developers
offer both a comparable standalone and on-line system to make a financial
comparison.
A less popular payment method for a somewhat popular standalone system from a
‘brand” developer entails annual payments per licensed user. This option became less
popular partly based on the lack of upgrades that appeared about 5 years after its
release. Some companies were especially irked when one “upgrade” re-established
users as an individual login. Prior to that “upgrade’ a user was a PC that supported
multiple logins.
Note: I recall one broker / property manager initiating a 30 minute rant when he
discovered that the ‘upgrade’ in his case would entail 2 more license fees with no
increases in his equipment. He had established 2 additional part time logins on one
system.
I believe the pricing arrangements for this system took full advantage of their :brand:
status. In addition this system was already 4 years old when it was re-marketed and
re-priced after an unsuccessful sales effort of a high priced system focused on a very
popular prior low to midsize product of theirs. The pricing was too high to acquire a
system that provided an expansion of users, but not much else.
Once the developer acquired brand status I was bothered by the number of systems to
new customers that were being sold that would not have been approved by the
company president. It was apparent that due diligence was not a factor present in the
customer’s decision, but I expected a better match up of requirements from the sales
staff.
A few financial companies offer financing which provides leasing or lease purchase of a
standalone system which may be an attractive option in lieu of using company capital for a
purchase. Another option that may be applicable to both standalone and on-line users is
the use of management bank trust account balances, (non-interest bearing ) and reserve
analysis to fund a lease purchase or the monthly on-line fees.
I am aware of a very small number of banks in San Diego County that have provided
various programs using reserve analysis for their property management customers. I
cannot address the availability of the reserve analysis service for other regions or states. It
can be a major factor in regards to reducing management expenses associated with
accounting operations, services and supplies. I have matched up a number of management
companies to a local bank providing an unusually aggressive bank reserve analysis
program.
8) Evaluate the Training and Support options for your company. They will play a
very large role in establishing a successful implementation plan. Training and Support
that is available from out of state may entail additional cost and time limitations.
Availability of local support and training may be of special interest to some users. Are
phone and e-mail support the only support options? Internet based desktop support
(GoToMeeting and GoToWebinar) training is becoming a practical alternative to
traditional training and support techniques. Some systems developers offer both
independent and tutored systems training and support. Independent study may consist
of systems videos, blogs/ white papers and forums. Developers that provide a strong set
of training and support resources provide additional value to their products.
Bundling (pay for training and support at the same time the software is acquired) may
provide some cost savings and often aids in the planning and implementation efforts. Well
written and detailed documentation accessibility is important during implementation and
in assisting new staff in working with the system later. Bundling appears somewhat less
popular currently. It appears more often that the general training and support is part of the
system package. Additional training and support may be available but is present as a
second set of services.
Some prospective users may be inclined to “go it alone”. Assuming no limits on time and
the prospective user has prior experience and knowledge in systems and accounting, an all
independent study effort may be an acceptable option. However, for most property
managers and owner/ operators time is limited and experience and knowledge is possibly
lacking. An established implementation program option offered by the developer or
consultants specializing in that system will normally provide significant time and cost
savings. In addition ongoing training options are important. Staff changes and availability
of new and advanced features, should mandate periodic training to maximize payback and
productivity.
9) Other developer issues that are of concern include the developers financial stability,
 future viability and the developers targeted market. Over the years we have seen a
number of users that gave up on their software based on the developer leaving the
business and abandoning the users. We have also seen companies with a national
presence refocus their efforts on a different market and no longer matching original
long time customers market focus. We have also observed developer financial failures
including Chapter 11, resulting in abandonment of support, upgrades / and new
products for their clientele.
10) Do not underestimate the importance of innovations and technology. Properly
designed And implemented innovations and technology will translate into labor
reduction, increased services, lower costs and an improved bottom line. Innovation
would generally be defined as programming techniques that allow increases in
accuracy, productivity and security. Innovation and technology both should be
considered as “force multipliers”. They also promote growth in an increasingly
competitive industry. They are however, somewhat of a lesser value for fee managers
with smaller portfolios since many innovations and technology are most effective
operating with higher volumes of properties, units, tenants and or owners.
Systems should be thought of as more than just the software. Systems should be
considered as encompassing the software, the required hardware, staff and the procedures
required to accomplish the necessary operations and results. The proper software however,
allows all of the system components to be elevated to new levels of innovation, service,
and productivity. Make your choice carefully and your company, your clients and your
tenants will benefit greatly.
We must recognize and understand that property management systems are an integral part
of the ever changing world of business technology. In a short period of time a company
can become a major player, which a few have, or find itself in bankruptcy court. The
companies that develop the systems may establish a business plan that is based on
focusing and maintaining multiple products and services for the property management
industry, or modify their focus to provide new products and services for multiple markets.
One popular California for a number of their early years identified their goal to create
additional applications other than property management, (“not necessarily real estate”) on
their website. They have developed a system for the legal industry and support application
for tenants marketing . So far their interest in other applications has not appeared to effect
the sales of their on-line system.
We have identified in an earlier chapter that a newer on-line system advertised in the
NARPM national magazine “Everything a property manager needs” and exhibited at the
CALNARPM conference a few years ago when they were not aware of the California
DRE mandates related to Trust Accounting and obviously were not compliant.
A more recent situation involves an East coast developer that replied to my inquiry re:
California BRE/ DRE Trust Accounting. They said the following: The system “ is not
state specific, seeing as the software is used nationwide.” My inquiry was based on a
former user’s critique which mentioned the software not conforming to state mandated
report requirements. That sounded like Trust Accounting report issues and their reply
seems to reinforce that they are not compliant even though “the software is used
nationwide.” Recent information indicated they have attempted to become compliant with
efforts to introduce Trust Accounting. I have not verified that they are compliant, but do
believe they have attempted to become compliant. Without knowing the sources that they
used to program the Trust Account routines and reports I maintain my doubts.
Note: Much of the above content was authored by me and published in NARPM’s
National Magazine in May 2008 under the title of “Shopping For Software”.
 CHAPTER 16
Property Management Systems Management – Management
Must Manage

Mary Boone is president of Boone Associates, a business consulting firm located in

Norwalk, Connecticut. She coaches, consults and speaks, to individuals and organizations
about how they can improve their business performance through innovative approaches to
communication and collaboration. She is also an author of a number of business oriented
books and over a hundred articles.
Over twenty years ago Mary Boone identified in her book “Leadership and the Computer”
(1993) the importance of management’s need to establish a leadership role regarding
computers in their companies. She focused her attention on the Fortune 500 and most
large companies have taken those recommendations seriously. Most of those companies
now have significant numbers of mid-level managers heavily committed to managing the
major departments and their systems throughout those companies.
It is also clear that a significant number of the “500” and the “100’ are also companies that
are computer / software based companies and their senior management in the past
established a lead role in their company and their industries. Steve Jobs of Apple Inc. , Bill
Gates of Microsoft, and Tom Watson Jr. of IBM Corporation, etc. led their companies and
their industries in the development of innovations and technology that has changed our
world.
However, in contrast our experience with the small business elements of the Property
Management Industry often find management, i.e. the broker, principals, owner- operators
of multiple properties, tend to provide limited guidance and leadership related to their
computer systems within their business’s. They primarily perceive themselves as
marketing/ sales oriented management and managers of staff, not systems managers.
Many or most do not consider Systems Management as a key element of their
management responsibilities. Many small business managers are struggling with Systems
Management as a concept and it’s reality.
At this point repeating a definition of a system may be quite helpful.. A system in our
context is the combination of equipment, software, staff, and procedures directed at
preparing a specific set of results. To qualify further we would also identify the results
should be accurate, cost effective, and timely.
Mary Boone points out that the need for and the benefits of executive leadership include
the following:
 Leveraging of time –
Improvements in System Communication and Business Knowledge –
Increasing the coaching and guidance activities and also the frequency of
management participation throughout the automated portion of business planning and
operations will generally provide improvements in productivity and possible
increases in income plus reductions in operating costs –

Creating and maintaining a technology oriented culture with emphasis on innovation

enhances almost all facets of company operations – Obviously a strong ongoing systems
leadership effort is being proposed. This approach is contrary to an established and
popular phrase of a well known clothing company which is “Lead, follow or get out of the
way”. In a small company the only real choice is for management is to lead. Allowing
staff to assume the major leadership role will traditionally result in one of the following
scenarios. We have observed all three of these situations occasionally in the past among
our clientele.
A hard charging, knowledgeable staff leader may provide a majority of good results,
but the system including staff becomes his/ her fiefdom and management becomes
irrelevant. In addition the loss of the staff leader creates a major disaster for
management and staff and sets the stage for an extended period of angst and anarchy
and all too often an increase in errors and delays in production. .
In a small company a likely scenario is that of a marginal staff person dedicated to
their payroll check, the clock and the status quo, assumes the role of managing the
system. They will avoid challenges, controversy, and competition. Their operating
motto is “ We have always done it this way” with the hope and intention of “this
way” not changing until after they retire. A common characteristic is that systems
security tends to be diminished and the staffer is likely to defend his/ her turf
vigorously. An exaggeration possibly, but most managers/ principals could certainly
identify the descriptions above with a number of current or past employees.
A third scenario and potentially the most devastating is that of an aggressive staff
person with evil intent who may initiate illegal actions creating multiple major and/or
minor transgressions involving embezzlement/ scams involving bank account
balances, tenant deposits, vendor and / or owner payments. End results could include:
bankruptcy, BRE/ DRE audit/ broker license restrictions, company failure, etc. The
staff person’s motivation often results from gambling, drugs, or other addiction /
financial issues which appear to be solved by the availability of an “open and
unsupervised checkbook” environment within the property management operations.

Note: Niche property management operations may in some cases provide a number of
additional opportunities for embezzlements and scams. Larger and long term bank
balances and deposits are factors of both HOA and short term rentals operations and have
been identified and targeted as embezzlement opportunities. Cash is often a readily used
payment option in some niche operations requiring additional procedures to minimize cash
receipt losses.
This situation is much more common than most brokers/principals are likely to believe. It
is not a situation that most brokers would be inclined to share or discuss among their peers
and therefore tends not to be recognized as often as this scenario actually exists. As a
result of my company’s many diversified systems services we have had special insights to
the circumstances and results of a number of actual fore-mentioned disasters. These
experiences are the basis of a number of our past Live and On-Line Seminars plus one of
our chapters. They include the following:
Dealing with Disasters –
Protect Your Assets – i.e. Systems Security -
Property Management Systems and the DRE –

As indicated above our extended experience with hundreds of Property Management

Companies has identified that far too often management is not actively involved in the
management of their system. In this respect they are decades behind in current
management philosophy and system operations. The Fortune 500 company’s management
accept and know that technology is to a great extent behind the ongoing increases in
productivity and the competitive edge they have acquired. The company’s IT Department
and its management are now an integral part of each company and are responsible for the
ongoing development and maintenance of the system(s) and ongoing improvements in
productivity in most if not all departments. .
This was not always the case. Senior management in decades past questioned the
conversion of various departments with staff that used calculators and typewriters, then
accounting machines and even later computers. Their doubts were also displayed in their
continued dictation of their letters and memos to their secretaries in lieu of their use of a
computer keyboard and word processing.
The accounting machines era is generally identified beginning in the 1890’s when Herman
Hollerith convinced the US Government to use his equipment for the 1890’s US Census.
Herman later merged his company with Thomas J Watson who later renamed the company
International Business Machines Corporation which became one of the world’s best
known companies. IBM accounting machines and their punched cards were the face of
automation from the 1920’s into the 60’s.
Most likely one of the first and most famous of those conversions is one that actually took
place in the late 1950’s in the IBM Corporation. Thomas Watson Senior, President and
Chairman of the Board of IBM disagreed with Thomas Watson Junior (future President
and Chairman of the Board) about the future relevance of computers. Thomas Junior’s
position on computers ultimately led IBM to the position of the major computer
manufacturer in the 60’s, 70’s and 80’s. It also led unfortunately, to Federal anti-trust
litigation during the “60’s” based on IBM’s success and some of their marketing policies.
Note: Generally the Federal anti trust litigation was based on IBM’s policy of renting /
leasing its hardware in lieu of selling it. (They preferred recurring income to one time
sales income. Does that sound familiar?) The courts mandated an end to that policy and
required IBM to sell or lease to customers and 3rd parties. A number of companies then
began to buy systems and lease them to companies who chose to use IBM Systems based
on IBM’s dominance of the systems market. Note: (Google “IBM and the seven dwarfs”
for details at that time on IBM’s competition).
An indication of how right and wrong Tom Junior’s position was, is identified in the
original plans for an expected manufacturing run of 50 of IBM’s first commercial
computer which was the IBM 650. The actual production line finally shut down after 1250
IBM 650’s were produced and shipped; a factor of 25 times more then the original planned
production run.
During the last of the 650 production cycle IBM initiated their second generation which
introduced transistors designed by AT&T. Replacing the vacuum tubes with transistors
initiated the long trend of miniaturization of computers. IBM’s third generation continued
their dominance of systems and the miniaturization of systems.
Even after that conflict was resolved in favor of computers a carryover from the
accounting machines era, the punched card , was still in use well into the 1970’s which
meant that that one of the most basic components of automation had an active life of
almost 80 years. Most observers would agree the long life of punched cards was an
interesting anomaly in the history of automation. Punched cards were a significant profit
center for IBM and a key factor in their extended existence. The punched card and the
devices that could read the cards were an interesting combination of change, continuity
and innovation within the spectrum of automation.
The point to be made is that automation for the most part equates to change and is an
ongoing issue throughout our society. Books and magazine articles are being published on
change, and the subject is often discussed on various TV programs. Currently books,
magazines and newspapers are experiencing change from traditional mediums to E-books
while magazines and newspapers are now available via the Internet on PC’s, SmartPhones
and Tablets. Change is often problematic and automation is only one facet of change. Our
current political environment certainly highlights that statement.
In the mid 60’s I attended an IBM inventory / automation workshop in Chicago. During
the workshop the attendees saw a demonstration of equipment that involved the reading
and interpretation of bar codes. It was an innovative solution to controlling and
minimizing the cost of inventory and retail purchase operations.. It wasn’t until the mid
80’s that the bar codes and the bar code readers began to appear in the larger retail stores.
In the interim 20 years the bar code automation was an innovation challenged by unions,
many legislators and to some extent the public significantly extending the delay of its
introduction to our society. Today it is a mainstay in retail operations and is an important
factor in reducing the costs of inventory control and point of sales. .
Another example of delayed development and implementation is the ATM. As manager of
systems and programming for a local multi branch bank I was present at early
demonstration of the ATM held in downtown San Diego. It took place in the early 70’s.
The original patents were established in the 1960’s. and US implementation began in the
mid 70’s and took place for about 10 years prior to almost universal bank installations.
Those examples of 20 year gestation periods are probably the exception in the world of
technology today. Technology appears to be moving much faster as a result of increased
Internet and media exposure, competition and our young people. Hi-tech successful items
are quickly inundated with proxies which usually have a few more features and lower
costs. A prominent example is the category of communications technology identified as
“SmartPhones”. All of the factors relating to the faster integration of “SmartPhones” are in
play. They are not only a consumer item they are also finding a place in the property
management industry.
The above information does serve a purpose. In the last decade young people led the way
in the acceptance of technology involving communication devices and techniques. They
are the “market’ in re: to the major increase in devices, “APP” and social media. As staff
members they may be excellent candidates to act as project leaders for the implementation
of the advanced features and technology that are available in current property management
systems.
The key is promoting change and motivating others to accept change is to promote its
positive results. This is one of the most important responsibilities of senior management
and tends to be one of the most common shortcomings among the small to mid size
property management companies confronting increased automation. If management is not
knowledgeable of the current system or the future system and its innovations and
technology it is impossible for management to provide the leadership to promote and
manage the system.
Small business is still struggling with Systems Management as a concept. In many cases
systems management consists of a senior staffer who has longevity in the company and
minimum skills and training related to the management of a system. Often the basic
mantra of this staffer and his/her associates is that of minimizing change and “don’t rock
the boat”. Their orientation is that of continuity of production and operations and not of
improvement. This is not a business philosophy conducive to managing technology and
the people heavily involved with it. Grouping however, the innovations and technology to
the use of Smartphones and tablets may be a means to accelerate staff into an improved
level of acceptance of the systems innovation and technology.
I do not deny some senior staffers have extended skills and experience in various
supplementary skills, i.e. accounting, which could be argued as an important skill /
expertise contrary to the innovation, goal orientation and “what if” thinking required in
systems management. (Basic accounting concepts were developed at about the time of
Columbus’s voyages). They are important but innovation in accounting is not a preferred
concept. GAAP, (General Accepted Accounting Principles) is an accepted standard and
should be maintained.
Another skill and extended experience present in some millennials is that of the use of
SmartPhones and tablets. They are aware of Apps and their acquisition plus the dexterity
to use them. The ability to work well with these devices is an important skill in beginning
the transition to mobile operations.
However, prior to moving into to mobile operations in the field management and staff
must be comfortable in the use of the basic functions of the system and have moved on
into use or at least awareness of many of the advanced features of the system. In too many
of the property management companies we service we see a lack of management
awareness and a major lack of involvement in the system that is capable of automating
almost all of the traditional operations of property management. Going mobile is a new set
of capabilities and challenges.
The importance of the system in property management operations currently cannot be
overstated. Unfortunately, that reality however, is not always understood or accepted by
the management in small to midsize property management companies. Considering the
need to implement and maintain the various government agencies mandates and
regulations while keeping tenants, owners and vendors satisfied, and the company
profitable, is a major set of tasks. It must also entail a significant level of ongoing
management systems oversight. Unfortunately, too often this is not the case.
I do not want to suggest that the large companies have all the answers re: systems
management. Over the years we have seen and aware of the blatant budget and turf wars
related to the IT Department, and the periodic lapses of memory re: who the IT department
actually works for. We have also experienced major conflicts of interest related to major
IT projects requiring a Board of Directors approval for a particular project and IT
departments not willing to accept outside solutions even when time and cost savings
mandate serious consideration over IT’s proposed in-house efforts and solutions.
The stereotypical “IT geek” wants to acquire and implement every new technology
available without concerns related to cost or applicability. An exaggerations surely, but
enough truth is present to recognize the f a degree of reality. Again, these are not factors
conducive to managing technology and the people associated with systems properly. Note:
In addition to the common characteristics above there is also a tendency for IT staff to
assume an elitist attitude contrary to working with other departments effectively.
I apologize for what appears to be a negative stereotype, but not for the warning it
provides for brokers and principals who are required to communicate with IT vendors and
staff. Our experience with microcomputers over the last 3 decades plus and the technicians
associated with this ever increasing spectrum of automation has generally reinforced the
stereotype above.
Unfortunately, in many offices management only becomes involved with the system when
the results are unsatisfactory, i.e. too many errors, too much cost, and too little results.
When management tries to correct the problem after the unsatisfactory results, they will
often discover a significant level of finger pointing and defensive behavior which tends to
minimize the likelihood of discovering the real causes of the problem. A proactive
approach entails a periodic evaluation of all the system components in order to determine
current shortcomings and “fixes” prior to the problems.
The fixes should include staff and management training in order to create and process the
files in the system properly and then document the key procedures to minimize future
problems if and when staff turnover occurs. If management is not aware of the systems
capabilities, (all elements), they will not know the capacity of the system, and its growth
potential. If senior management is not aware of all of the features in the system, they will
not know or understand the true potential and importance of the system in regards to
productivity. Innovation and productivity to a great extent determine a company’s success
in their market.
Without this basic understanding, management is severely limited in its ability to provide
effective systems solutions, and tends to fall back on more staff, and bigger, faster, more
expensive hardware and operating systems to resolve problems which may be solved with
the use of software features that currently are unused. The above circumstances also
provide ample opportunity for property management systems sales people to promote l
larger and more expensive software products when a number of no cost / less cost options/
solutions may be readily available.
Upgrades may be available and may provide likely improvements in the company’s
operations. This could be the case whether it is a standalone system or an on-line SaaS
(Software as a Service) system. ( See “On-Line Versus Standalone Systems” in the
Technology Addendum ).
We have often observed that situation where the “Brand” served as the major factor for
acquisition when a lack of due diligence by the buyer and a sales person focusing on
commission only resulted in an overpriced/ oversold, under-serviced purchase of property
management products and services. Details related to a number of the above scenarios
were acquired by our company when property management staff contacted our office to
provide training and support after the sale of some systems. Brands are somewhat less
important now that more than 100 systems are now available and competition is more
present than ever.
We have been shocked and disappointed a number of times with the details of a number of
sales of the “Brand “ company sales and support staff. We have also been shocked and
disappointed by the lack of management’s due diligence in relying upon the “Brand” to
provide the pricing, product and service the customer deserved, but never experienced. It
was depressing to talk to the management and staff of the management company and
determine they had no idea as to what they had paid for in regards to the product and
services other then it was from a “Brand” company.
It was also depressing to discover that one company with thousands of units acquired a
“pricey” system with the intent of only using 10 to 15 % of its capabilities and which
would not provide the compliance that was required or replace the manual accounting and
operations of their maintenance department. It was also bothersome that it appeared that
management was clueless as to the capabilities that system provided. In addition their
apparent refusal to apply both the mandated compliance requirements and well established
maintenance management system routines in lieu of manual maintenance procedures
system that had been in place for years.
At the most basic level, management should at least assume a leadership role in the
implementation of the applicable basic system operations and determining the benefits and
productivity possible with the advanced features of the system. Even without the
knowledge and understanding of those features, management should be able to acquire an
overview of what is available from the developer, consultants, possibly system training
and support resources and system and other resources that may be readily available. In
some cases management does not expect the level of current resources in that they were
not available with their prior system.
As indicated above one of the common observations we experience with many/ most of
our clients systems is that their property management software is underutilized. We often
find that the following features and functions are not used. They include:
Attachments - MICR Check Writing – Blank Check Ops –
Budgeting – Other Accounting Operations -
Contact Management – Reminders - Password Security – Internal Controls -
Electronic Funds Transfers - Reports Customization – Multiple Formats
E-Mailing of Reports - Invoices – Etc. - Reports Batching -
Forms & Letters – Mail Merge Ops - Scanning Operations -
Integration with Support Systems – i.e. Work Orders - Purchase Orders -
Background Checking – Payroll – Web Site Portal Operations -

* Note: The number of hand written checks we still receive suggests that some of our
clients are not using any accounting software for their office operations. There are a
number of potential benefits in using your P/M software to also automate your company
accounting and financial reports. Utilizing two accounting systems, i.e. QuickBooks and
the property management system, mandates additional software costs, systems training
and additional procedures related to the lack of integration of the systems. A property
management system with a strong accounting capability can handle the accounting of
more than a single accounting entity. Maintaining two accounting systems is an example
of unnecessary redundancy.
The above features and functions above provide significant increases in productivity
relating to both financial and management operations. Implementation of the above
features should result in time and money savings, plus a higher level of customer service
and satisfaction. For a number of current systems many additional innovations f and
advanced features are available.
We often observe significant upgrades in hardware, and in operating systems with no
indication of expected results, and no quantification of actual system improvements.
Assuming both the hardware and operating systems are working, most likely the only
really noticeable improvements in upgrades within those components will be in faster
printers and communications, i.e. Internet access. Some of those improvements will then
be offset based on the additional time necessary to figure out how to use the new operating
system and associated generic applications.
It is our belief that specific training on the property management software, probably your
most important application, will probably provide your best return on your upgrade
dollars. The return can also be quantified, in labor cost savings, in expense reduction, in
fewer “do overs”, and in client satisfaction.
Resources to provide assistance to the above situations may be available through local
trade associations, user group meetings, newsletters, the Internet, other management
companies using the same software, plus the company or the dealer from which the
software was originally acquired. It is very important that a pattern of trust, integrity, and
successful training and support be validated from the software vendor prior to acquisition.
These resources can be invaluable, and need to be utilized to maximize your investment.
It is possible that one or more staff members may have an innovative, management
oriented, save time and money, work ethic and philosophy. Our experience with most
small to mid size property management companies suggest however that combination of
characteristics among staff is rare and often unappreciated by management. They tend to
promote change and often find themselves in conflict with staff and management based on
their interest and efforts towards system improvements.
They should however, be recognized for their attitudes and ideas and given the
opportunity to prove the feasibility of their ideas with appropriate management
parameters. The actual results of 2 or 3 “test” ideas / innovations will clarify the value of
the innovation oriented staff member.
Once the innovative staff member has established a pattern of successes with
improvements in productivity, services, cost reductions, etc., management must recognize
and reward the staff members achievements and efforts. Establishing a team of innovative,
goal oriented, staff members can truly reverse a downward trend in systems operations
with a series of significant improvements in attitude, and productivity.
It is of additional importance however, that management provides ongoing direction and
motivation for ongoing operations and improvements of the system. Allowing staff to
control the security, improvements (or lack there of), and general policies and procedures
related to the system is a design for disaster.
There is a slow but growing awareness that small and mid size company managers must
apply many of their basic management skills and functions to the systems which
increasingly assume or assist in almost all of the business operations. The knowledgeable
manager will recognize the importance and power of the system and apply the appropriate
management skills and expertise. However, with the smaller company it occasionally
appears to management that the system is more of a burden rather then a necessary and
important productivity asset. This is displayed in many ways, i.e. a lack of management
interest and involvement in re: to systems operations and improvements. Levels of
software training for both management and staff tends to be limited in scope and in
frequency while advanced training is too often ignored or considered unnecessary.
Quite often the systems staff is relegated to a 2nd class status based on management’s
systems shortcomings. Current equipment and operating systems are capable of much
greater innovation and technology then systems of ten years ago. The greatest area of
innovation and technology relate to the Internet, and the various means the Internet can
provide a multitude of options to support and train. The Internet can provide improved
communications, integration of support functions, data transfer, pictures and reports to
staff, owners, tenants and vendors.
The integration of support systems such as background /credit checking, electronic funds
transfers / automatic clearing house transactions, payroll, tenant prospecting, etc., have all
been enhanced or activated with the integration of the Internet. Additional automation and
systems integration is moving towards a seamless set of property management operations
requiring less independent and non-system activities and more remote capabilities.
Note: On-line systems may provide a number of additional capabilities but we recommend
that a review and analysis of available and unused features in the current system be
considered before migration to a new system or significant new cost upgrades are
uninitiated.
Today’s management challenges include dealing with increasing legislation at Federal,
State and local levels which may require different rental policies, agreements, routines and
documentation. Some states, as reported earlier already require significant additional
routines mandated by state and local agencies and all indications are that additional states
will be added in the future. As much as possible the system should automate the special
government requirements in order to minimize administrative time and costs.
Knowing the system and its features will allow management to determine the priority and
the payback that unused and/ or new features and enhancements will provide. Knowing
the system and its features will allow management to plan for increased growth and
extensions of the system. Knowing the system and its features will allow management to
promote its benefits and provide a competitive edge in marketing management services to
owners and tenants.
More now then ever before the success or failure of the property management company
can depends upon the “system”. It is worth repeating again that the system includes the
elements of the software, the hardware, the staff including management and the
procedures that formalize systems operations. Re-directing a portion of management
efforts and energy to systems management can generate a multitude of benefits for your
clients and your company. An important goal is to balance the elements. Most often the
hardware and software has considerably greater capacity than management and staff
utilizes. In those cases growth is generally provided via increased staff. More than likely
training of management and current staff to utilize additional features, innovations and
technology is a better solution.
 ADDENDUM 1
System Management – Top Ten Tips

1. Cross train - Staff - The smallest office needs more than one knowledgeable systems
user. It may be a receptionist, wife, daughter, son, etc. A crisis develops quickly
without the knowledgeable user. Cross training is also of value in regular operations
in maintaining schedules and providing additional management and staff flexibility.
2. Document Key Procedures - Prioritize and document the critical, difficult and special
processing requirements, most likely to be incorrect. This is a key element in dealing
with the potential crisis identified above.
3. Periodically Review & Evaluate the System - Evaluate key operations and results for
accuracy, functionality, improvability, cost, legality, security, and BRE/DRE
compliance. Generally, the longer a “system” is in place the likelier it is
underutilized, irreconcilable and NEEDS serious intervention. We often discover a
need for better methods, reports, additional accuracy and corrections that should be
implemented among our users. Obtain knowledgeable outside help if available. Call
us for experienced and valuable assistance.
4. Management Training - The Broker, or other management members needs to know
enough about the system in order to minimize potential damage / destruction. A level
of knowledge of the system is also necessary in order to direct the growth of the
system by phasing in available upgraded and advanced features in a planned &
orderly method. Our E-newsletters has that as a key goal. Call our office to be placed
on our newsletter list.
5. Planning for improvements - Any Property Management system of merit will have 2,
possibly 3 levels of features and upgrades within the system. It is up to the users to
determine when and what will be implemented at any given time. (See 4 above)
6. Invest in staff training. The best method for getting maximum payback on your
system is to insure your staff is using the systems features and using them correctly.
7. Secure the system. Embezzlements, DRE audits, and natural & manmade disasters
can easily destroy your business if planning and precautions are not in place to
minimize the damage and maximize the ability to recover quickly. The system needs
to be secure from internal and external threats. Standalone systems are most subject
to internal criminal acts while on-line systems share security threats from interal and
external threats.
Fortune 500 companies are appearing regularly in the business news as the latest
hacking and confidential data theft companies associated with the Internet and on-
line systems. At this point I am not aware of a single on-lie property management
 system that has been victimized. There are however, significant numbers of Internet
users, includig property management companies that have lost power and the Internet
based on storms, tornados and floods in recent times.
Note; Power generators can provide local power but does not replace the lines that
provide communications and the Internet.
Note 2: Not all power generators are compatible with computer equipment. Based on
their specifications some may actually damage / destroy computers due to voltage
fluctuation.
8. Keep up to date on Federal, State and Local Laws & Regulations and determine how
your system can aid in preventing litigation, fines and penalties. Join a local trade
association (IREM, SDCAA, San Diego NARPM) to keep informed.
9. Integrate and upgrade -Many systems today have incorporated additional features,
innovations and technology that provides most if not all of the functions currently
required for complete and successful property management operations. Older systems
will not have many of the capabilities of the newer systems. However, many of the
missing features may be available through 3rd party products and services that can
integrate with or support the older system.
10. Promote change, innovation and technology. Challenge and motivate staff to
establish new sources of income, reduce expenses, improve productivity and
recognize and reward when they do. Establish a company culture that promotes that
“there is always a better Way”. (IBM – 1960)
 ADDENDUM 2
The Three Phases of Systems Implementation

The first level or phase relates to the basic system processing that must be implemented,
i.e set up, receipts, payables, report preparation and distribution. In some respects the three
phases match our observations related to the development of property management
systems and the innovations and technology that have advanced systems to their current
capabilities and state of importance.
The second level or phase is usually focused on advanced features such as letters, contact
management, work orders, etc. which are time saving and important features but generally
not a part of daily processing. If possible it is best to try and implement level 2 features
within 3 or 4 months after startup.
This same period should be used to document the procedures that require special handling
and operations that are exceptions to normal processing. Documentation should also be
created for the normal scheduling of key operations and BRE/DREDRE systems
compliance and procedures.
Level 3 might apply to an advanced feature or an add-on which provides a major new
capability which significantly impacts current processing. Examples include e-mail
operations, ACH processing, remote site operations, or integration of payroll, background
checking, or check reader / scanners. Their implementation initiates a whole new level of
systems performance and cost reductions.
Management must understand that the” system” is now the structure in which the business
operates. All aspects of the system, like a car, an apartment building or commercial
property, needs periodic maintenance, and replacement of components that are not
functioning effectively, with upgraded, improved components.
Management’s decision to change and implement a new system is not a one time specific
event. Implementation of new capabilities, features, procedures and technology should
continue to take place within the system as long as it is feasible and cost effective. The
increasing speed in which innovations and applicable technology are being developed and
available for property management systems implementation is a major challenge for
management.
It is not likely that management can self educate themselves on proper systems
management and/ or the system, They should look to their peers in other companies,
industry trade associations, and the systems developer / industry consultants for the
educational opportunities of obtaining and maintaining the knowledge to lead, to motivate,
to plan and promote the staff and system productivity.
Management must dedicate more time and efforts in understanding and evaluating the
benefits and potential risks of new innovations and technology within the industry,
followed by the planning, the prioritizing and implementation of the innovations and
technology offering the best benefits, paybacks and services. In today’s business
environment maintaining the status quo is a recipe for business and system decline.
Technology Addendum – Introduction

This is the first in a number of Technology Addendums supporting our “Property

Management Systems – From A To Z” book. We will also be continuing to author future
articles , reports and white papers directed at the use of technology in the property
management industry. Past published articles related to current technology have tended
towards an introductory level and a more general audience of readers. We will focus our
series of technology addendums with the intent of providing additional background and
added details of features, benefits and implementation issues.
Traditionally new technology is implemented initially among the largest property
management companies based on the volume of clients, tenants / homeowners, vendors
and transactions both current or forecasted. Most current technology in use today within
our industry is based on some level of associated technology and may be available to the
client, tenant/ homeowner and /or vendor, e.g. ACH/ EFT transactions, e-mail capabilities
and scanning.
As the technology develops, standardizes and is available from more sources reduced
costs for both mid size and smaller companies will acquire the technology and apply it to
their own operations. Generally the larger management companies will implement new
technology first based on the issue of volume justifying the cost of new technology.
The availability of the technology however, may still require some additional innovations
to be available to the small and midsize companies and their client/owners, tenants/
homeowners and vendors. Demographics are a special concern in re: tenants and HOA
homeowners. Lack of Internet and e-mail capabilities among tenants and HOA
homeowners (especially seniors) will generally negate the option of ACH/ EFT for those
tenants/ homeowners. Lack of a tenant or HOA homeowner bank account obviously also
negates ACH/EFT operations for those residents.
Property owners, in contrast obviously have acquired additional assets and generally
would be PC or MAC literate and are likely to have more than one bank account per
household. Demographics also are a factor, but it relates to age. Older property owners
may not be as inclined to acquire PC/ MAC literacy or accept a change from traditional
management operations that may have been in place for decades. For many property
managers the number of computer illiterate clients continues to decrease while the growth
of technology increases.
We strongly recommend that property managers and investment property owner/ operators
investigate the availability of key technology and its integration in the property
management systems they are currently using or the systems they are evaluating. As
indicated elsewhere in the book it is a “force multiplier” and has generally accomplished
increases in productivity while reducing costs.
Technology Addendum – Ach - Eft & Nacha

An important ongoing revolution is taking place. It started over 50 years ago when banks
established certain standards for the automation of check processing and created an
alternative to cash transactions. Money orders, cashier checks, credit cards, gift cards and
debit cards have been added to the mix and have allowed business and consumers even
more options for purchasing goods and services.
In 1958, the American Bankers Association (ABA) adopted E13B font as the MICR
(Magnetic Ink Character Recognition) standard for negotiable documents in the United
States. It was applied to checks and money orders and provided the means to identify key
information on the check including the originating bank, (transit and routing), the account
number of that bank, amount of the check and optionally the check number. Prior to the
development of the MICR font and the high speed bank equipment that could read and
sort the checks, check processing was a very slow manual operation.
In the early 1970’s while managing a group of analysts and programmers at a local bank I
saw the arrival of the beginning of the Social Security Administrations (SSA) Direct
Deposit operations. The deposit data arrived on tapes readable by mainframe computers.
The deposits were then processed along with the checks and money orders being
processed that night.
SSA established a means for its recipients to receive their benefits with a safer, quicker,
and less expensive method of disbursing SSA payments via Direct Deposit or Electronic
Funds Transfer (EFT). The Direct Deposit became a standard within the government, big
business and in more recent times some inroads are taking place with small business and
consumers. With so many players using EFT a need to standardize and regulate the rules
and procedures for Electronic Funds Transfers became a necessity. Currently about 85
million recipients receive benefits via Direct Deposit EFT. Of special note is that SSA has
finally ended in 2015 the creation of SSA checks. All SSA recipients are now Direct
Deposit recipients.
An Automated Clearing House (ACH) Network was created with NACHA (National
Automated Clearing House Association) assuming the role of creating and maintaining the
rules for over 11,000 financial institutions who are members of NACHA. It is also worth
noting however, even though NACHA creates the standards for ACH formats and
processing it seems apparent that some financial institutions have the ability to modify the
standards for special operations. See below.*
The Automated Clearing House (commonly, but incorrectly referred to as “Automatic
Check Handling”) was first established in California in 1972, by a joint effort between
banks and the regional Federal Reserve to facilitate paperless check transactions. As news
of the success of this first association spread, more ACH associations were established,
with agreements made between the associations and their corresponding regional Federal
Reserve Banks to operate regional ACH networks.
The National Automated Clearing House Association (NACHA) was established in 1974
to coordinate efforts to develop a nationwide ACH network, ultimately succeeding in
1978, when all ACH networks nationwide were electronically linked. In 1980, the ACH
Network was changed slightly by the passage of the Monetary Control Act, which allowed
for private sector ACH Operators to compete with the Federal Reserve Bank.
There are now three recognized private sector ACH Operators: American Clearing House
Association, the New York Automated Clearing House, and VisaNet ACH Services. It’s
expected that more private sector clearing houses will emerge in the near future. Currently,
the FED ACH Operator (Federal Reserve) handles more than 85% of ACH transactions.
The ACH Network is what is responsible for allowing such services as online bill pay,
direct deposit, and direct debiting, and has proven to be a viable, faster and more cost
effective alternative to paper check processing. It consists of more than 12,000 financial
institutions, 650 industry councils, and a network of regional ACH associations, and is
governed by NACHA - The Electronic Payments Association in Herndon, Virginia.
The variety of institutions and individuals who use the ACH Network may be of interest.
The Network includes:
— Mortgage Lenders
— Insurance Companies (Home, Life, Auto)
— Auto Lenders
— Mutual Funds and Investment Companies
— Newspapers/Magazines (for subscriptions)
— Utilities
— Long Distance Providers
— Cellular Service Providers
— Internet Service Providers
— Cable/Satellite TV Providers
— Health Clubs
— Credit Card Companies
— Non-Profits and Fundraisers
— Zoos and Museums (membership fees)
— Online Payment Services (BillPoint, PayPal)
— Employers (for Direct Deposit)
— The IRS (for Direct Deposit of refunds or automatic payment of taxes owed)
— State Departments of Taxation
— State Bureaus of Motor Vehicles
— State Attorneys General (for payment of liens owed the state)
— State Highway Patrols (speeding on the Turnpike is hazardous to your bank account!)
— County Courts (for payments of fines, liens, fees)
— Child Support Enforcement Agencies
— The US Social Security Administration
— Consumer Collection Agencies (so you may pay your obligation quickly)
It might surprise you to know that many websites which require membership for viewing
also use the ACH system, as do “check by phone” companies, and as indicated in our
earlier writing an increasing number of property management companies and owner /
operator landlords will accept rent payments via ACH.
ACH is perhaps best known for Direct Deposit. According to the Mid-America Payment
Exchange, ACH is used for Direct Deposit now by 100% of all Social Security benefit
recipients, 46% of the U.S. workforce, and 96% of all Federal Government employees.
The workforce and Federal Government numbers most likely also increased since the
numbers were originally reported.
Direct Deposit saves time and money for both employers and employees, making it one of
the fastest increasing services of the ACH Network. Some financial institutions will also
waive your account fees if you use Direct Deposit!
All of the above payment methods, (with the exception of Gift Cards), are in play in
varying degrees within the property management industry with checks, money orders and
in some cases cash still being the prevalent method. What is new is a growing interest by
property managers, owner / operators and even tenants in seeking new alternatives to
reduce labor costs, shorten processing times and provide higher levels of service for
owners and tenants.
Traditional check processing is labor and equipment intensive for the banks. It is also
labor intensive for property management operations. The processing and conversion of
check content electronically is significantly less so.
The creation of a traditional check, its disbursement, distribution, deposit / cashing and
reconcilement entail significant elements of time and cost through out the complete
process. ACH payments provide benefits for the payer and payee but are not for every
one. Payers, (tenants, and HOA homeowners) who do not have bank accounts, regular or
adequate earnings are not candidates for ACH payments. Payees who do not have a bank
account, (owners, vendors, tenants), also will require a non ACH/ EFT payment.
Therefore, it should also be understood that ACH is not an instant solution. Time and
often significant efforts must be made to acquire the ACH information ( bank account
information and authorization/ approval must be obtained) and entered into the system
before any processing can take place. This will potentially entail a number of specific
management efforts before the information and approval is available in any volume.
Another payment alternative which promises to be an extended interim solution is Point of
Sale, (POS), which is a combination of a Check Reader / Imager /Credit Card Reader
device which can convert the checks to an ACH transaction usually via the Internet. It is
also used to enter the check information to the appropriate tenant record within the
property management system. In that case it replaces the traditional data entry ( by
keyboard ), processing of checks by the management company, and still provides the
option of implementing the non-check ACH transaction in the future. An additional
benefit of this technology is that a copy of the scanned check is created and stored in a
designated file on an available hard drive. One property management system we work
with attaches the scanned check image to the associated tenant record.
In either case however, once ACH receipts are initiated an immediate payback should be
apparent based on reduced labor and processing costs. ACH/ EFT payables will provide an
increased level of service for owners while at he same time reducing the time and costs of
printing, distributing and reconciling owner and vendor checks. It is imperative that the
property management company also coordinate their efforts with their bank(s) in order to
minimize confusion and delays.
* We are aware that some banks have deviated from NACHA standards in their file
formats which has created special problems where multiple bank accounts are in use. One
very large well known bank uses a modified ACH format that according to a bank
representative provides additional security. Not a problem for most companies which only
use one bank account for receipts and expenses or where one account is only used for
ACH transactions.
The implementation of ACH/EFT transactions within a property management company
does introduce a competitive edge factor into their operations which will continue to
provide improved benefits as the percentage of ACH/ EFT transactions increase.
Management companies should introduce the concept to their tenants, homeowners,
vendors and property owners before implementation is initiated. Initial responses and
prospective authorizations will provide an idea of the magnitude of this type of change
and set the table for a faster, and simpler conversion.
ACH / EFT capabilities are appearing in two different mediums. They are being provided
as a module specifically designed and programmed to integrate with a given property
management system. They are also available as an on-line Internet based System (or
subsystem) which in some cases can be used as a stand alone operation mostly focused on
ACH rent / fees receipts.
An option is also available which allows integration of an SaaS system with some PC
based property management programs once export / import routines are added. In both
mediums identified above there are additional receipt payment options include recurring
payments, one time payments or e-checks, credit card payments, debit card and check
reader / scanner ACH conversions. The Check Reader/ Scanner / Credit Card Reader
payment alternative above promises to be an extended interim solution.
Point of Sale, (POS). which is a combination of a Check Reader / Imager /Credit Card
Reader device used currently in retail stores, will be a likely alternative for tenants not
willing to commit to specific receipt processing schedules based on variations of pay days
and income.. It would have the most immediate result in replacing the traditional receipt
processing of checks by many management companies and owner/ operators, and still
provides the option of implementing other non-check ACH transactions in the future
Another significant capability that has lagged somewhat in smaller business operations is
the ACH / EFT Payables function. Vendor ACH operations are more limited due to some
vendor limitations and lack of support. Vendor payables lack consistency and may be
derived from multiple sources. This can be explained by the number of small business
vendors lacking the interest and technology in accepting ACH / EFT payments.
We have observed owner ACH operations are generally more prevalent in property
management systems for receivables and owner payables ACH/EFT operations. The
payables ACH/EFT operation is basically the same as paying bills with an on-line banking
system which in most property management systems would entail redundant invoice data
entry. The PC based ACH payable function however requires invoice data entry (and
possibly Work Order conversion) but then provides the conversion of volume owner ACH
transactions in lieu of the traditional owner checks.
This technology significantly reduces the many and varied costs of traditional check
processing including the bank processing costs. It is worthwhile noting that converting
checks (receipts and payments) to ACH transactions is also a stated goal of the banking
industry in order to reduce the costs and overhead of traditional check processing.
It should also be understood that ACH is not an instant solution. ACH information ( bank
account information and approval must be obtained and entered into the system before any
processing can take place. This will potentially entail a number of specific efforts by
property managers before the information and approval is available for ongoing ACH /
EFT operations.
Note: The above information was derived from a number of Internet resources and the
authors banking experience.
Technology Addendum – E-Mail Operations

Now that we are well into the second decade of the new millennium it can be assumed that
most of our population is at least aware of e-mail even though not all of the population is
using e-mail on a daily basis. It appears that many property managers are using e-mail on
a regular basis but very often it is as a separate application and not integrated with their
property management system.
The use of e-mail in property management operations provides a number of important
benefits. A major reduction in administrative time and costs are paramount for the
management company, but the use of e-mail is most often an improved level of service for
the property owner, tenant, HOA homeowner and vendor.
Twenty years ago the Internet and e-mail was almost unknown. The commercial e-mail
was just beginning. Prior to 1995 the Internet was a communications network involving
the government, the military and academia.
Note: In the mid 80’s I was teaching a community college Data Communications class
which included a field trip to the Naval Training Center’s Communications Lab in San
Diego. While there the class went on-line to the University of Illinois and worked with a
Physics Computer Assisted Instruction (CAI) program ; (one of the first) on what became
the Internet in years to come. The US Navy was using a number of CAI courses to assist
in the training in a number of their A schools. It was a good example of what the future
held in regards to computers and the Internet.
E-mail and the beginnings of Internet like operations began its introduction to small
business and real estate operations in the 80’s. Teletype equipment was in use locally to
provide MLS information along with a number of analysis programs to establish various
indicators of value for real estate investments. Prior to the introduction of the Internet and
the general use of e-mail, communicating with owners, tenants and vendors was either by
phone, USPS mail or in person. Later, limited e-mail operations were done individually or
using contact lists separate from the owner, tenant, and vendor records within the
management system.
The presence of a list of key property management contact info separate from the property
management database was a major systems operations problem identified decades ago by
systems analysts. Maintaining two or more files with common data, phone numbers,
mailing addresses, e-mail addresses, etc. requires significant additional oversight and
effort in order to keep the data files synchronized and up to date and was very prone to
periodic failures. .
We still find this concept being used by some management companies when attempting to
maintain 2 separate but related databases. An example would be a real estate contact
management database for real estate sales / prospecting and the property management
database. Investment property owners who have or may acquire, sell or exchange
properties, and may use the services of a real estate / property management company
would likely be in both databases.
Based on the age, design and limitations of the management software there is often
inadequate ability to provide the additional data required for the brokerage data perceived
as necessary. At some point in the past it was then decided to add a database using a
contact management or database program to accommodate the sales side of the company.
On a lesser scale we find that many companies with older property management systems
are using MS Office for the Outlook E–mail capabilities and Microsoft Word Mail Merge
to provide letters to owners and tenants as an alternative to using the Letters function that
may reside in the system.
It is a given that the older management systems were most often using a Letters routine
that is significantly less capable then MS Word or Word Perfect. As a result in many cases
the Letters routine was discounted and ignored and no effort directed to implementing an
important tool that was part of their property management system.
Instead, often a separate function using other application software was implemented which
entailed the maintenance of a separate contact list which required ongoing synchronization
with the property management owner, tenant and vendor data. Many companies
discovered that maintaining the separate e-mail and address lists required more time and
effort then expected and failures in maintaining the list could and would create serious and
costly management problems.
Appropriate solutions include the following:
Utilize a property management system that provides the functionality to expand the
design of the system to offer the ability to create additional data screens/ fields to the
system to accommodate the additional uses of the system. Today there is a growing
number of systems that provide that capability.
Utilize a property management system which includes a Letter/ Forms Feature that is
capable but also simple enough for any user to master quickly to include the use of
the mail / merge function utilizing the tenant, owner and vendor data. Features should
include the ability to batch e-mails which dramatically reduces the time required to e-
mail large volumes of documents.
Utilize a property management system that uses MS Word, Word Perfect or very
similar word processing program to avoid the complexity and confusion of two
separate and distinct word processing programs.

Outlook provides additional features to personalize e-mails and their distribution which
includes a means to e-mail large numbers of individual e-mails. It is an important feature.
A few property management systems integrate with Outlook negating the two database
issue identified above and in an early chapter.
Other e-mail elements that have an additional value to property management operations
are the attachments. They may be reports, documents, scanned invoices, pictures,
recordings or videos pertinent to the e-mail content and to the recipient. The attachments
may be provided in a number of possible formats such as Word, Rich Test File, Excel,
Spread sheet, and PDF format or a few other picture formats.
Currently more property managers are appearing to utilize the PDF format based on the
premise it requires specialized software for the report to be modified, suggesting a higher
level of report integrity. (With a PDF format it is less likely that an owner would be
capable of modifying a financial report based on the need for additional software that
would normally add cost.
Unfortunately however, few companies are in position to transition 100 % from traditional
to e-mail operations only. Acquiring e-mail addresses and using them are requirements
obviously for e-mail operations. Most companies will discover that obtaining e-mail
addresses is more of a task then they expect. New owners, tenants and vendors are
generally not a problem. The e-mail addresses can be obtained from the documents
(applications, W-9’s, etc.) used to set the owners, tenants and vendors into the system.
The process of getting that same information from those already in the system more often
will require multiple contacts by phone, letter or personal contacts. Depending on the size
of your management operations the time and cost of acquiring a significant majority of e-
mails for your management database can be intimidating and initially is likely to be
underestimated.
If your company has not initiated a e-mail address program start now. If you have started
and discovered it is not as easy as once perceived, double your efforts. With every new
address your company is providing another alternative for greater productivity of your
communication,. documentation and distribution operations. The dividends (time and cost
savings) accrue even with e-mail operations that are not integrated with your property
management system.
They will increase dramatically with some of the current systems that will create
formatted reports and e-mail them to the recipients with a single command. The level of
automation in some of the newer and upgraded systems is impressive and sometimes
breathtaking. It would be well worth your time to check it out.
E-mail operations also should entail the implementation of a documented policy relating
to e-mail operations. It should be understood that e-mails are regularly finding their way
into both civil and criminal courts and must be considered as potential evidence in any
future litigation. This means that e-mail contacts with owners, tenants and vendors must
be created with the same concerns and discretion as company letters.
Much of the use of e-mails currently, (especially those generated by our young people) are
created with a level of casualness and informality which some maintain was initiated in
cell phone use. The key difference is that e-mails are automatically documented while cell
phone conversations are not unless they are recorded. E-mails are also easier to maintain
and retrieve then phone recordings.
Those characteristics provide both benefits and risk factors. The informality and “off the
cuff” casualness often observed in cell phone and” texting” use is highly inappropriate for
business e-mail and must be constrained. In one respect e-mails can be more damning in
that tone and the subtlety of the language are somewhat limited as compared to a phone or
face to face conversation. The actual text in an e-mail therefore is more definitive then that
of a voice recording and is highly regarded as evidence in legal matters and litigation.
If e-mails are not carefully prepared and not business like, the likelihood of successful
litigation is sure to increase. Miscommunications and misunderstandings are sure to occur,
which at some point will result in small claims and/ or law suits. Management should
review the e-mails of staff until assured staff fully comprehends the need for clear, concise
communications.
The policy on e-mails is a key element of an office Internet policy. Specific limitations and
restrictions are required in order minimize the improper use of the Internet. Studies have
indicated that major abuse of the Internet is taking place in both the private sector and in
local, state and federal government. Inappropriate use includes games, gambling, private
correspondence, pornography, private projects and personal activities.
Newer systems are promoting the creation of batch operations in report preparation and
their distribution. As indicated above most companies will require 2 or more distinct batch
operations to deal with the traditional non-e-mail report / distribution operations.
Advanced batch e-mail operations provide savings in administrative time, materials and
postage costs. Savings are significant.
Some of the newest programs provide the ability once set up is completed, initiating a
batch operation will accomplish the following:
Creates the owner reports specifically for each owner with the appropriate export
format -
Match the reports with the correct owner’s e-mail address -
E-mail the owner reports within the batch with a single mouse click –

Management companies should calculate what is the cost of their traditional report
distribution operations in labor, materials, postage, etc. in order to determine the savings
associated with the use of current e-mail technology. A follow on to that calculation is that
of the cost of labor, materials, postage, etc. in operations associated with the preparation
and distribution of invoice copies.
Other e-mail operations generally will also provide savings. Many companies provide
copies of the invoices related to their owner’s properties. This is done monthly, quarterly
or on an annual basis. Traditionally this requires copying and filing of the invoices,
packaging and postage. Storage costs are also a factor. When combined with scanning
capabilities the invoices can be e-mailed as digital records minimizing the administrative,
materials, postage and storage costs.
E-mail operations when used properly will generally reduce the number and length of
phone conversations, and average response time. They will also provide better
documentation which presumably will minimize potential litigation and legal costs.
Limited e-mail operations are generally in play in most property management operations.
Fully integrated property management operations are a major leap in efficiency,
productivity and service. They most likely will entail new benefits and services not yet
perceived, and for that matter caveats may also be yet perceived. It will also be necessary
to establish additional security precautions and procedures to properly secure the
confidentiality of this new information.
An important consideration to further the success of your e-mail operations whether they
relate to marketing, or tenant and owner operations is to improve the rate of delivery and
readability. The amount of e-mail being mailed continues to increase while tighter controls
generate increases in spam and junk mail. There is a growing list of Internet Service
Providers ( ISP), browsers, and e-mail services with a variety of features including
limitations on e-mail delivery.
Those features may limit access of e-mails based on a number of elements and factors
associated with the e-mail. Meanwhile the recipient’s ability and interest in viewing
mailbox content must also be maintained and improved. Consider periodically surveying
e-mail recipients as to whether they are actually receiving their e-mails and any
recommendations re: content they may have. Determine the current level of distribution
and the level of e-mails actually read. Do not assume your e-mails are all delivered and
read.
Another survey option is to e-mail property management clients focused on the current
and possible future services that clients currently are provided and/or may be offered in
the future. A company may create its own survey or use an Internet service such as Survey
Monkey. Surveys are a marketing function in that they indicate interest in the client’s
opinion’s and thought’s and may result in suggested changes and improvements in
customer services and company profitability.
E-mails are an important Internet tool that tend to improve many of the most important
functions and operations of property management. Do them frequently, professionally and
prosper.
Technology Addendum – Scanning Operations

Scanning technology while certainly not new, has yet to assume the importance and aura
of excitement as many of the other popular current technologies. However, it has its own
special company benefits within the company confines. It also has the ability to extend
some benefits to clients, and to a lesser extent if at all to tenants, homeowners and
vendors. Some categories of participants, e.g. commercial tenants (large and small, college
students, plus property owners and their teen age offspring are more inclined to be
computer literate and Internet capable.
Scanning would generally entail 5 possible categories of equipment: they include:
Desktop scanners for scanning of checks and money orders, invoices, expense
receipts and documents - A few desktop scanners can process batched invoices and
provide software to store, organize and provide extensive search functions for the
small to mid size business operation including property management operations. At
this point they are not integrated with the property management system, but are still
capable of significant benefits based on the basic qualities of scanning technology.
We do know however , of at least one system developer system that is working on an
upgrade that would integrate scanning devices with the property management system.
Larger, more capable scanning systems ( including high end MFM (multi function
machines – e.g. copy, fax, printer, scanner) devices provides additional features
oriented towards high volume operations which includes scanning of batched
invoices and possibly OCR (optical character recognition) as an alternative to
traditional keyboard data entry of invoices. The larger systems are also attuned to
network operations which entail the sharing of the equipment among multiple PC
users via the network.
Desktop MFN copy/ print/scan devices. Many are relatively inexpensive. Check
Reader Scanners for the handling of receipts, ( checks & money orders) –
Mouse scanner – This is a device that is an excellent option for scanning newspaper
articles and other irregular shaped content. It is not a high volume device.
Check / Reader / Scanner - There are 2 types of check reader scanners.
The most common are provided by banks and minimize the need to prepare
deposit slips and bringing the receipts to the bank. The checks and money orders
are scanned and totals provided. The scanned items are available on-line for
review. The scanning however, still require manual data entry of the receipts
into the property management system and totals need to be compared to the
scanned items.
There are also a limited number of scanners that are integrated with a few
property management systems. They actually update the tenant / homeowner’s
 transaction records and add the scanned record to the tenant’s / homeowner’s
history. An additional option provides an ACH transaction eliminating the need
to manually enter the data or transport the receipts to the bank. If the ACH
option is not active it would still require checks to be brought to the bank or
banks if multiple banks are being used in the system. .

A few desktop scanners can process batched invoices and provide software to store,
organize and provide extensive search functions for the small to mid size business
operation including property management operations. At this point they are not integrated
with the property management system, but are still capable of significant benefits based on
the basic qualities of scanning technology. Note; In California the BRE/DRE requires that
cash, check and money order receipts must be scanned or copied as a component of their
processing.
Scanning implementation therefore provides almost immediate benefits within the office
based on the conversion of receipts and invoice copies to scanned images. Multiple
benefits may entail:
reductions in data entry, deposit preparation and bank travel/ teller time
administration -
reduction in materials cost, toner & paper –
reductions in storage costs. file cabinets, floor space –
reductions / elimination of off-site storage, transportation, and records destruction
cost –

Additional incremental cost reductions will be realized as owners, vendors and tenants
provide e-mail addresses and authorize e-mail operations providing the ability to
significantly modify traditional reporting operations resulting in less time and costs of
those operations. Those reductions will include:
reductions in labor during report preparation / distribution ( exported reports/
documents) –
reductions in materials cost (toner, paper, envelopes ) –
reductions / elimination of postage/ shipping costs –
reductions in labor may allow elimination of overtime or at the minimum a
significant reduction in cost for preparation and distribution of owners, tenants and
vendor reports documents and communications.

We recommend an evaluation be initiated to determine actual traditional production costs

of the above operations and the estimated savings based on the current levels of e-mail
addresses currently available among owners, tenants and vendors.
Our own experience and observations identifies the efforts necessary to acquire the e-mail
addresses to transition to e-mail operations will most likely be a more extended effort than
expected. As indicated in the E-mail Addendum we strongly recommend that a significant
information and promotional effort be introduced immediately in regards to acquiring e-
mail addresses from owners, tenants and vendors as soon as possible in order to e-mail
scanned invoices and other documents. Written requests for this information even with
incentives, does not seem to have the same level of success as does a scripted verbal
request.
Basic communication operations are enhanced (and documented) when email becomes the
established alternative to the phone. The e-mailing of reports and scanned r documents
will introduce additional cost reductions and a new level of services for owners, and
tenants. Owner acceptance of scanned invoices and other documents in addition to their
management reports will provide significant company cost/ time reductions. A total
conversion of owner invoice copies to scanned invoices and other documents e-mailed or
downloaded to owners is desired but may be delayed in acquiring client / tenant e-mail
addresses and authorizations.
Note: A variety of current methods are in play in re: to the handling of invoices. The
management company establishes a schedule; i.e. monthly, quarterly or at year end and
mails the invoices based on the schedule.. Invoice copies or the original invoice once it is
copied may be mailed to the owner at the request of the owner. Often the request is based
on an audit by the owner’s accountant, CPA or a government agency. There are various
costs associated with traditional invoice copy and distribution.
Invoice scanning is an improved operation in conjunction with e-mailing to the owner on a
given schedule or held until requested by the owner, Distributing scanned/ digital invoices
would be a significantly more efficient method of distributing invoices to the owner
whether scheduled or on request. The combination of scanning and e-mailing provides
significant savings in time, materials and postage.
Generally, scanning is generally not a major factor with tenants although it is an
improvement over copying operations based on BRE/DRE requirements. This is based on
the reduction of time and paper. It is even more efficient if the scanning operation includes
the posting of the check/ receipt.
The diversity of current devices does provide a multitude of alternatives in implementing
scanning plus other potential functions associated with the monthly cycle. The check/
reader/ scanner/ ACH function is the most efficient function s in that it replaces a number
of traditional manual operations with the multi-function check scanner that is integrated
with the property management system and the ACH/EFT service provider.
For the smaller office a desktop scanner connected to a single PC may be a logical start up
for general office scanning operations. Staff responsible for entering payables can scan the
invoices either prior to, or after entering the invoices. File names that easily identify he
specific invoices can be created during the payables / scanning process, thus providing the
means to access / recall the scanned items for review or distribution.
More recently the desktop scanner has been acquiring some of the features of the larger,
generally more capable systems. At least two companies, the Neat Company and Fujitsu
now have desktop scanners which provide both optical character recognition (OCR) and
batched documents scanning in the $400 price range. For some companies one of these
scanners would be paid for in just a few e month’s use. For those companies the scanner
may provide benefits more than three or four times the scanner cost in the first year; an
impressive payback.
Larger, more capable scanning systems ( including high end MFM (multi function
machines – e.g. copier, fax, printer, scanner) devices provides additional features oriented
towards high volume operations which includes scanning of batched invoices and possibly
OCR (optical character recognition) as an alternative to traditional keyboard data entry of
invoices. The larger systems are also attuned to network operations which entail the
sharing of the equipment among multiple PC users via the network. Obviously however,
sharing an MFM device does have limitations in regards to multitasking. A copying
function and scanning function cannot be operating at the same time since they both
require the use of certain device components.
Management will discover the mix of traditional paper report oriented operations and
digital reporting operations will be an initial challenge. Most likely it will also be
recognized that the new technology techniques provide positive improvements in
management communications, operations and services plus an incentive to increase the
pace of conversion.
Three options that may be available in re: to providing owner access to their invoices
include:
e-mail invoices and reports as attachments to owners –
initiate a download of scanned invoices (and reports) to owner – (scheduled or by
owner request) -
owner access to owner reports and scanned invoices.via the company web site with
owner login and password –

Large portfolio r possible options in scanning solutions would include a complete on-site
solution entailing scanning equipment, the scanning search software and hard drive
external storage facilities for the scanned items.
For management companies with only a basic (non-batch mode) e-mailing capability, an
option could include exported owner digital reports (PDF) that are e-mailed or
downloaded along with the scanned invoices. This may be the most attractive option for
the smaller company trying to minimize infrastructure costs and upfront costs plus
automate a number of key labor intensive operations.
Note: We do believe scanning operations is a major improved operations opportunity and
should be promoted as a future planned systems improvement.
Note: Other options to avoid significant upfront costs for equipment and or software
include leasing and bank funding. Contact our office for more information re: those
financial options.
My company’s interest in this technology began In December 2009 when an Associate of
my company and I were on site with one of the larger property management companies in
San Diego. They had experienced what appeared to be a major corruption of their database
near the end of the month. An analysis and evaluation of the data identified that the
database had not been corrupted. The program had been corrupted as a result of a backup
that was attempted when one or more PC’s were left on overnight and was still logged into
the property management program and the database. When the system was backed up. We
were on-site that December evening to reinstall the program.
We immediately noticed the presence of dozens of cardboard file boxes filled with records
in addition to a very large number of 4 drawer metal filing cabinets throughout the whole
office. Records were everywhere. Presumably the filled cardboard file boxes were soon to
be transported to an off-site location with the future potential of being recalled if needed
for review and / or their predefined scheduled future supervised destruction. It was
apparent that the record keeping operations were significantly beyond what was originally
planned and there had to be a better, less expensive, less labor intensive method of dealing
with records and record retention.
To use a slogan from my past IBM days “There is always a better way”. That evening was
the beginning of my recognition and appreciation for the real need of an alternative
technology oriented solution for an established, expensive and very obsolete combination
of invoice / record retention operations.
As identified above scanning technology has an immediate effect on office based
operations and significant secondary effects as the distribution of scanned invoices is
implemented. The image in my mind constantly revolves around those dozens/ hundreds?
of cardboard file boxes and metal filing cabinets. A second image is that of 50 plus large
envelopes filled with copies (or original invoices) pending their delivery to clients via the
US Mail.
The image then proceeds to scanned images all stored on one or more of a 2” USB
memory device, e.g. Travel Memory, Thumb Memory, et cetera resulting in the
elimination of most of the filing cabinets and hundreds of cardboard file boxes and the
resulting expenses.
Those images can be a powerful motivation to initiate an evaluation/ review of actual
labor and materials cost associated with a company’s current operations and the resulting
evaluation and implementation of one or more scanning technology solutions. It is quite
likely the evaluation / reviews will identify major benefits in cost reductions, productivity
and improved services.
Technology Addendum – On-Line Versus Standalone
Systems

Over the last few years there have been an increasing number of on-line applications that
have been introduced to the business community via the Internet. There has also been
increasing number of articles and reports promoting the benefits of on-line applications
originally identified as ASP, (Application Service Provider). A more recent acronym
identifying on-line application software is SaaS (Software as a Service). The ASP / SaaS
software now include a significant number of relatively new property management
systems.
The trend, especially adopted by younger entrepreneurs is the adoption of the on-line
systems concepts. It is worth noting however, that the actual systems operations in re: to
remote and mobile operations is migrating to alternative solutions. Many standalone
systems are utilizing communications programs including:
Go To My PC –
Log Me In –
Remote Desktop Protocol to remote to other PC’s.

In addition there are special I-Phone and Android “Apps” which allow those devices to
use the programs and data acquired from some of the communications programs above.
Currently there are limitations, but the potential uses and frequency of access may provide
a more feasible alternative based on the additional ongoing costs of an on-line system. For
some smaller companies the periodic use of devices and various communications software
and “apps’ may satisfy remote / mobile requirements.
Microsoft 10 was released in 2015, and it’s features and future developments suggest
additional compatibility between the office PC’s and mobile devices. Some MS 10 articles
have even suggested that Apple IOS “apps” and Google android “apps” will be emulated
at some time in a future MS 10 version negating the current incompatibility and associated
limitations.
Another element that may become a factor is the issue of advanced features. For some
standalone systems users the number and productivity potential of the advanced features
may delay or negate the conversion to an on-line system. Will the benefits of an on-line
system, possibly from a different developer exceed the benefits of implementing the
advanced features in the current system? Working with newer systems it often appears that
the benefits of an on-line system are overestimated in the short term and costs
underestimated, (if calculated at all) in the mid and long term.
I have yet to hear of an on-line user identifying his company’s on-line costs 4 or 5 years
out from the present. Generally the only cost being mentioned is the current month.
An on-line system in itself is not a better system. For some reason on-line systems appear
to acquire an additional value based on their on-line configuration. It may be a worse
choice if the core program is lacking in basic features for the general accounting or
advanced features for significant improvements in operations productivity. The elements
that are most prevalent in justifying an on-line system, i.e. remote locations, mobile access
and midsize portfolios or larger should be present or at the minimum priced appropriately
for smaller portfolios.
Working with larger portfolios where on-site resident managers, leasing agents and / or
maintenance staff can almost immediately benefit from on-line operations and is an
excellent justification for an on-line system configuration. Smaller portfolios being
managed from an office where there is significantly less need for remote operations
justification should also be evaluated for cost justification. The ”hype” needs to match the
property manager or owner/ operator operations needs.
It should be remembered that on-line systems are priced on a monthly or annual basis.
Overpriced on-line systems are overpriced for as long as they are being used. Standalone
systems pricing are up front with generally some relatively support and upgrade costs
being applied annually. It is not likely a property management systems developer that
began their company since the millennium will be able to offer both standalone and an on-
line system offering. I am inclined to believe that can be a special benefit available from a
few very established systems developers.
I have attended a number of presentations which while entertaining also seemed a bit
“over the top” in the discussion regarding the benefits of on-line or SaaS (Softwre as a
service) . These presentations heavily emphasized the “Pros” while avoiding the “Cons” of
on-line systems.
One of the major benefits regularly present in these promotions identifies the reduction /
elimination of significant systems infrastructure when using an on-line system. This is true
to a degree if the on-line system (property management software in the case of property
managers and investment property owner / operators) is the only shared data that a
property management company or owner / operator requires.
Sharing of data, i.e. word processing documents, spreadsheets, e-mail, contact
management data, etc. however is the norm and does require networking unless all of the
fore-mentioned generic applications and data are also on-line and shared. That scenario is
at this point extremely rare for the vast majority of companies that we have worked with,
negating much of the infrastructure issue.
If however, the company or owner /operator has out of area / remote properties of some
size and staff to service them the infrastructure issue may be a major factor in justifying an
on-line systems solution for future operations. Costs of the additional infrastructure,
server, operating system and communications software licenses to service multiple remote
locations will most likely become a significantly greater cost element compared to an on-
line / SaaS / Cloud solution.
In any case remote operations entail new challenges and issues in that the resident
management and maintenance staff must be trained and additional supervision established
in order to assure that the system is used appropriately. Many benefits do appear as the
beginning of the month workload migrates from the company back office to the property’s
resident management office(s).
The system begins to operate in more of a real time environment as transactions are
generally processed the same day compared to the 2 -3 days in the traditional non-on-line
back office receipt processing operations mode. The difference is that the volume of
receipts for the most part is now processed by resident management staff instead of main
office staff.
Note : New technology such as check/ reader/ scanners also has a major effect on receipt
processing Work loads.
Migration from manual operations at the remote properties to the hands on use of a
property management system could take place with either an on-line system (SaaS) or a
company office based system with remote resident management access of the system. In
either case resident staff assumes new responsibilities and a new management persona.
They will appear to their residents to be in more control and less dependent upon the
company office and its staff.
However, those characteristics can only be acquired with mastering the system functions
required by resident staff. For some of the more senior resident staff that may be more of a
challenge and change that they are capable of accommodating. The excellent business and
communications skills that many experienced and senior resident managers have acquired
are not necessarily transferable to use of the property management system. Senior
management needs to carefully evaluate their resident management staff for the best initial
results in placement of the system in the remote properties.
Lack of supervision in the remote locations is another issue that needs additional
consideration. This is pertinent to the increasing use of remote access software allowing
staff to access their company network from home, while on vacation or during business
travel. Communication software such as GoToMyPC, MS Remote Desktop Protocol,
LapLink, etc. allow staff to access the system and supporting programs and data on a 24/7
basis. This creates a new security threat based on the availability of the system 24/7.
The growing number of “Smart Phones” as remote systems devices will introduce
additional security concerns based on the additional likelihood of being lost or stolen.
Additional security measures should be introduced to minimize the increased liability of
confidential data via future “Smart Phones” access.
Studies and surveys have indicated that many security breeches, embezzlements and
inappropriate access and use of the system takes place after hours and weekends. Some
studies have indicated that over 50 % of embezzlements are established after regular
business hours. The staff member who appears to go the “extra mile” with an abundance
of off the clock systems time may actually be establishing an off the clock second income.
Company management must recognize and protect against the additional opportunities
provided to staff by 24/7 access. A well designed audit routine within the property
management system is invaluable in those circumstances. Every access of the system
involving any modification is recorded including date and the user login.
One of the highly publicized important operations associated with on-line systems is the
“early and often” back up function for your data. This is a very positive aspect of on-line
applications. In past years my company staff probably averaged one call a month based on
a problem with back ups involving traditional standalone systems. The backup was too
old, corrupted, non-existent or required IT assistance since company staff did not know
how to restore their backup. In addition it often appeared that the IT person who installed
the back up system was vacationing in Cancun, snowboarding at Mammoth, or not
available for some other reason.
On-line systems supposedly don’t have that problem. Some of our readers might at this
point say to themselves, “ Yes! Back ups are not a problem with on-line systems”. Others
might add, “But how do we back up the Internet and what about the hacking problem?”
In September 2011 a blackout In San Diego, parts of Arizona & Baja California Blamed
took place over night, It effected about 50 million people. ‘Inadequate planning was
identified as the cause.
A few years ago one of our clients and many other local businesses in that area of San
Diego lost both their phones and the Internet for a morning.
A couple of years ago some individual(s) physically hacked some underground cables in
the Silicon Valley and literally severed Internet operations in the area for some time.
Continued connectivity is a concern once a company places its main business application
and data on-line.
Standalone users do have the option of adding a power backup to their office
infrastructure. Very few do, but it is an option.
Just recently Consumer Reports and Fox News reported that approximately 800 company
breeches took place in the US in 2014. Considering the major breeches that were
identified we can assume that the Internet played a role in the majority of the breeched
databases. However, I have no knowledge at this time that any on-line property
management system has been hacked or breeched.
One logical assumption would be that those property management system developers that
maintain on-line databases are not the targets that the Fortune 500 companies, financial
institutions or other major institutions are. They don’t have the exposure that the “500”
have and the property management industry and its technology is less known. That may
provide a level of security for some time.
Some recommendations are appropriate in regards to the issues and uncommon events
above. They include:
Create multiple internet connections through different providers –
Establish multiple points of entry for Internet connections –
Manage your network bandwidth, and avoid near saturation –
Review and understand your bandwidth contract, and plan for peak hour spikes -
Create contingency plans for short and long term outages.
Evaluate the security systems and procedures that the on-line company maintains.
Consider the use of an IT security specialist to provide a recommendation.

Ask the questions, “Why might the service fail? Why would my internet connection fail?
What are my recovery options? How secure is the system? Both internal and external
security should be evaluated. What don’t I have an answer for?
Note: Above some of the above content provided by Joanie Mann, Managing Editor
InSync - 11/2009 -
Another issue that should be considered as to the migration of your data if at some point
you choose to go to another system, or need to move to another system based on a
potential inability for your current on-line system vendor to continue its operations. Your
data and the program you were using is controlled by an on-line vendor. What facilities,
services and at what cost and time factors would allow your company to move your data
to a replacement system?
One major example related to the above scenario is the Yardi Windows Professional
System. It is still being used 20 years after its release and twelve years after it was
discontinued by Yardi. Its popularity and the existence of consultants familiar with the
program have filled most of the support gap created once the developer ended support.
There are a number of issues to consider if an on-line service provider “goes South”. How
is the service user protected? At this point it appears that most on-line / Cloud / SaaS
companies are just taking the position that it’s not going to happen. This is definitely an
area of concern with which you do want to discuss with your current or potential future
on-line provider.
Another benefit often emphasized is the monthly payments and the significantly lower
cost of an on-line start up operations when compared to the cost of a standalone system
start up. Initially this is a short term benefit, but in at least one system providing both
standalone and on-line systems the start up costs and monthly cost will equalize in most
cases in less then two years.
A follow up analysis on a small portfolio (100 units 2 user system) applied the costs of
both the standalone system and a comparable on-line system over 4 years. The end result
was that the costs of the on-line system were double of the standalone system. Generally
however, comparisons are difficult in that very few developers offer both on-line and
standalone systems which include the same core program routines. One company that
offer both on-line and standalone is Rent Manager and therefore an evaluation identified
above is a relatively simple set of calculations. See Property Management Systems
Addendum -
An intermediate to long term evaluation will result in an on-line user generating systems
costs equivalent to 4 or 5 times the cost of the standalone system after a number of years.
Our current clientele probably averages 5 to 6 years of system age with some of our oldest
clients using software as long as 15 years.
For those companies or owner / operators interested in not using their cash to acquire and
implement a standalone system we can recommend two possible solutions. The first
entails a lease-purchase financial solution. The second entails bank funding of your
purchase via a special bank regulation that uses bank account balances and a process
called “Reserve Analysis” to assist in the acquisition of your system and /or ongoing
accounting oriented expenses.
We know this bank function / service is in place in San Diego and presumably in
California, but I cannot speak to its operations elsewhere. We can identify local banks
providing this special service for a number of our clients. Contact our office for more
details.
Our purpose in this article primarily is to present a second opinion to what tends to be at
this time an almost standard acceptance that on-line systems are obviously the best
response to a new or replacement property management system. An on-line system may
be the best option based on existing or future conditions that may apply, some of which
were identified above. They are not however, the universally accepted choice, contrary to
the statements of the on-line developers who only offer an on-line system solution.
Assuming the Internet remains a relatively safe and secure environment and there is
continued development and competition among the developers, the issues we have
identified should begin to be resolved. Meanwhile, they do need to be considered as part
of any effort in the evaluation, selection and implementation of a new property
management system.
In general, many of the on-line Property Management Systems developers are relatively
new to property management and to property management systems. They have yet to
prove that their programs, their financial status and their marketing know how will
provide them the maturity and financial stability that they and their customers seek.
Technology Addendum – Topics - Portals

One of the more popular technology terms being discussed over the last few years which
actually has a non-technology origin is portal. One definition is that of “a grand and
imposing entrance” from the world of architecture. Within the spectrum of the Internet it
also represents an entrance into on-line entrance to on-line services and products.
Generally Internet programmers and web masters hope to achieve similar reactions to their
efforts in creating web sites and Internet grouped services. The term portal, also referred to
as a gateway, is the entrance for Internet users to acquire access to groups of resources and
services. Examples of public web portals are ASK, Google, MSN and Yahoo.
Portals have grown more capable and powerful, (Google comes to mind) and they have
also grown in the number of portals that focus on specific offerings in a specific area of
interest, whether it be government, industry, sports, etc. Initially they tended to be their
own entities which provided information and grouped services of a specific nature. Further
developments in Internet based portals introduced new features and functions allowing an
increased flow of data and associated services in both directions.
One of the earliest portals focused on property management and one of the most
successful developers provided a very powerful and popular internet based tenant
prospecting system. Later they also introduced integration of their interactive features with
a few property management companies and their web sites and the property management
system being used by the property management company.
Traditionally most property management companies web sites originated as a basic
“brochure” web site with the intent of just providing company and contact based
information. More recent developments entail the evolution of company web sites from
the basic “brochure” web site to that of a multi-purpose interactive portal. We now
observe the development and discussion of portals by property management systems
developers and programmers that provide support systems such as tenant prospecting,
background checking, and ACH/ EFT transaction processing which are either stand alone
support systems and / or integrated with some property management systems.
The portal may provide many new services and/or capabilities to applicants, tenants,
owners and vendors with the goals of providing new capabilities, reduced costs and
increased income and services. Use of exported data and imported data from / to the
company’s standalone system via the portal is a key element in providing new capabilities
and innovations and is an alternative solution to the on-line property management system
which has become increasingly popular within the property management industry, Many
company websites currently are not only advertising their business, they are doing the
business.
Property management company websites can market their rental/ lease properties to
prospective tenants, by providing current and future vacancy information, floor plans,
directions, amenities, pictures of the units and common areas and other brochure type
information. In addition, they can provide and process applications, receipts and deposits,
schedule appointments, handle inquiries, and possibly rent or lease a unit possibly without
a phone conversation or an on-site visit ever taking place. They provide 24/7 presence.
They can also initiate tenant maintenance requests, process tenant payments, provide
access to owner reports and communications plus provide a multitude of other services
resulting in better services and better management. A user may enter data and also retrieve
data while also collaborating with other users. A portal may provide Go To Meeting and
Webinar services and / or access to training videos related to the system or the business
ithe portal is associated with.
The portals may also utilize special equipment such as mobile cell phones, ( I-phones -
SmartPhones & Blackberries) or scanners and bar code readers as required by the portals
primary services and functions. They may have the capacity to significantly upgrade the
technological capabilities of companies using older systems or even none at all. It must be
understood however, they are inhabitants and participants of the Internet and therefore a
minimum of Internet connectivity or WiFi services are required.
The more computer literate the prospective residential or commercial tenant, investment
property owner or vendor is, the more likely they will use the facilities and services
available via the portal. Applicants looking for housing or commercial space will find a
wealth of information re: the properties / units that are available in addition to preparing
and providing a secure application and background check authorization. This can be done
comfortably with a minimum of time and effort and possibly without ever going on-site or
talking to a leasing agent.
Tenants may request maintenance services, inquire about current and past charges and
make a payment through the use of the A/R portion of the portal. They may also initiate
inquiries, provide notice and communicate via the portal.
Vendors may want to use the portal to establish directions and the exact location of a
specific property/ unit now waiting on a Work Order request by a tenant or resident
manager. Maintenance staff and possibly vendors may have the ability to update the
pending work orders in real time.
Owners may be provided the option of using a secure portal login for the purpose of
reviewing and downloading owner reports and possibly other documents available from
the web site portal. They may also use their portal to leave messages for the property
manager assigned to their property(s).
Their use of the portal will again usually provide new services and conveniences and
likely promote a stronger business relationship based on the new uses of technology your
company has applied to the management and operations of their property.
The information that is available of course is derived from the existing property
management system and is dependent upon the ability to both export and import via the
portal and its integration with the property management system. The integration is key in
that it allows the data to flow in both directions without the redundancy of data
duplication.
Property management companies are beginning to consider the upgrading of older web
sites in order to establish some of the capabilities above. It is imperative that they work
with companies/ individuals that have extensive experience with both integration and
interactive functions for their web site.
Property management companies seeking for assistance in acquiring a website portal
should also seek web masters familiar with the property management business. Significant
costs can often be attributed to the time required to educate the tech on the required
functions of the website. Prior experience and knowledge re” property management
operations will lower the cost of the completed website portal.
If an on-line system seems to work for your company then look to a developer that has the
experience, maturity and financial status to help assure they will provide an excellent
product, an excellent level of service and be a viable resource in the years to come.
Technology Addendum – Remote Devices

It is true that SmartPhones have evolved from cell phones but the thousands of
applications and many of the physical characteristics of SmartPhones are somewhat
revolutionary in the relative speed of recent development and the distribution and
capabilities of the various and sundry devices.
A personal digital assistant (PDA), also known as a palmtop computer, or personal data
assistant, is a mobile device that functions as a personal information manager. The term
PDA was first used on January 7, 1992 by Apple Computer CEO John Sculley at the
Consumer Electronics Show in Las Vegas, Nevada, referring to the Apple Newton.
Despite its groundbreaking design, touchscreen with handwriting recognition, and internal
modem add-on, the Newton’s $700 price tag and notoriously buggy software led to years
of slow sales. It was manufactured by Sharp.
So it came as no big surprise when Steve Jobs eventually axed the project after returning
in 1997 to whip the company back into shape. As it turns out, nearly a decade later Jobs
revisited the scene of the crime to reinvent the PDA for the internet age, and wound up
with a few devices that would have made the Newton proud: the iPhone, iPod, and iPad.
In recent years Apple’s profits have soared on wave after wave of portable devices, but the
company owes much of its current success to a failed PDA launched in 1993 during some
of Apple’s leanest times. (From Time Magazine – Top 100 Gadgets)
Current PDAs often have the ability to connect to the Internet. A PDA has an electronic
visual display, enabling it to include a web browser, but some newer models also have
audio capabilities, enabling them to be used as mobile phones or portable media players.
Many PDAs can access the Internet, intranets or extranets via Wi-Fi or Wireless Wide
Area Networks. Many PDAs employ touch screen technology.
In 1996, Nokia introduced the first mobile phone with full PDA functionality, the 9000
Communicator, which grew to become the world’s best-selling PDA. The Communicator
spawned a new category of mobile phones: the “PDA phone”, now called “Smartphone”.
Today, almost all PDAs are smartphones. Over 150 million smartphones are sold each
year, while “stand-alone” PDAs without phone functionality sell only about 3 million
units per year. (Wiki Pedia provided some of the content above)
Many would suggest that another Apple Computer product called the I-Phone would
create the next generation of devices which began the realm of the “Smartphones”. The I-
Phone uses the IOS operating system and it and the I-Phone devices have been well
received by I-Phone users. The I-Phone is notable for its features, innovation and top of
the market pricing.
The I-phone even with it’s high exposure also maintains the high end product cost and
possibly a lesser volume of applications. It will maintain it’s hard core Apple fans and will
be a major player for the near future, but there are competitors making progress in the
SmartPhone market.
Multiple wireless services and devices have since flooded the market. The applications
were distributed among a number of operating systems with perhaps the most offerings
provided by the Android System which was acquired by Google in 2005. Google’s
involvement, PC orientation and popularity along with what appears to be the largest
collection of “Apps” suggest that the “Droid” devices may become yet become the e ‘top
dog” in the future.
Android is an open-source software stack for mobile devices that includes an operating
system, middleware and key applications. Google Inc. purchased the initial developer of
the software, Android Inc., in 2005. Android’s mobile operating system is based upon a
modified version of the Linux kernel. Google and other members of the Open Handset
Alliance collaborated on Android’s development and release. The Android Open Source
Project (AOSP) is tasked with the maintenance and further development of Android.
Android has a large community of developers writing application programs (“apps”) that
extend the functionality of the devices. There are currently over 150,000 apps available for
Android. The Android Market is the online app store run by Google, though apps can also
be downloaded from third-party sites. Developers write primarily in the Java language,
controlling the device via Google-developed Java libraries.
The unveiling of the Android distribution on 5 November 2007 was announced with the
founding of the Open Handset Alliance, a consortium of 80 hardware, software, and
telecom companies devoted to advancing open standards for mobile devices. Google
released most of the Android code under the Apache License, a free software and open
source license. The Android operating system consists of coding from a variety of
program languages.
The last four paragraphs above would generally fall into the “more then you want to
know” category but do indicate the seriousness of the Android effort. Characteristics and
features that we currently see and use in the I-Phones and SmartPhones today we will be
seeing on our PC’s and MACs in the future.
“Droid” apps already provide the ability to access the PC systems back in the office
allowing users a PC in your pocket capability. Access to your desktop and web site
provide a whole new level of remote capability that only our ability to innovate controls.
For many future users the PC will become a support device for the Smartphone
technology.
At least initially the SmartPhone applications should primarily be directed as “Read
Only”. Security and screen size limitations initially suggest that a Read Only capability
may be a transitional option especially with new devices and new users.
Tablets are a hybrid of the SmartPhone and the laptop/ notebook computers that preceded
the early tablets. They now are provided by a number of the major developers of
SmartPhones and associated “Apps”. Some PC companies are also marketing tablets.
They appear to be replacing some of the traditional laptops and notebooks that have been
part of most offices and many homes beginning in the 1980’s.
The Microsoft’s Windows 8 operating system included touch screen and emulates many of
the maneuvers we are currently using on I-pads, Generally however the cost of a “Touch”
monitor has limited its use with PC’s. However, Smartphones and tablets are currently
operating in a “touch” mode and not likely to change that method of operation any time
soon. . The mouse and keyboard will still be available but will most likely be viewed as
transitional devices
The Microsoft Windows operating systemfor its phone and laptop/ tablet is a relatively
new offering and with fewer wireless services, devices and ‘apps” it will only acquire a
small portion of the market initially. It is becoming more attractive however with
competitive pricing and the inclusion of Windows office.
The release of Microsoft 10 however, originally expected in October 2015 surprised many
in the technology world with an early release at the end of July. It could be a game
changer. MS10 will initiate compatibility among Windows PC’s, Laptops, Tablets and
Smartphones. Early announcements of MS10 has also indicated that Google’s Cortana is a
feature of the system and indications are that both Apple and Android Apps at some point
will run in the MS10 platform, but not for some time. Microsoft has announced it will
offer no cost upgrades to MS10 from MS7 & and MS8 users to increase the speed of
transition to MS10. That offer will end July 31, 2016.
It could be that MS 10 is the product that brings Microsoft back to it’s past glory and
recreates it’s domination of computers, plus SmartPhones and tablets , using MS 10 as the
means to provide compatibility through out the current mix of devices and “apps” in the
future.
Technology Addendum – Voice Recognition & Artificial
Intelligence

A popular category of software that I have had some interest in over the last decade is that
of voice recognition software. My interest was based on an increasing level of writing and
a somewhat decreased dexterity in use of the keyboard. About 10 years ago I did have a
test version of the most popular version of voice recognition software and did spend some
time in testing the potential productivity. For a variety of reasons I moved on without a
commitment.
It was apparent that it would require a lot more time in the creation and editing the
document that I was inclined to spend. As a result although still interested I did not want
to ” be the first on my block” to implement voice recognition as an everyday use
technology.
At the end of 2007 Bill Gates and his Microsoft staff of thousands introduced Vista which
generally received a warm reception, (some would say I am being too complementary). In
any case, I revisited my past interest in voice recognition via the Internet I have heard that
Dragon Naturally Speaking was still the number one Voice Recognition system and that
Bill Gates had quietly included a V R system in Microsoft Vista. Google and the Internet
confirmed those issues. The Internet also provided a video of the little known semi-public
demonstration of Microsoft’s voice recognition system’
The demonstration was provided for 50 to 60 business reporters. The video clearly
identified that the demonstration was a technology train wreck. The first statement was
interpreted as gibberish and the correction was more so. By the third attempt, the
demonstrator knew that the demonstration was beyond salvaging. However, it appears that
the attempted demonstration was a nonevent based on the lack of reporting except for the
video, which found its way to the Internet later.
It was later indicated that the size of the room where the demonstration took place and the
ongoing background noise was the culprit. That was the cause of software failure,
although one would think that the importance of the demonstration would’ve dictated one
or more test runs in a similar environment prior to the actual demonstration. It appears that
Microsoft had maintained a very low profile on this voice recognition software inclusion.
It has continued with later Microsoft later operating systems inclusion of the voice
recognition software. Some suggest that it may be due to the possibility that the MS voice
recognition software is badly done. Various evaluations and comparisons indicate
otherwise.
A number of possible considerations come to mind as to why Microsoft’s V R addition to
Vista basically remained a secret. The one that seems most likely to me is that Bill Gates
did not want his company to once again experience anti-trust litigation. Many observers
believe his company got off easy the first time when Microsoft became the dominant
operating system and generic office software company with Windows 95, Office 95 and
Internet Explorer software.
Remember the past popularity of WordPerfect and Lotus Spreadsheets? MS Windows 95
and Office 95 together all but destroyed the Word Perfect, Lotus and other generic office
computer software products. The past battle with the Justice Department may have been a
factor in minimizing the exposure of Microsoft’s introduction of Voice Recognition
software in Vista.
It is suggested above Microsoft’s voice recognition is generally recognized as a good but
not yet the equivalent of Dragon Naturally Speaking, It has been identified as the next best
thing and the fact it is bundled into Microsoft 7, 8 and 10 helps. Those ratings appeared to
be significant in that the continued implementation of Microsoft’s Voice Recognition in
their operating systems provide a large number of users the opportunity to be introduced to
V R. It is even more important for those users that are deficient in keyboard skills; (I
include myself among that group).
Both Dragon and Microsoft’s Voice Recognition integrates with the major MS office
applications. It is possible some future thinking business systems developers (including
property management systems developers) may possibly integrate voice-recognition with
some business systems including property management systems and their operations. A
starting effort would most likely focus on the communications elements (letters and e-
mails). There is an increasing emphasis on extended communications and documentation
in and out of the office with owners, tenants and vendors. Voice recognition would be a
major benefit in providing the means to create those communications.
I currently use Dragon 11.5. I am pleased with its ability to create e-mails and Word
documents with a minimum of issues. I do not consider myself an expert in its use, but I
do believe Dragon is a better option than depending on my limited keyboard skills. It does
have limitations however. Last Winter one day during its use I noticed more errors then
usual; most likely due to a heavier voice and additional sounds resulting from a cold I
acquired two days earlier.
Other V R options are available including an IBM application identified as IBM Via Voice
at roughly half the cost of the of the basic Dragon system. There is also a Mac application
available identified as MacSpeech for Mac users.
We are seeing increasing use of voice-recognition on the I-Phones and SmartPhones
flooding the market. It generally is used in searches and inquiries but is also being used for
notes. It was the I-Phone 4S devices which introduced Siri which and its detailed voice
responses to voice inquiries. Siri is a personal assistant and knowledge navigator which is
an application for Apple’s IOS devices. It can use voice input to send messages, schedule
meetings , place phone calls and many other tasks. It is a bit unnerving initially hearing
the responses and recognizing that the only human input is the programming that created
Siri and the user’s voice inquiry.
It is a combination of voice recognition and artificial intelligence. Readers may remember
HAL in 2001; A Space Odyssey. They may also remember that HAL was huge and
intimidating. Siri however , appears to be polite, inquisitive and very helpful. Initial
impressions by one group of medical professionals resulted in a consensus identifying
their response.
My wife and I were present at a retirement party for a longtime friend and former
neighbor who was also a psychiatrist. Numerous psychiatrists were also present. One of
the psychiatrists had just purchased his I-Phone and demonstrated the SIRI feature by
asking SIRI for details about a specific psychiatric treatment. SIRI responded . The
medical professionals were awestruck as were the non-medical participants at the party.
Google’s Android Applications released some time after SIRI’s introduction a Siri like
product called Cortana which is now available to users on Android devices. We can most
likely expect future extensions to Siri and Cortana follow on versions and competitors also
providing similar capabilities and improvements primarily to the artificial intelligence
elements of this exciting innovation. Siri and Cortana has introduced the subject of how
much longer will humans be relevant? I suspect that a whole new category of apps using
Siri and Cortana will be forthcoming in the future. Can Siri and or Cortana be integrated
into a property management system?
Meanwhile other large industries are acquiring additional interest and commitments to
voice recognition as a potential and most likely a partial solution to their systems efforts.
Dragon in addition to their home and small business versions also provides both a medical
and legal versions to be used by doctors, nurses, and medical technicians plus lawyers and
paralegals.
My wife is an RN who has transitioned from the Operating Room to that of a Medical
Records Systems Specialist/ Trainer recently acquired her copy of Dragon in order to help
with its implementation at her hospital. After some initial difficulties with the headset she
was pleased as to the minimal time in which she was creating voice input documents. The
medical version is now being implemented slowly at the hospital.
Even though Voice Recognition is not yet integrated with property management systems I
perceive the likelihood of a few hard charging, innovative developers extending the use of
Voice Recognition in their systems along with other developers of business systems. There
are major benefits in the future substitution of voice recognition and artificial intelligence
for traditional keyboard operations in the property management and other industries. A
somewhat competing alternative may be that of the ”Touch Screens” we currently use with
our I-Phones, I-Pods and SmartPhones and expect to see in future operating systems and
their computer monitors.
As indicated elsewhere the MS!0 is the beginning of the future based on its support of
both Voice Recognition and basic Artificial Intelligence with its Cortana System. MS10
was originally designated as an October 2015 release, but instead was just released at the
end of July.
Technology Addendum – The Future

It appears that we will continue to see new technology and innovation provided by both
established and startup software and hardware companies. New apps continue to appear
for Apple , Google and now Microsoft devices. Google and Facebook continue to expand
upon their current already extended list of Internet based products and services.
Management should be attentive to business sources highlighting business tips focused on
innovation and technology.
Future innovation and technology should not only be reviewed to benefit the business, but
also to assure that the new innovations and technology is not used to endanger the
business and its participants. The presence and use of Smartphones establishes new
security concerns with devices that have become casual participants socially and in
business. Many believe too much information is being provided in social media activities,
It is likely that some of those concerns will also be present with both current and new
software and device releases.
Access to the Internet, its programs and data continues to increase providing new potential
sources of data breeches and theft. New cars are being delivered with enhanced consoles
and Wi-Fi. Wrist devices and clothes are now being designed to access the Internet in a
less visible fashion.
Microsoft’s new operating system, (MS 10) provides compatibility across Microsoft
devices. There has been a number of articles suggesting that Microsoft will provide the
means to run both Apple’s (IOS ) and Google’s (Android) apps on MS 10 devices
sometime in the future. That will be a great event if and when it occurs. It would provide
the means to run hundreds of thousands of programs/ apps on a wide range of devices.
It should be understood that traditionally most new technology applicable to property
management is only available to the larger companies based on the volume of activity they
require. This is less the case for much of the current technology that the property
management has or will implement.
Initially, ACH/EFT, E-Mail, Scanning, remote devices and voice recognition and artificial
intelligence were all more expensive technology then currently. Competition, innovation
and time have all been factors in reducing the cost of those capabilities.
It is likely that most completely new technology will require the same elements identified
above prior to to successful implementation within the rental industry.
Technology Addendum – Property Management Systems
P/M/S

As indicated elsewhere one of more Property Management Systems websites that are
attempting to identify the majority of existing Property Management Systems are currently
in use. They may or may not include specialized niche systems such as those used in the
hotel/motel industries niches and other short term rental niches, but usually identify that
they are separate from the majority of residential and commercial management systems.
Note: Hospitality ( Hotel Systems ) apparently have also chose to use the terminology of
Property Management Systems to categorize systems specifically for the hospitality
industry.
Key issues to be evaluated in selection of a system include the following:
Age – Newer systems generally will lack the refinement and program stability of
more mature systems.
Lack of training and support resources -
Lack of market share and financial stability limits the likelihood of ongoing upgrades
and long term continuity – i.e. Apple/ Mac systems –
The system may be limited in its features and its market focus, i.e. small portfolios,
and/or owner/ operator investment properties only –
General evaluations of systems tend to devalue standalone systems and overvalue in-
line systems- Note: Authors opinion not generally supported .

Note: One company that decided to buy a number of property management systems
beginning in 2005 or so in order to market their an integrated their background/ credit
checking and renter’s insurance products into the established property management
systems they acquired. A few years later they systems initiated a Chapter 11 bankruptcy
when they were not able to refinance a $21,000,000 loan with their $1,400,000 in assets.
The loan was used to acquire the different systems they had acquired and the follow on
marketing. Obviously, the users of those systems had to undergo major issues in dealing
with the aftermath of the bankruptcy.
A recent review of a few of these websites will identify from 10, up to 150 or so of the
residential/ commercial programs of which 10 to 20 % can be categorized as popular and
maintains a recognizable market share. It is likely that a number of listed programs are
functionally obsolete based on a number of possible issues. The newer programs (those
released since the millennium) are almost exclusively on-line systems. Other terms for on-
line systems include the following:
ASP – (Application Server Provider) –
 The cloud –
SaaS – (Software as a Service) -

A very short list of popular systems and critiques that are available on the Internet and
from this author follows in alphabetic sequence:
AppFolio – A popular on-line system out of California that focuses on technology
operations. It is relatively expensive, ($200 per month minimum - $1 per unit over 200
units ) – Began customer operations in April 2008 – Success has been acquired partly by a
very large marketing budget. Initially provided SFR and condo rental management and
than slowly introduced multi-unit residential management routines. Developers had a
significant background with Citrix which had a major role in early Internet systems
development.
Buildium – A popular on-line system out of Boston for both owner/ operators and fee
managers. Recent reports have indicated Buildium is providing Trust Accounting for
California Fee Managers. It has a significantly lower monthly fee structure then Appfolio.
User reviews have been impressive.
MRI – A long time high end ( expensive ) system directed at large diversified portfolios
with extensive financial reporting options and services. Originally a standalone system,
but now offers on-line operations.
Propertyware – An on-line system offered as a small to mid size portfolio system by a
large systems developer ( RealPage ). Originally began in 2001 and acquired by RealPage
in 2009. They have acquired mixed reviews partially based on slow responses to systems
requests. Personally I am aware of at least 3 local companies that ended their management
operations with Propertyware in their first year. Evaluate and review carefully.
QuickBooks - A popular generic accounting system for the small business community. It
is not a property management system, but a small number (2-3) third party versions
designed for property management operations have been developed. Claims have been
made in at least one case by a 3rd party principal that the modified system is California
DRE compliant. Caveat emptor!
Quicken – Rental Property Manager - A basic property management system for owner/
operators. Inexpensive, but lacking many features that would be of value for other than
start up portfolios.
Note: Both QuickBooks and Quicken Rental Property Manager systems are products of
Intuit Systems. Intuit offers both standalone and online accounting systems and products
including payroll and tax services.
Real Page – Began with a product in 1998 called Rent Roll for on-site management of
large apartment communities. Three years later they began their on-line management
services. RealPage currently offers a number of high end products including both
residential and commercial products including accounting as a separate service and
pricing. They acquired the rights to the various programs involved in the bankruptcy
above.
The systems and their users generally suffered as a result of the bankruptcy and their new
ownership.
Rent Manager – One of the early 80’s system developers, and currently offering highly
ranked systems products. It was also the first developer to release a property management
on-line system. Rent Manager currently provides both full featured standalone and on-line
systems plus a number of modules focused on niche management operations, i.e.
commercial and manufactured housing/ mobile home parks. Rent Manager systems can
manage from 10 to 10,000 plus units with pricing that begins at $15 per unit for its small
portfolio standalone system. Rent Manager’s on-line system is priced based on concurrent
user(s) plus a one time set up fee per user. unit. There has been a significant set of
extensions to the on-line system focused on portal services and use of remote devices,
Note: In late 2007 my company became a dealer for Rent Manager systems after about a
month of Internet research and phone conversations with sales managers and systems
developers. I believed that Rent Manager’s maturity, financial stability, systems products
and services provided the best systems elements for my company’s current and future
clientele. After seven years I still believe that to be true. Generally Rent Manager is
usually identified as one of the 5 or 10 most popular programs and most often is not
identified as offering both standalone and on-line versions. Other features of significance
for the full featured system is the value pricing for the smaller start up / small portfolio
user.
Skyline - Also an early successful system developer, but lost market share based on a very
slow move into a MS Windows product. Locally they were a popular product in the late
80’s and early 90’s but began to loose out to Yardi systems when Yardi introduced MS
Windows versions. Yardi even acquired Skyline offices in late 90’s. Still active but
nowhere near the market share they once maintained.
Tenant File - A popular standalone product for owner/ operators and some fee managers
(other than California) with small to mid size portfolios. It has been a favorite of owner /
operators for about twenty years. It appears to have upgraded to many of the current
technologies and is an attractively priced system.
Yardi Systems – Yardi was one of the earliest property management systems developers
starting the company in 1982 in Santa Barbara, California. The first products were DOS
programs and did for a time also offered Apple versions of their system. They provided 5
versions of the DOS software before releasing an early Windows 16 bit hybrid version.
Their most popular program was Windows Professional which was released in 1995 and
was used by thousands of owner/ operators and fee managers. They release 3 versions
with numerous updates through 2002. They discontinued support in 2003. There had been
some indication they were going to offer an upgraded 32 bit version of Professional but
soon ended that discussion after about six months,
I had become a dealer of Yardi systems in the early 90’s which also include a construction
accounting and real estate office accounting system using the accounting routines already
in the property management system. At one time my company had over 300 Yardi
Systems clients. I still have 30 or so Yardi clients still using 20 year old software.
Yardi Genesis - An older standalone system originally released in 1999 as Yardi
Enterprise Express. It’s pricing was not well received by the thousands of Yardi Windows
Professional users looking for an upgrade. In 2003 it was re-configured , re-named, re-
priced and released as Yardi Genesis. Some suggested it should have been re- named as
Yardi Phoenix. For a number of years users were not pleased with the lack of upgrades,
especially when the annual license lease fees were due. A replacement Genesis2 was
recently released.
Yardi Genesis2 - Now an on-line system focused on small to midsize portfolios with
many possible additional modules and pricing options. It still targets the small to midsize
fee property management portfolio and appears to be the upgrade option for former
Genesis system users.
Yardi Voyager – A high end pricey on-line system released in 2001; still in active use. It
is known for its accounting and customization features. At one time it was priced at about
$200 per month per user. Many additional components and pricing configurations have
been added since then. It is a popular system and was one of the early high end on-line
system offerings.
Yardi Point2 – A low end on-line system that was acquired out of bankruptcy a few years
ago by Yardi. It was originally marketed as the DIY on-line system and the source e of one
of my National magazines published articles. The article was based on the marketing
slogan the company used in California at NARPM conferences. “Everything a Property
Managers Needs” which was not even close to being true when directed at California Fee
Property Managers.
The system did not include Trust Accounting which was a DRE mandate for California
Fee Property Managers. The company representatives at the conference in fact had no
knowledge of Trust Accounting or its mandated use. I believe it has been updated since its
acquisition by Yardi which is a California based systems developer. Yardi appears to have
removed it from its main website after a relatively short presence. The release of Genesis
2 may have established
Point 2 as a redundant and dated small to midsize portfolio on-line property management
system.
The above systems are a sampling of the 150 plus systems currently available. We have
varying levels of experience and opinions based on our years in the field and the
observations that I and our clients have made related to these systems and are part of the
content above.
Property Management Systems – From A To Z Glossary

Note: A glossary generally provides a description of the key word / term used in the article
/ white paper or book. The A To Z Glossary of terms is defined generally in the chapter(s)
and/or the addendums in which it is used.
Term Chapter(s) Addendum(s)
Accounting 7
Accrual Accounting 7
ACH 1/3/4/9
Air Park 8
AirBNB 2/8
Android AKA Droid 9
Anti-virus 11
ADA (American Disability Act) 14
AppFolio P/M/S
Apple 1
AP’s (Accounts Payable) 4
AR’s (Accounts Receivable) 3
ASP (Application Service Provider) 9 P/M/S
Background Checking 2/12
Back-Ups 9/11
Bank Reconciliation 7
Batch 5
Bookkeeping 7
Buildium P/M/S
Calendar 2
CAM (Common Area Maintenance 3/8
Cash Accounting 7
CC&R’s (Covenants, Conditions & 3/8
Restrictions)
Charge 3/8
Check 21 4
Check Reader/ Scanner 3/7 Scanning Operations
Citrix 9
Cloud 9 P/M/S - On-Line Vs
Standalone
COA (Chart of Accounts) 7
Commercial 8
Contact Management 2 On-Line Vs Standalone
Contra Account 7
Cortana 9 Remote Devices - Future
CPM 1
CraigsList 2
Credit 7
Credit Cards 3
Credit Checking 2/12
Debit 7
Debit Card 3
DOS (Disk Operating System) 1
DRE / BRE (Department of Real Estate ) 1/
11/13/14
EFT (Electronic Funds Transfer) 1/34/5 ACH/ EFT Operations
Embezzlement 11
E-mail 5 E-Mail Operations
EPA ( Environmental Protection Agency) 12/14
Excel 5
Fair Housing 12/14
Fiscal Year 7
FTB (California Franchise Tax Board) 1/5/14
GAAP (General Accepted Accounting 7
Practice)
GTM – (GO TO Meeting) 1/2
Google 9
Help Screens 15
HOA – (Home Owner Association) 1/3/5/8
HTML 9
Identity Theft 11/12
Industrial 8
Innovation 1/15 Future
Integration 1/9/15
Invoice 4/5 Scanning Operations
I-Pad 9 On-Line Vs
Standalone/Remote Devices
I-Phone 9 On-Line Vs
Standalone/Remote Devices
Internet 1/9 On-Line Vs
Standalone/Remote Devices
ISP –(Internet Systems Provider) 9 On-Line Vs Standalone
IREM (Institute of Real Estate Management) 1/13
Journal 7
Journal Entry 7
Kickbacks 11
Late Charge 3
Lease 8
Lockbox 9
Lodging Credit 8
Login 1/11
MAC 1/9 Remote Devices
Malware 11
Marinas 8
Manufactured Housing 8
Memorize 5
MHP (Mobile Home Park) 8
Microsoft 1/9 Remote Devices/ Future
Mini-computer 1
Mixed Use 8
Money Order 3
Month to Month 3
Move In & Move Out 3/4/6
MRI - P/M/S
NAA (National Apartment Association) 1/16
NARPM –(National Association of 1 /13/15
Residential Property Managers)
NSF – (Non- Sufficient Funds) 3

Office Building 8
On-Line 9 P/M/S On-Line Vs
Standalone
Operating System 1/9 Remote Devices
OSHA (Occupational Safety & Health 14
Administration)
Owner 2/5/12
Owner Contribution 3
Owner Draw/ Distribution ¼
Payback 15/16
PayChex 9/15
Payroll 9
Password 11
PayLease 9 ACH/EFT
PC-DOS 1
PDF (Portable Document Format) 5
Pharming 11
Phone Broadcast 5
Portal 2/9 Portals
Prepayments 3
Propertyware P/M/S
QuickBooks P/M/S
Quicken (Rental Property Manager) P/M/S
RDP (Remote Desktop Protocol) 9 Remote Devices
Red Flag 11/12
Rent Control 14
Rent Manager 5/12 P/M/S
Retail 8
Reserve 8
Reserve Analysis 9/15
Resident Manager 2/9
Risk Management 2/12
RUBS (Resident Utility Billing System) 14
RV Park 8
SaaS - (Software as a Service) 9 P/M/S
Sales Tax 14
Scam 11
Scanning/ Scanner 5/10/12 Scanning Operations
Section 8 3/14
Service Request 6
SFR –(Single Family Residence) 8
Siri 9 Remote Devices/ Future
SmartPhone 9 Remote Devices/ Future
Standalone 9 On-Line Vs Standalone
STR – (Short Term Rentals) 8/14
Templates 6
Tenant Pro 1
Terminal Server 9
Triple Net Lease 8
Trust Accounting 13/15
Unit 2
Upgrades 15/16
URL (Uniform Resource Locator) 9
USB (Universal Serial Bus) 1
Vendor 4/5
Virus 1
VOIP Voice Over Internet Protocol) 10
VR – (Voice Recognition) 5 Voice Recognition &
Artificial Intelligence -
Future
Webinar 2/9/15
Web site 2/9 Portal
Wi-Fi 9 Future
Withholding (California Franchise Tax 14
Board)
Withholding (Federal Income Tax) 14
Work Order 6
XLS 5
Yardi Systems 1 P/M/S
Yahoo 9
Zillow 2/9
Zoning 8/14
Acknowledgement

Almost all authors have at some point recognized the importance of others in the creation
of their published writings. My significant other is my wife, my partner, the mother of our
children, the really grand grandmother of our grandchildren and my better half. She has
cared for many others as an operating room nurse in addition to caring for me and other
family members. . She has taught many others as a head nurse, including doctors and
nurses the protocols and procedures required in the OR suite.
A number of years ago after an extensive set of experiences and accomplishments in and
about the OR including management she transitioned into the realm of medical record
systems or Informatics. Some may note that that in a number of ways her professional
journey paralleled my own journey which involved years of prior general systems
experience in preparation of my 30 years of property management systems. She now trains
doctors and nurses on the mandated requirements of medical records systems that are now
a part of hospital, clinic, and OR procedures.
I cannot imagine my life without this woman. I consider myself blessed that she came into
my life a second time many years ago during a visit to Chicago to spend time with my
parents. She has assisted and supported me in so many ways in and sickness and in health,
during successful professional activities and major disasters effecting me and my
associates. She has helped in keeping me focused on the book along with my clients, and
my family. She deserves to share in any future kudos that may be forthcoming from the
book.
Dick Jonilonis
January 2016