One of the most important economic factors in successful apartment management is the property’s residents. Attracting and retaining high-quality tenants—in addition to reducing operational expenses and improving net operating income—require an enterprise-wide view of the risks and opportunities residents represent, as well as a foundation of statistically valid decisions based on empirical data.
Multifamily industry leaders have long had an intuitive understanding of the inverse relationship between resident quality and resident-related damage: As resident quality declines, resident-related damage increases. In conjunction with this principle, apartment managers face risks in five major areas when operating properties:
- Brand/reputation;
- Regulatory compliance;
- Lease performance;
- Resident third-party liability; and
- Resident damages.
Here, we’ll focus on the last category—resident damages—of which there are two types:
Resident-caused damages refers to claims that directly result from resident negligence, such as a kitchen fire, whereas resident-related damages are losses experienced by the resident but are not the result of his or her negligence. An example of the latter would be a theft claim.
When renter’s insurance is in force, resident-caused damage claims are paid as liability losses by the renter’s insurance company. Alternatively, resident-related losses can be third-party property damage claims, such as water damage with an unclear cause, impacting the apartment owner and the resident’s neighbor. Or, the loss can be a first-party property claim, such as a theft.
An increased understanding of resident risk specifically identifies important opportunities for apartment owners and managers. With an enhanced capability to make risk-informed decisions, apartment managers can develop strategic solutions to address resident risk that provide positive operational, bottom-line results and benefits to both residents and external stakeholders alike. Additionally, insurance underwriters who focus on multifamily communities can utilize unique statistically valid methodology to significantly improve the evaluation of damages for which residents may be liable.
Download the Adding Value Through Comprehensive Resident Risk Management™ white paper to learn more.
