Property Management: How Does The Money Flow?
Hello to All,
Basic question about using Property Management firms - what is the typical arrangement with them insofar as the flow of money?
They collect gross receipts, so do they deposit the money minus their management fees into my account and subsequently draw from same account to handle their expenses? OR am I billed for expenses as they occur, or is all this included in the management fees up front? If they draw from my account not sure I like that, without my prior OK. I may decide to so some repairs myself, for instance.
Thanks folks.
-presley
Most management firms offer you different options. Mine sends me a check each month. If there are repairs they simply call me and I either repair it myself or call someone. My manager will also call the subs himself if I wanted and the subs will bill me if I have used them before. There are also many other options with varying charges depending how hands off you want to be.
Different property management firms have different capabilities concerning deposit of funds. One company I use can electronically transfer deposits to my account, while another either has to use one of my deposit slips or send me a check.
In my experience, management companies will ask you to fund a maintenance reserve account to handle small emergency repairs and expense items as they arise. The management companies may also offer to pay your mortgage and your homeowners association fees from the rental proceeds, then send you the remaining balance.
Companies will differ on what services are included in their management fees and what are reimbursed. For example, one company I use charges me for newspaper advertising. Two other companies don't, but their management fees are higher. There seems to also be a trend in property management agreements to charge the property owner a "supervisory fee" for any repairs the management company orders. This fee seems to be about 10% of the cost of the repair and is meant to cover the time, and labor involved in coordinating with the contractor and the tenant.
In summary, while you started with a basic question, there is no simple, one-size-fits-all answer. Fees, services, and capabilities will vary with each company.