When a property needs maintenance/repairs from a third party, does the property manager cover the cost and take out of rent or send the bill to the owner?
My company does this one way and a guy that I’m considering selling the biz to does it the other.
BG
I prefer that I get the bill! You could do it the other way if you want to be completely hands off! Either way the repairs are deductible!
As an example, the septic tank needs pumping. That’s something no PM company would have in house skill/equipment-wise. It’s a $300-ish bill. You have a couple of houses with a expected rental income of about $1000. You’d rather have the PM coordinate the work, then have the septic company send you the bill?
My business model pays for the service, takes it out of next month’s rent. I have a ceiling of $100 before I touch base with the owner before I go forward, then I have a max of about $1000 that I’ll spend on a house before I start pushing the owner for some contribution.
Does that not sound typical? If not, does it not sound ideal?
I shaped my business model to establish owner’s trust for me and vendor’s trust for me. I don’t want to have an owner not paying a vendor in a timely manner or a vendor sending over a bill that isn’t within my negotiated rate structure. I want pay the vendor, then get the funds back from the incoming stream. I think the problem for the guy who’s buying my business is the operating capital needed to manage this. He won’t admit that, but he’s suggested that he’ll ask owners to pay the bills directly or to establish a reserve fund after the transition. I establish a reserve fund by taking an extra little fee when leasing it. Over time that has built to a good pile that I can work from, but in the beginning it was my captial that floated the whole process. I asked him what value is he bringing if all he does is generate bills that the owners have to receive and write checks for. It doesn’t make sense to me and it would be a shock to my clients to have that change. I think it is a deal breaker for me.
I don’t think that getting a random bill in the mail about your rental house that someone else is “managing” is an acceptable practice. Am I way out of the norm? I wasnt’ very versed in PM practices when I started this biz, I just did what I thought I would want. I owned several houses and managed them fine. Now I manage all of my client’s houses as i
We have a managed property. The manager takes care of everything and pulls it from the rent check.
If it’s more than a simple repair, they involve us.
For instance the dishwasher died. Management company informed us, I said don’t waste your time trying to fix it. Went to a place, picked out the new one. Told the company which model number. They purchased/replaced the dishwasher.
The only reason I was involved was because we have plans to sell and wanted a nicer than “contractor” grade appliances.
As the owner I expect the management company to bill me. I would be pissed if I started receiving random bills from subs.
That’s the way I set it up. I’m not sure what this other guy is thinking. It isn’t client-focused they way I have been. He says he has plenty of capital, “10s of thousands available” and I’m under 10k in my operating account. He should be good, but doesn’t see the strategy. I’ll back out if he doesn’t align.
He references that the software I use has the option to charge the owner instead of take it from rent. It doesn’t make any sense to me. Might not be the guy I’ll sell to after all.
BG
Bto- if your deal falls though shoot me a message. Each situation and owner’s needs really dictate the course of action- parameters should be explicitly defined in your Mgt Agreements/ contracts. Valuation of your portfolio can be weighted by age of contracts(in addition to ancillary fees/business models ect). Feel free to email message with any questions.
George Carlin said it best, ‘Think of how stupid the average person is, and then realize that half of them are stupider than that’’.