Handling Tenant and Owner Funds

Handling Tenant and Owner Funds

Owners entrust their property manager with more than just their physical assets. Property managers handle rental income, reserve funds, manage security deposits and write checks on the owner’s behalf. To function properly, this relationship requires trust, transparency and accountability. 

Here’s a list of issues to review and questions to ask any property management companies that you interview:

Payment to Owner

• What day of the month do you mail checks to owners?
• Will the check be for that month, or will you hold back a month? (It’s better to have your rental revenue in your bank account collecting interest as soon as possible rather than sitting your manager’s bank account.)
• Do you provide direct deposit?

Taxes

• Will you me with an IRS-1099 and a summary profit and loss statement for tax purposes?
• Are you able to advise me on tax deductions?

Accounting

• Do you keep detailed records and documentation?

Reporting

• How often do you send out reports? When are they sent out?
• Will I be able to view reports online?
• Can  I see a sample report?

Security Deposits

Security deposits are an important tool for motivating tenant care and recouping losses due to tenant damage, but if they aren’t handled correctly, you could lose your right to keep any portion of the deposit. Worse, you could end up owing your tenant several times the deposit amount. Ask any prospective property management company the following questions:

• How do you handle security deposits?
• How much is collected?
• Do you accept personal checks for the security deposit? What if the check bounces? (This is not a good idea, and the deposit should be cash, money order or a cashier’s check.)
• How quickly do you send out refunds?
• What is you list of conditions and deductions for refunding security deposits? How often do you go to small claims court over security deposits?

Miscellaneous

• Do you make payments for owners (mortgage, insurance, property taxes, HOA dues, etc.)?
• Will you be authorized to sign checks on my account? If so, what types of controls are put in place to prevent misuse of funds, or outright embezzlement?
• How quickly do you pay vendors?
• Do you prevent the co-mingling of funds among the properties you manage?

Given a property management company’s fiscal responsibility, it’s a good idea to raise these questions during the interview process and make sure you understand their approach. 

Next, we’ll look at the management company’s policies regarding setting and collecting rent.

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The Realty Medics are the nation’s leaders in “Rocket Science Renting”: Rocket Science Renting is about keeping your life simple by letting someone else handle the complex work of property management for you. It’s knowing that your property is running smoothly, with no hiccups or glitches. It’s hyper-responsive customer service that gives you property management peace of mind. It’s advanced technology that could only be designed by a former NASA engineer like our owner, Ben Sencenbaugh. And it’s knowing that you’re always getting maximum value and ROI for your investment.