Author Topic: How much money should I give a property manager for "unplanned maintenance"  (Read 2794 times)

savingstldad

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I am working with a property manager that is including an expense for unplanned maintenance.  In this case, the monthly income is over 4k.  The net back to me after expenses/mortgage/vacancy/etc is around 1k.  One of the expenses listed in unplanned maintenance repairs of over 400/mo. 

Does that sound normal to you guys?  How much should I keep in a fund like this for potential unplanned repairs?

iamlindoro

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Is this maintenance that is actually occurring, or the PM is taking out an additional $400 a month into some sort of reserve or as some sort of contingency?

If the former, it's difficult to say whether it's normal or not without knowing a lot more about the size, condition, and type of property we're talking about.  If the latter, then I would say it's inappropriate as it's not the property manager's job to ensure you have adequate reserves, it's yours.  Since it's 4K in rents and the amount quoted is $400, I'm guessing the PM is trying to enforce your keeping a 10% of rents repair budget.  While that number is probably appropriate in a lot of cases, and may even be in yours, it's not the PM's job to be withholding those funds.  All of this is under the assumption that this money is sitting in a reserve account, and not being permanently paid to the PM.

You signed a PM contract, what did it say?

tonysemail

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We use a PM who holds a reserve fund of $250 relative to monthly income of $6000.
the reserve fund doesn't get tapped every month, so normally we get the $250 included in the owner's disbursement.

savingstldad

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I haven't signed anything yet, it's just included in an estimate.  The property is well kept with a new roof, air/heat, exterior, parking pad, etc.  I'm just not sure because the place looks like it needs 0 work.  This isn't money paid to the PM, it's just a reserve for repairs.

iamlindoro

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I haven't signed anything yet, it's just included in an estimate.  The property is well kept with a new roof, air/heat, exterior, parking pad, etc.  I'm just not sure because the place looks like it needs 0 work.  This isn't money paid to the PM, it's just a reserve for repairs.

None of the PMs I work with do anything like this.  At most, I am required to keep a small amount ($300-500 total regardless of how many units I have them manage) in a reserve account to cover small incidental repairs.  You are in the driver's seat, you are able to request that they amend their agreement with you, or find another property manager.  What is this PM bringing to the table that others do not that merits even considering this?

Once again, it's probably appropriate to keep 10% or so of rents for maintenance and capital repairs.  You *should* do this.  You just don't have to let the PM control it.
« Last Edit: July 08, 2015, 04:32:21 PM by iamlindoro »

CashFlowDiaries

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I have one PM that requires a $350 repair escrow fund that they keep and hold for emergencies.  I also have another PM that does not do that.  I wouldnt say its out of the ordinary but it happens.  You should be able to negotiate with them if you dont like it. Ultimately, you need to be the one that approves all repairs.  The funds they keep are really more for super emergency type situations.

iamlindoro

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I have one PM that requires a $350 repair escrow fund that they keep and hold for emergencies.  I also have another PM that does not do that.  I wouldnt say its out of the ordinary but it happens.  You should be able to negotiate with them if you dont like it. Ultimately, you need to be the one that approves all repairs.  The funds they keep are really more for super emergency type situations.

Note that the OP is talking about them reserving $400 *per month*, implying they wish to reserve 10% of rents under their control over the longer term.  This is very unusual.

savingstldad

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Thanks for the responses.  It seemed odd to me as well, which is why I asked.  Does the PM usually pay the bills for you as well?  Things like water/electrical/trash/etc?  I'd like to get some of the details worked out before I sign anything.  It seems like the PM would need some variable amount of money per month to pay those things unless I just do it myself.

iamlindoro

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Does the PM usually pay the bills for you as well?  Things like water/electrical/trash/etc?

Nope.  This PM could be totally legit, but enough things are out of the ordinary that it at least makes my spidey-sense tingle.