Posts Tagged Manage To Make Money
MANAGING PROPERTY FOR OTHERS – DELIVERING STATEMENTS AND PAYMENTS TO OWNERS
Posted by patandkrislarkin in Property Management on February 20, 2012
Delivery of Statements – Mail Hard Copy vs. e-mail
When our company started all of these processes and procedures . . . it seems bizzare to say it but . . . there was no internet or e-mail. All of the monthly statements along with all of the backup copies of invoices were packaged, posted and mailed out to each of our Owners. With the advent of e-mail and good quality scanners, we were able to move toward e-mailing our monthly statements to our Owners. The only thing that held us back was our Owners; many of whom were a bit technologically challenged and “didn’t do e-mail”.
As we moved forward though, we pushed to make the change. I am a big believer in processes and the more processes you have for the same outcome, the less efficient you are. I know that the time is quickly approaching when this will no longer be an issue and electronic delivery will be the standard for all property owners.
If you are just starting a property management firm, this is an awesome opportunity for you. You can start from the beginning sending your statements out electronically . . . and not be faced with converting to the new technology that will undoubtedly be here all too soon!
Payments to Owners
Assuming that our Owners’ property had a positive cash flow, we paid a disbursement out to each of our Owners at the time we issued the statements. Our software had a default setting that basically told it to send the Owner any remaining cash in the account after all expenses have been paid. This is not always a good thing; if you have a system like this, you want to be diligent to keep an eye on future anticipated expenses. Let me tell you it is not fun to have sent an Owner a bundle of money one month, then the next month you are trying to pay his real estate taxes and you don’t have enough money in the account. You then have the opportunity to ask the Owner to send the money back to you. This is not good for your credibility! We could also go into our system and set a cash minimum that we wanted to maintain in all of our accounts and it would automatically send the Owner anything in excess of that amount. It is all a matter of how you want to set it up.
Like mailing out hard copies of statements and technology marching on, making payments to our Owners has also undergone some changes. In the early days, we sent out live checks each month to our Owners. Now, with the advent of ACH or; Automated Clearing House, we can electronically transfer funds from our trust account to our Owners’ bank accounts, minimizing live checks, mail problems, etc. Again, we still had those Owners (probably the same ones that “don’t do e-mail”) “who don’t do electronic deposits”. We continued to work with them knowing that “someday . . . this too shall pass!”
Our hope and prayer is that this information has been helpful and sparked some thought processes for you. To discover more resources for managing rental properties for yourself or others, visit our website and check out our Books, Documents, Forms, Checklists, Videos . . . available in hard or immediately downloadable versions.
Thank you for reading!
Pat and Kris Larkin
MANAGING RENTAL PROPERTIES FOR OTHERS – Statements and Payments to Owners
Posted by patandkrislarkin in Property Management on February 15, 2012
Monthly Statements
One of the purposes of property management we was to provide accurate accounting for our Owners, and part of that is to provide them with monthly statements. As we mentioned previously, a property management firm must set up and maintain a “Fiduciary Trust” bank account for all of the monies for the properties it manages to flow through. In our company, we had the rent revenues as well as mortgage, HOA dues, maintenance and a multitude of other expense payments for over 320 properties flowing through this account. Keeping it all straight is paramount!
Regardless whether you manage one property for an Owner or five, you will need to provide all of your Owners with a monthly statement. This statement spells out all of the income, expenses, disbursements to or from the Owner, operating profit or loss, and the beginning and ending cash position for each individual property for each month. You will send out each statement, along with copies of all invoices paid for the period and the Owner’s check (assuming they have positive cash flow) or advice of deposit in their account.
Cutoff times and statement dates
This has been an issue that was a difficult one for us to get our arms around. We all have different needs, and while we were building the company, like any other fledgling small business, we attempted to accommodate everyone’s needs. Some Owners needed their disbursements by the 10th of each month and others were OK so long as they received it before the first of the month. Consequently, we set up two statement dates for our Owners; one on the 10th and the other on the 25th. This became very labor-intensive as we found ourselves always dealing with statements and statement issues. We later learned that if people want your service, they will adapt to your processes and procedures, so we changed to one statement date of the 25th for all of our Owners. OK, we still had some of our oldest clients, (some had been with us for many years and others had been on this earth for many years and others . . . both!) who we maintained a 10th of the month statement date for their convenience. Though that number continued to decrease!
We set up our statement date of the 25th of the month so that we could manage our clients’ expectations as well as exceed them. You remember I mentioned that most of our Owners needed their funds before the 1st of each month? Well, that is why we set up the 25th as the date we specify in our contract. We promised that they will always have their money by then. Now, to exceed their expectations; internally, we worked with a 20th statement date. Due to the calendar and the tricks it plays on us from time to time, we may miss that and go to the 22nd or so, but with few extenuating circumstances did we ever miss the 25th and nearly all of the time we exceeded it! Which of course kept our Owners happy!
It is all well and good that we talk about a statement date of the 25th. So what? What that really means is that behind the scenes we have to have a cutoff date for all transactions between the 15th and the 17th of the month, depending on where the dates fall on the calendar. That means all rents have to be in; all payments made including mortgages, taxes, HOA’s and even security deposit refunds. Otherwise, we will need to run a supplemental statement for that property for that month. If we don’t, there would be a gap in the information on the statements from month to month.
If this information has been helpful to you there is a lot more where it came from! Visit our website for more books, videos, downloadable e-books and live seminars near you.
Thank you for reading!
Pat & Kris
MANAGING RENTAL PROPERTIES – The Management Contract
Posted by patandkrislarkin in Uncategorized on February 6, 2012
MANAGEMENT CONTRACT
A written management agreement is paramount if you are going to manage someone else’s property. This doesn’t have to be a thirty-page document; in fact, it can be very simple. The main thing is that you spell out what you agree to do for the Owner as his property manager, and what the Owner agrees to pay you for those services. That gives you the “bare bones” agreement and you can add to it from there.
I have included a copy of our management agreement for you to get an idea of what kind of a document you will consider using. Again, please be sure to have a competent attorney review all legal documents you are considering using and have them comment or recreate them into a document that works best for your needs.
Termination of Management Services
All good things must come to an end, as do management contracts. They end, either because they expire and are not renewed, the Owner sells the property, or the relationship between the Owner and ourselves simply was not a good fit.
Our management agreement allows for early termination by either party with 30 days written notice. If we have leased the property for the Owner and paid a commission, the only thing we asked of the Owner was to be paid for the unrealized portion of the leasing commission. In other words, if we paid out $1,200.00 to a real estate agent from an outside company to find a Tenant for this Owner’s property, and 3 months later the Owner decides to terminate the agreement for whatever reason, then the Owner would have to reimburse us for the 9 months of commission, or $900.00, before we would let them out of the agreement. Now, like everything, there are exceptions; we once had an Owner with whom the chemistry between us was so negative that we were glad to “eat” the remaining commission just to get out of the bad relationship!
When you know that you will soon not be managing a property any longer and you know the date, you need to send a letter to the Tenant advising them of the situation. Basically, we prepare a letter that says “as of this date, we will no longer be managing the property you are living in.” Tell them who will be managing it, where to send their rent payments as well as who has their security deposit. Send it to the Tenant via certified mail and send a copy to the Owner. Just prior to the effective date, cut a check for the security deposit and send it to the Owner. Be sure that all of these steps are well documented in writing. They don’t have to be fancy or eloquent, just documented.
The above is an excerpt from our new book: “Manage To make Money . . . with a Career i Property Management”. This book helps you to transition your career to one in the residential property management field. We also offer 3 hour workshops on transitioning your career. If you would like to view the management contract or other documents referenced you will need to see the book.
If this information has been helpful to you and you would like to explore more residential property management tools or resources, please visit our website.
Thank you for reading!
PatandKrisLarkin.com 