A perk when hiring a property manager is having somebody else to coordinate repairs. Yet, landlords often find themselves asking “How do property managers pay for repairs?”.
This article covers management agreements, explain how property managers pay for repairs, and landlord benefits. At the end we discuss alternatives that are landlord friendly.
Understand Your Property Manager Agreement
Before assessing any issues, questions or concerns with a property manager, you must understand the Property Management Agreement.
This important document defines all the responsibilities for property managers and landlords. Including maintenance and repair coordination. As well as payments.
Review your management agreement for the specific clause. Read our article that helps break down the maintenance clauses.
How Do Property Managers Pay for Repairs?
Easiest way to say it: with the landlord’s money.
Property managers rarely go out-of-pocket.
This is a main reason property management companies hold onto rent checks for weeks before paying landlords. If you currently use a property manager, you’ll notice rent is paid on the 1st. Yet, you don’t receive rent checks till around the 20th each month.
When a repair occurs, the vendors will bill the management company. Your property manager then enters the data into accounting reports, tracking the property expenses.
Before paying out landlords, property management companies pay the vendor bills. Then deduct it from your monthly rent check.
For example, if the tenant paid $1,000 rent on the 1st and there was a toilet leak that costs $400. The property manager pays the plumber first, then pays you the remaining $600.
Essentially your property manager uses the rent money they’re holding to pay repairs. When a bill is expected, this may cause your rent check to be delayed.
What About Landlords Minimum Reserve for Repairs?
Every property management company requires landlords to keep a minimum reserve. This is for maintenance and repairs. Intended to pay bills quickly, without waiting on landlords to fund.
These reserves vary in amounts from $250 up to $1,000. Most commonly, $500.
A good property manager uses their reserve to pay vendors and bills. Then replenish the reserve with next month’s rent.
A bad property manager delays your rent check until they have paid the vendor. Never touching the reserve account.
Is This A Benefit to The Landlord?
Simply put: no.
When it comes to property management, the biggest risk to landlords is the lack of control and accessibility to their money. BANK OF PROPERTY MANAGEMENT hold the keys to your bank vault.
Landlords lose out on several key points.
Cannot Argue Excessive Repair Costs
Sadly, for landlords, they are one of many clients to a property manager. Yet property managers rely heavily on their team of contractors. Due to portfolio size, contractors repair a lot of properties for a manager. This leads to more favoritism to the contractor than landlord.
Property managers like to pay their contractors quick. Why? Because there are other rentals in their portfolio that need repairs as well. Therefore, they want the vendor happy. A happy vendor makes repairs timely.
This is a benefit for landlords when you need a repair. Not when you pay for repairs. Especially if the repair costs are excessive.
Paying Vendor by Credit Card
Secondly, landlords lose out on the chance to pay by credit card. This might not seem a big deal, but it’s a good time to gain points and cash back.
For landlords low on cash reserves, it provides an extra 30 days to build up their own reserves.
If your rental properties are in an LLC, this is also a way to start building credit for your real estate business.
What Other Options Do Landlords Have?
Sad to say, not every landlord can self-manage even if they wanted to. Out-of-state landlords must typically hire property managers for their local presence.
Luckily times have changed for landlords!
If you’re a landlords that want a property manager to coordinate the repairs. But you don’t like management holding onto your rent money. Start to consider using Burbz.
Burbz is a property management software that allows property managers to fully operate all tasks online. However, rent payments go directly to the landlord.
This means landlords get paid rent faster as well. It also means landlords can choose to pay the vendors bill directly. Giving the landlords the ability to review invoices before paying. And enjoying the benefits of credit card points.
Can I Change Property Management Company?
One of the hardest aspects for landlords is dealing with bad property management. Of course, firing a property manager is not an easy task. Management agreements are designed to financially protect the property management company.
Switching companies used to be hard. Most landlords would take over the management until their agreement expired.
On Burbz, we level the terms. We believe a good property manager is not afraid of a landlord firing them. With great customer service, most landlords will stay with their manager for a long time.
When landlords hire a property manager through the Burbz platform, the management agreement is month-to-month. With no termination fees.
Also, your property data stays with you! Allowing you to keep a thorough history of your rental property regardless who the property manager is.
If you’re interested, start with a Request For Proposal today. Burbz will introduce you to property managers interested in providing you great customer service