Renting a unit to your property manager

5 Replies

Hi, I work with a property management company at one of my buildings (a 7 unit) at 9% of rents. One of the units was destroyed by a tenant and need about $7,000 of rehab. 

The property manager offered to do rehab in exchange of rented out the unit as her office for free or cheap for a year or two. 

Would you do this? Would this effect the property value by decreasing the income I could have had for this unit or could rehab be considered a years rent for tax and property value purposes? 

Thank you, 

Greg

I might do it but it would reduce the value if you plan to sell it soon.  If you are going to hold for 3+ years it probably isnt that big of a deal.  The main issue is whether the return to you cashflow wise is better if you just pay the rehab and rent it traditionally.  Its really just a math problem.

Jeffrey Holst, Real Estate Agent in Tennessee (#343371)

Makes sense. Appreciate it Jeffery

Originally posted by @Jeffrey Holst :

I might do it but it would reduce the value if you plan to sell it soon.  If you are going to hold for 3+ years it probably isnt that big of a deal.  The main issue is whether the return to you cashflow wise is better if you just pay the rehab and rent it traditionally.  Its really just a math problem.

Great post, and agreed. It's a math problem. Which has more value to you in the long run?

Did the PM company give you that $7,000 rehab amount? is it possible they are exaggerating their estimate to make it seem like a better deal to you? In addition, I would only do it with a lease for market rent, with a full rent credit for the first x months, under condition you remain owner.

Ade note: when things start getting this complicated, I tend to think they aren't worth it

Originally posted by @Andrew Boettcher :

Did the PM company give you that $7,000 rehab amount? is it possible they are exaggerating their estimate to make it seem like a better deal to you? In addition, I would only do it with a lease for market rent, with a full rent credit for the first x months, under condition you remain owner.

Ade note: when things start getting this complicated, I tend to think they aren't worth it

The 7k is my estimate. I like the idea of doing a rent credit to keep the value of property intact.  

Some things I would add to contract are

-condition of me remaining owner

-conditions of us keeping an owner/manager relationship with the rest of units

- contract at market rent with credit of among we agree upon (maybe 8k) 

I agree,  if it gets more complicated than this,  I wouldn't do it. 

Thank you

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