Flow of Funds with Property Management Companies

Investor · Member since 2021 · 24 posts · 14 votes

QQ on how property management companies work!

Typically, do the tenants make payments to the property management company (and then the property management company forwards the funds to us (owner of the unit)? Or does the check from the tenant directly go to the owner and the property management company is just responsible for collecting the check and depositing it into the owner's bank account.

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

For me, the tenants pay the property manager, and then the funds move to me. The funds are held in escrow by my property manager, and disbursed later in the month to my bank account.

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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
4y
For me, the tenants pay the property manager, and then the funds move to me. The funds are held in escrow by my property manager, and disbursed later in the month to my bank account.
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Nikhil Agarwal
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Investor · Member since 2021 · 24 posts · 14 votes
4y
Quote from @Scott Trench:

For me, the tenants pay the property manager, and then the funds move to me. The funds are held in escrow by my property manager, and disbursed later in the month to my bank account.

Thank you!
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y
Quote from @Nikhil Agarwal:

QQ on how property management companies work!
Typically, do the tenants make payments to the property management company (and then the property management company forwards the funds to us (owner of the unit)? Or does the check from the tenant directly go to the owner and the property management company is just responsible for collecting the check and depositing it into the owner's bank account.

Payments go to the property manager.
They hold the security deposit in a Trust account where it remains untouched until the lease is terminated, then they apply it to cleaning, repairs, and unpaid charges or refund it back to the tenant.
Rent payments are collected each month. The PM deducts their fee and pays any bills on your behalf (maintenance, taxes, insurance, or whatever you agreed to have them pay), and then they disburse the remainder to you. They should provide you with a detailed accounting each month showing all income and expenses.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
4y
@Nikhil Agarwal for smaller properties, what's been said so far is true.
For larger multi-family properties, the property will have it's own bank account, which owner & PMC have access to. Tenants deposit rents to this account and PMC then takes their fees from it. Expenses are also paid from this Operating Account.
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Nikhil Agarwal
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Investor · Member since 2021 · 24 posts · 14 votes
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Thank you @Drew Sygit and @Nathan Gesner for the detailed explanation and scenarios.
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