I am closing soon on my first rental property, I will be using a property manger to manage my property. Property Manager have two option on how to have operating account.
1. To have a trust account with property manager as operating account, property manager will deposit check in my bank accoint once a month minus bills and his percentage.
2. I add property manager as authorized user to my bank account and property manager will operate though my account.
Can you please suggest which one you suggest a preferable way?
My banking relationship with my property manager is set up like #1. Seems to be working well.
As a PM I do number 1 with all of my clients/customers/partners.
Too many downsides for both parties using #2.
Hi @Chad Hale , can you share some downsides for #2? My PM is recommending #2 as option.
@Gary Bahl I own multiple properties and I have never seen a PM offer # 2 as an option. It's risky for investors and time consuming for PM. Think @ if the PM starts managing over 200 properties, s/he would have to operate 200 separate accounts if each property is owned by different investor.
I wouldn't even go with that PM if he/she is recommending option # 2.
@Gary Bahl A few issues with #2. From the owners perspective, giving access to someone else to my checking account. I wouldn't do it. From the PM perspective, I want to control the account as I know what is coming in and out and when. I don't want to be coordinating with someone else wondering what outstanding payments might exist. Also this doesn't work well with account automation and monthly reconciliation.
@Alpesh Parmar We do open a separate account for every owner. This removes any issues with co-mingling of monies and keeps CA PMs out of hot water with Department of Real Estate.
Here's some additional info if interested. Or google real estate trust funds property management.www dre.ca.gov/files/pdf/re13.pdf
@Gary Bahl I would ask this PM how many properties they manage because only a crazy person would do what you suggested in option2. Yeah great if you are a PM with only 5 owners then maybe you could keep it straight but with hundreds of owners no way!
If they only have 5 owners get ready to learn some lessons since you are going to be a guinea pig while they learn the ropes.
If they aren't NARPM credentialed then you should be quickly moving on to someone who is. NARPM members vs. an agent with a license who thinks they can manage property is like Major league baseball vs. the little league.
Thanks all for the responses.
One additional detail I missed mentioning that in #2 option, I will open additional separate personal account for my mortgage payments etc. I will withdraw set amount from my joint account with PM. So i will have two accounts in this case. One, joint with PM and Second, my personal account.
With this information do any of yours recommendations change?
@Gary Bahl Nope doesn't change a thing for me.
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