Is it normal for property management to hold a minimum?

NJ · Member since 2019 · 29 posts · 13 votes

I use Crestcore in Memphis, TN. Not a very responsive company. I wonder if it's normal for them to request and hold a minimum amount in my account for repairs. At least that's what they claim as the purpose. I am not a big fan of the idea but lack experience to understand. Does anyone know if this is common or not? I want to stop this.

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Patti RobertsonBusiness Member

Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes

That is typical. If the PM doesn’t sit on your collected rent for a full month, they generally hold a small amount of an owners funds back so they have some money to use in the even there is an emergency repair before the next rent cycle. This is to save the owner that hassle of dropping everything they are doing to wire funds to the PM at the last minute.

757-472-2547

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
I've never had my PM do that.
0 Reply
Danielle Wolter
Rental Property Investor · San Diego, CA · Member since 2019 · 290 posts · 253 votes
6y
@Kevin Feng My property manager here in San Diego does that as well. I don't know if it's common or not, but it's what I have experienced so far. I haven't gotten my property in Memphis rented out, so I can't speak to what's the norm in Memphis yet.
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Patti RobertsonBusiness Member
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
6y
That is typical. If the PM doesn’t sit on your collected rent for a full month, they generally hold a small amount of an owners funds back so they have some money to use in the even there is an emergency repair before the next rent cycle. This is to save the owner that hassle of dropping everything they are doing to wire funds to the PM at the last minute.
757-472-2547
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Koleton Daley
American Fork, UT · Member since 2017 · 175 posts · 76 votes
6y
@Kevin Feng we would simply suggest that you find a new property manager. In our opinion, Crestcore is very unprofessional and very dishonest. We’ve had a terrible experience with them as well. You’re not alone and you’ll find similar complaints about them. From our experience, we wouldn’t recommend them to our worst enemy. We hope others will continue to see these threads and know we’re not the only ones that have been lied to by this organization. They took several months to simply payout earnings that were showed “owed to owner”. It took several letters from our attorneys and we even filed a civil suit against them for a magnitude of other issues before they even paid out what simply showed “Due to owner”. Shame on you Crestcore for continuing to treat your clients like this.
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Kevin FengPro Member
OP
NJ · Member since 2019 · 29 posts · 13 votes
6y
@koleton Daley Thanks for the heads up. I am considering a new PM and will likely start looking. I am still fairly new at this so was the process to change PM from Crestcore to another a painful experience? Since I have a 1 yr contract, I wonder if they are going to make it difficult to switch.
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Kevin FengPro Member
OP
NJ · Member since 2019 · 29 posts · 13 votes
6y
Thanks to all for the reply. I do appreciate the advice.
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Koleton Daley
American Fork, UT · Member since 2017 · 175 posts · 76 votes
6y
@Kevin Feng our legal council wants to talk to you about your situation with Crestcore. Will you please send us a good contact number to reach you at?
There is more of us then most realize that have been treated this way by them. In our opinion, they seem to try and cover it up. We won’t let our experience or opinion be drowned out by them. We believe that people need to know about what we’ve experienced as well as what you and others have had to deal with.
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Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
6y
It is typical a PM company to hold $300 or so per unit or hold on to rents until the end of the month. This covers any costs they come up throughout the month like water bills, toilet replacement, etc. Otherwise the PM company would have to float thousands, maybe tens of thousands of dollars for the owners. And most choose not to do this. Can’t speak to this particular company but that’s a common practice.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
It is not uncommon for a property manager to hold a "reserve" so they always have funds available to pay for minor maintenance, utility bills, HOA dues, etc.
If you're looking for a new PM:

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
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Kevin FengPro Member
OP
NJ · Member since 2019 · 29 posts · 13 votes
6y
Originally posted by @Josh C.:
It is typical a PM company to hold $300 or so per unit or hold on to rents until the end of the month. This covers any costs they come up throughout the month like water bills, toilet replacement, etc. Otherwise the PM company would have to float thousands, maybe tens of thousands of dollars for the owners. And most choose not to do this. Can’t speak to this particular company but that’s a common practice.

Thanks.
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Kevin FengPro Member
OP
NJ · Member since 2019 · 29 posts · 13 votes
6y
Thank you everyone. I started looking for a new PM. Has anyone heard of PMI of Memphis?
1 Reply
Koleton Daley
American Fork, UT · Member since 2017 · 175 posts · 76 votes
6y
@Kevin Feng we haven’t heard of those guys, where did you find them? We’re sorry you had a bad experience with Crestcore in Memphis. It’s become more and more common with those guys. The best thing you can do is to talk about your experience and chime in when you see someone asking for recommendations for Memphis Property Management/Real Estate organizations.
Have you thought of paying a little more and finding a law firm to help you self manage? It costs a little more but they keep everything nice and legal and really protect you. Plus from our experience, they pay a lot more attention to the property, are easy to get a hold of, can provide quick and seamless legal advice, help keep contractors honest, and quickly help you handle any issues that arise.
In our opinion, Crestcore is highly unorganized, very unprofessional, and downright dishonest. From what we had to deal with, we would think ANYONE would be a better choice to work with.
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Ryan Brocklebank
Rental Property Investor · Calgary, AB · Member since 2019 · 49 posts · 27 votes
6y
@Koleton Daley @Kevin Feng Hey guys I see this thread has tapered off but I'd like to chime in on the conversation. Firstly, I have a couple properties with Crestcore and am very disappointed to say that I've had the same infuriating experience. We are collecting evidence of payments from tenants that have never been logged into our account, revolving door of account managers, erroneous eviction fees, the list goes on... One insight I can add: I met Dan Butler (co-founder) early on and we got along very well; from a macro perspective I really enjoyed our conversation and respected what he's done with the business. Where Crestcore has failed I think is scaling too fast and not being excellent at each of their disciplines (PM, wholesale, lending, etc). I intend to provide this feedback to Dan but have first been trying to be fair by moving our concerns progressively up the chain of command. Perhaps he will care, perhaps not; ultimately that too will be a test.

To shift to a constructive aspect: have you found an excellent new PM? Reedy & Company have good reviews online (870 total) as do Home River Group and Lubin. I have not performed any DD on these co's yet but will and am happy to report back if you are interested.

Another consideration is that perhaps a group of us can vet a new PM and offer to come to them as a collective if they satisfy our DD requirements.

Thanks to @Nathan Gesner for taking the time to provide us a well structured post. Cheers everyone and happy investing!
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Koleton Daley
American Fork, UT · Member since 2017 · 175 posts · 76 votes
6y
@Ryan Brocklebank our attorneys would very much like to talk with you. This appears to be common practice with CrestCore and our attorneys have established this fraudulent type behavior to be VERY common with them. You’re entitled to damages from CrestCore. We truly believe CrestCore to be one of the most dishonest groups operating in Memphis, in our opinion.
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Alan McClainPro Member
Rental Property Investor · Columbus, OH · Member since 2019 · 32 posts · 12 votes
6y
@Kevin Feng
Hello Kevin,
While I’m not familiar with your market, in Columbus OH it is common for PM to hold a reserve. The reserve is the same amount as they have authority to make repairs without contacting me. For my manager, the amount is $250 per property.
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Ryan Brocklebank
Rental Property Investor · Calgary, AB · Member since 2019 · 49 posts · 27 votes
6y
@Koleton Daley happy to chat, sent you a PM. I'm not certain that I'm at the point of making legal calls yet but it's clear that you've spent time and energy looking into this.
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Ryan Brocklebank
Rental Property Investor · Calgary, AB · Member since 2019 · 49 posts · 27 votes
6y
@Alan McClain seconded Alan, our PM in Dayton holds a $250 reserve.
One thing with mentioning is that although a reserve is normal, one thing you can do is change the amount that triggers your authority for work by the PM. I've done this with success until establishing a working relationship with the PM then increasing their approval amount.
Thoughts?
1 Reply
Tyler Tapley
Real Estate Agent · Memphis, TN. · Member since 2018 · 175 posts · 101 votes
6y
I don’t manage any property in Memphis but I represent tons of investors who buy in Memphis. Happy to share my experiences. I believe I can provide neutral, third party analysis if needed.
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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
6y
Originally posted by @Alan McClain:
@Kevin Feng
Hello Kevin,
While I’m not familiar with your market, in Columbus OH it is common for PM to hold a reserve. The reserve is the same amount as they have authority to make repairs without contacting me. For my manager, the amount is $250 per property.

Yes it is common.
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Alan McClainPro Member
Rental Property Investor · Columbus, OH · Member since 2019 · 32 posts · 12 votes
6y
@Ryan Brocklebank
Would you mind sharing what you have increased PMs authority to and why that amount? My thoughts on why I prefer around the $250 range are:
1. It gives you the opportunity to touch base with your PM besides the monthly reports. It allows me to ask other questions over the phone to get a better feel of how the tenants and the property is doing.
2. While I have established trust with my PM, it is always good to have checks and balances especially when you have skin in the game and they do not.
3. Could decrease long term expenses. When the property manager is running the show they may only think about fixing that one repair. You may be able to add other items that could be repaired to decrease future maintenance/ repair calls.
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Ryan Brocklebank
Rental Property Investor · Calgary, AB · Member since 2019 · 49 posts · 27 votes
6y
@Ryan Brocklebank a quick correction to my above post: auto-corrected from "worth mentioning" to "with mentioning". Apologies
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Ryan Brocklebank
Rental Property Investor · Calgary, AB · Member since 2019 · 49 posts · 27 votes
6y
@Alan McClain excellent clarification and I completely agree with your points Alan. The context I should have added is that our project manager, in one of our markets, also has a PM division and we've established the trust to allow for larger expense authority. As an extension of your first two points in this situation we talk several times a week about our active properties (renovations or rentals) and they always give me a heads up of costs.
Although I only raised the point as an option to get people thinking, I appreciate you expanding the conversation. For those interested, my intentions in allowing my PM greater spending authority (once established) is to offload some of the minor decision making and allow my focus to be on bigger picture items such as growth, new market entries, etc.
Would love to continue this convo Alan, or anyone else that chimes in, because I certainly don't have the system fine-tuned nor is it perfect for every scenario!

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Ed W.
Investor / Landlord · Columbus, OH · Member since 2015 · 276 posts · 174 votes
6y
@Nathan Gesner and other other property managers. I have a fair number of units and I've always been a pretty hands-on guy for pretty much everything in my business except for maintenance (anything more than minor repairs and I'm likely to do more harm than good!)
A few times over the years (I've managed rentals for over 25 years), I've looked into using management companies. I've looked at big ones and small ones, including some that have come with good recommendations. Almost every one that I thought was credible had contract wording making me assume the liability for the manager. In my simple brain, the nerve of them asking in the first place, I always wondered why anyone would indemnify a supposed professional for the professional's errors and why would those supposed professionals not stand behind their mistakes? I've tried to negotiate those way - always without success. If I'm going to take on the liability, I may was cover my butt by doing it myself.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
6y
Totally normal. This is one of the reasons that, whenever possible, I encourage new investors to invest locally and manage on their own for a period. If you haven't ever done it, how do you know what your PM should be doing? How hard is it? How much time does it take them to deal with a maintenance issue?
You hired a PM to take care of the property for you- not so you could spend your time managing the PM and their day to day management of your property. The reserve is in order for them to take care of small repairs without bothering you, which is exactly what you pay for. If there's a clogged bathtub, do you want them calling you to discuss strategy? No, you want them to have a bit of your money set aside so that they can get the plumber over there and take care of it and give you a heads up that it's already being taken care of.
I don't know your style, so I am not making any assumptions, but there's not much money in property management on the individual level. If I am managing one house for a client and they want to have ongoing discussions with me about routine maintenance items, I just can't do that, there's no return for me and I can't afford to pay my staff to manage those relationships, I lose money.
Find a PM with great reviews, hopefully a personal reference from someone you know, and let them do their thing.
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Alan McClainPro Member
Rental Property Investor · Columbus, OH · Member since 2019 · 32 posts · 12 votes
6y
@Ryan Brocklebank
It sounds like you have a great relationship with your PM and have systems in place to scale your business. Currently, my PM manages the rentals including tenant screening, showings, rent collections, managing repairs/service calls, etc.
You mentioned they also manage the renovations. Can you elaborate? Do they act as the general contractor for these projects? Do you BRRR these properties or flip them?
I have never done a rehab but is something I am interested in doing in the future.
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