Normal for Property Manager to Hold Rent till the next month?

Question

I have 6 rentals in 5 states. Each one is managed. 5 of them collect rent on the first, and pay it back me by the 10th or 15th of the same month. 1 of them collects rent on the first, but holds it until the 10th or 15th of the NEXT month (example, March 1st rent paid to owner April 10-15), saying that they need to hold it for any expenses that come up during that month. That seems so completely wrong to me, but is that normal in certain places? This particular rental is in Arkansas. Does anyone else do this?

Kenny Dahill · Answer

That's weird.  I understand holding for potential expenses but isn't that part of the minimum reserves account is for?  This is them assuming an expense may be 2x rent; if that did happen, it's a major appliance which isn't a common enough issue.

I'd push back on this.  It's definitely not normal for 6-8 weeks.

Craig Mitchelldyer · Answer

yeah I checked the agreement and it wasn't in there one way or another, so I wrongly assumed they wouldn't hold my money hostage for a month.

Nathan Gesner · Answer

Craig, the "normal" process is to pay in the month the rent is collected. However, there are an increasing number of property managers that hold the funds through the month collected so they have cash on hand to pay invoices, then they pay and give a full accounting on the following month. However, they usually do that on the first day of the following month, not the 10th or 15th. Why would they need an extra two weeks?

It's important to read/understand your management agreement. Their process for payment and reports should be spelled out.