What do you pay yourself or let your property manager pay on your behalf?

Question

Does your property manager pay property taxes and mortgage on your behalf?

All rental property expenses paid through the trust account I have with my management company, including property tax and mortgage. I like having everything coming from one account since it feels neat and organized.

I get copies of all mortgage statements and property tax statements so I know each bill is being paid. Recently someone told me they'd never do this - "what happens if they forget to pay?"

What you the rest of you prefer and why?

Thanks!

Jay Thomas · Answer

If you opt for centralized payments, it's super convenient because all your bills get paid automatically through one account, saving you a bunch of admin work. It also keeps everything organized for easy bookkeeping, and your funds are held securely, reducing the risk of any payment mishaps. However, Mistakes by the management company could mean missed payments and late fees. You hand over direct oversight of bill payments, relying on the company's efficiency. Adjusting payment arrangements or managing individual bills might get complicated.On the other hand, individual responsibility grants you full control over managing and paying bills directly, ensuring timely payments and allowing for customization. You stay actively involved in your property's financial aspects, identifying issues early. However, the cons include the time-consuming nature of bill management, organizational challenges with multiple bills, and the potential for missed payments on your end, leading to late fees. The best approach ultimately depends on your individual needs and priorities.

Spencer Abeyta · Answer

I agree with Michael, there is way too much liability on the PM to pay your mortgage. We have tried doing this in the past but it is so risky unless we are holding multiple months of reserves for the owner. Without holding a huge reserve, we would only be able to pay the mortgage out of the rental proceeds. But if the tenant doesn't pay or the property is vacant, we have to reach out to get funds from the owner and this can delay the mortgage payment.

Theresa Harris · Answer

They ensure the tenants are paying utilities. I pay property taxes, insurance and mortgage; no way I'd leave those to another person to pay.

Michael Smythe · Answer

The biggest issue is what happens if the PMC doesn't have the funds to pay your expenses?

You get time to pay property taxes and even insurance, but there are penalties.

The biggest risk is the mortgage - a late payment (30 days) is almost impossible to remove from a credit report!

Our PMC will pay anything BUT mortgage payments - except on an individual emergency basis only (like owner on vacation and forgot to pay, so wants us to do so).

Paying everything, but the mortgage, does keep all the income & expenses on the Annual Statement we send our clients. So, all they have to do for their income taxes is give that statement plus their 1098 from their lender to their tax professional.