Monday, December 14, 2015

Property Management Bookkeeping: How to Watch the Maintenance Expenses


How to Watch the Maintenance Expenses

When managing properties for private owners, it is usually the property management company's duty to ensure that the property remains in habitable condition. This means handling maintenance issues for both occupied and vacant units, making certain each property is in good repair.

With occupied properties, the care for minor maintenance issues can be a negotiable part of the lease. This means either the property management company or the tenant can assume responsibility for handling minor repairs. In either case, the property management company wants to take on the repairs regardless of who's responsible. This ensures that the maintenance issue gets taken care of, preventing the possibility of a minor issue growing into a major issue.

In handling maintenance, the costs are usually covered by either the tenant or the property owner. This puts the property management company into an interesting dilemma. The company can either wait to receive the funds from either party to begin the repair or can have the issue resolved and bill the responsible party later.

With minor maintenance issues, it's best to handle the issue promptly and bill the responsible party after the fact. As I stated earlier, you want to prevent minor problems from growing into major ones. It's in the best interest for the property management company to incur the cost upfront and seek reimbursement later.

For major maintenance issues, it's a completely different story. When major repairs are needed, it's best to assess the situation and get an estimate for the cost of the repair. Once the estimate is received, determine if the tenant is responsible for the issue or if it was simply the result of extensive wear and tear over time.

If the tenant is responsible, then the tenant should be charged for the repair. However, it's best to consult the property owner on the situation before making a decision. While the tenant may be ultimately charged, the property management company and the owner may have to front the cost for the repair at first.

It's best that the property management company get some commitment from the owner prior to making the repair because it's the property owner that is responsible for the cost regardless if the tenant pays or not. While it is ideal for the property owner to cover the cost in full, the property management company may assist the owner in covering the cost of the repair with a promise of reimbursement.

Under no circumstance should the property management company proceed with a major repair without at least a partial payment for the work to be completed. This results in a loss of income to the company, especially if both the owner and the tenant choose not to pay what they owe. The property management company is in business to make a profit from renting not issuing loans.

By seeking handling minor maintenance issues promptly, getting estimates on major maintenance issues, and requiring an upfront payment from the property owner, the property management company puts itself in a great position to manage the costs of repairs.

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