It’s Tax Time: Do You Have the Right Property Manager to Take Care of Your Investment?
Accounting–it can be tedious and rarely fun, but you need to make sure you stay on top of your accounting when it comes to your rental property. Not only does it make easier when tax time comes, but just having peace of mind knowing that your records are accurate and organized can be refreshing! In addition to hiring a Property Manager for the standard day to day tasks, did you know that Property Managers can also handle rental income, reserve funds, security deposits, and write checks on your behalf? Below are a few questions/tips to follow when hiring a property manager to protect your investment.
Payment to Owner
Tenant rent is normally paid on a monthly basis, due on the 1st and late after 5th of each month.
- What day of the month do they mail checks to owners?
- Some owners prefer monthly checks mailed but having an option to direct deposit monthly proceeds could save you time, allow your money to be available sooner and save you the hassle of running out to the bank.
- Do they make payments for owners (mortgage, insurance, property taxes, maintenance vendors, etc.)?
- Most property management companies ask for a reserve fund to pay monthly invoices in a timely manner.
- Will the management company provide you with an IRS-1099 and a summary profit and loss statement for tax purposes?
- Here in Hawaii we also have General Excise taxes, will your property management company handle and file in a timely matter on your behalf?
Accounting / Reporting
- Do they keep detailed records and documentation?
- The goal is to provide a clear audit trail for all funds for each property. Look for a company that keeps and is happy to provide you with copies of all invoices. This will also help with taxes and legal situations that could arise.
- How often do they send out reports? When are they sent out?
- Monthly is standard; choose a company that can provide reports! There’s no reason to deal with a company that doesn’t provide income/expense statements each month.
- Will you be able to view reports online?
- Companies that provide online reporting and direct deposit create convenience and increase transparency that saves you time.
Security deposits are an important tool for motivating tenant care and recouping losses due to tenant damage, but if they aren’t handled correctly you could lose your right to keep any portion of the deposit or worse, end up owing your tenant several times the deposit amount.
- How much is collected?
- The total amount of all deposits may not be in excess of one month’s rent. This includes the security deposit and any deposits for keys, pets, or anything else. The tenant may not use the deposit as payment for the last month’s rent unless the landlord agrees with the tenant in writing to such a use, and the tenant gives 45 days’ notice of vacating the premises. In any event, the landlord retains the right to have the tenant pay for damages caused by the tenant.
- How quickly do they send out refunds?
- Here in Hawaii, property management companies should send the tenant a report with the refund and/or itemized deductions of the security deposit remaining within 14 days after the termination of the rental agreement.
- Do they prevent the co-mingling of funds among the properties they manage?
- Given the fiscal responsibility that a property management company has, it is a good idea to raise these questions during the interview process and make sure you understand their approach.
To inquire about our property management services, please call (808) 593-9826