Property management vs onsite personell

[Grant Wieczorek]

I think I am getting the hang of this, but it is still wishy washy in my mind.  The on site people at a complex are going to do the day to day work, and the "property management" line on the expense line are the ones that set and check budgets, hire/fire, create tax forms, monitor legal filings, etc.  Does that seem right? anyone know of a comprehensive list somewhere of what each group would be responsible for?

[Jonathan Twombly]

@Grant Wieczorek I don't know about a comprehensive list, but are you trying to read financial statements and figure out what money is going for what service?

When you are dealing with a third party management company, you are going to have several line items.  "Management fees" are what you pay to the company to cover operating expenses for your property (hiring, firing, management, paying bills, compiling financial reports, etc.), the portion of the management company's overhead allocated to your property, and profits for the management company.  I have never seen management fees broken out any further, but these are the items you are paying for.

You then have another line item for payroll.  This is your on-site staff, which are generally the employees of the management company, but their payroll burden is allocated directly to your property.  Sometimes you see this further broken down into salary, worker's comp, health insurance, etc.

Your onsite employees are going to be the ones filing evictions and overseeing all minor capital projects and day to day maintenance items.  The management company may be the ones overseeing major capital projects, and sometimes they will charge an oversight fee if the project is over a certain value, because they will need to assign someone to oversee it and that costs money.  This should be spelled out in the management contract.  But if you are just evaluating a property from the financials, that's irrelevant unless you see the item in the financials, and even if you do, I would eliminate it because it's a one-time expense that's unlikely to be repeated.  In any case, it's a capital expense, not an operating one.