Strange way Management company charges me

[Peter Grosso]

Hello All, 

       My management company recently put a new tenant into my rental, They charge the first months rent.   Instead of just taking the first months rent they actually paid me the first months rent, then charging me the 10% management fee and sent me a bill for the full months rent. 

      Anyone else have this done?  If feels like slimy way to pull an extra 10% out of the owner. 

[Kevin Harrison]

my property management company does this too. but they just take half a months rent and 10%. although they take what the % would have been at for a full months rent. I think its slimy but its the way the business works.

[Kevin Harrison]

my property management company does this too. but they just take half a months rent and 10%. although they take what the % would have been at for a full months rent. I think its slimy but its the way the business works.

[Account Closed]

You have to look at the wording in your property management contracts.

Our management contracts as we take a 10% fee on rent collected so we charge 10% on the first months rent that was collected.

Also, our management agreement says we charge a 50% leasing fee will we initially put in a new tenant. So this 50% would have been also charged against the first months rent that was received.

I am not sure why they sent you the monthly rent and then turn around and billed you. They should of deducted the leasing fee from the rent and then showed you had a remaining balance with them.

They may be operating on a different property management software system and have to do things differently.

You need to have a good understanding of your management agreement agreement with the management company. I would call or email them and ask for an explanation. It is important to keep good communication between your management company.

[Peter Grosso]

Originally posted by @Account Closed:

You have to look at the wording in your property management contracts.

Our management contracts as we take a 10% fee on rent collected so we charge 10% on the first months rent that was collected.

Also, our management agreement says we charge a 50% leasing fee will we initially put in a new tenant. So this 50% would have been also charged against the first months rent that was received.

I am not sure why they sent you the monthly rent and then turn around and billed you. They should of deducted the leasing fee from the rent and then showed you had a remaining balance with them.

They may be operating on a different property management software system and have to do things differently.

You need to have a good understanding of your management agreement agreement with the management company. I would call or email them and ask for an explanation. It is important to keep good communication between your management company.

  I agree Kevin,  

I did read the contract and even asked for a few things to be changed.   This one slipped by me.    I should have read that part of the contract more literally.   I have always just had the first months rent taken by the Management company, since there was not income then there was no 10% fee.    I felt like they gave me the money for the purpose of justifying the 10% charge. 

[Account Closed]

The first month's rent is still income to you. This first months rent would reflect on your year-end statement and your 1099 income reported to IRS by the property management company.

The first month's rent is just being offset by the expense of the leasing fee that is one months rent and will show up on your expense category on your year-end statement.

If you had another management company handling it differently in the past, I am not sure that they were doing it properly.

I do find one of the most important things that landlords can do is keep good open communications with their property managers.

We never have problems with owners questioning us on the things that we do and are always happy to explain why were handling something a certain way.

I am amazed sometimes that the initial attitude and some of our owners can be very poor and do not make for good working relationship.

When dealing with your management company try to keep things on a positive note. Most good management companies are happy to explain their systems and procedures. A good working relationship between you and property management company is one of the keys to your success as a investor.