All Forum Posts by: Dave Jackson

@Drew Sygit Thank you for the information. Seems odd to me also, unfortunately I did do a lot of vetting and interviewing but since I'm in tertiary market, there weren't too many options for other property managers. Already had to fire another one in the same area. Looks like I'll have to return to the drawing board here.

Hello Bigger Pockets Community,

I have some multi family properties (total of eight units) and the property management company has a shared bank account so they can deposit rents and then debit expenses with co-sign ability. They recently overdrafted my account because they claimed there weren't enough available funds for expenses (had over $2,000 in account at the time), so they're now saying they would like there to be one months rent or security deposits to be kept in the bank account at all times (roughly $5,000). I don't like the idea of leaving security deposits with them because they don't keep it in a separate account. They leave it in the same account and then draw funds out of it when they need to for expenses which seems to defeat the point of a security deposit, unless of course the expenses are related to move out. This is why I removed the security deposits and placed them in a separate account that only I have access to.

1. Does any of this seem normal? How much money would it be advised to leave in the account for this situation? I already don't like that they have co-sign ability. Having more than $1,000 in the account seems high to me. To me it seems to make sense to withdraw as much left over money as possible so it can be reinvested or sit in an interest-bearing account.

2. I have a $300 threshold for expenses per property and if that get's used I refund it, although they tend not to notify me of expenses in the first place that go over and also don't tell me when a unit is turning. But since there's two properties, I keep about $600-800 per month in the account for expenses at all times, sometimes more. Is this not enough? How much should I leave in the account for the management team?

3. Moving forward, what would be advised for an agreement with a property management company for paying bills?

It seems like there's a lot of red flags here but I'm trying to see if I'm overlooking something or if they way they are operating is normal in the property management space, although from what I've seen it seems most companies pay bills out of their own pocket first and then deduct that from rental income before sending payment to the owner.

Many thanks for your input!

@Charles Carillo

Thanks for the response. The current four plex is not my primary residence. It's fully rented out. This is why I thought it was strange that just because the other property is zoned commercially, they won't insure it, forcing me to go with another company. Other than the zoning classification, there is little difference between the two properties and I applied for insurance the same way.

@Stephanie P.

Right, seems like it can be a headache. What I thought was strange for the insurance side was that the agent told me even if I get it rezoned as a residential property, the insurance company would still consider it a commercial property.

I own a fourplex in Indiana that is zoned residential and thus taxed and insured as a residential dwelling. I am in the process of purchasing another fourplex, about a mile away in the same zip code, but for whatever reason it's zoned as 4-19 family apartments. The property has no commercial business or storefront. The only thing that differs between the two properties is the new one has a common area stairwell that leads to the two upper units. My current fourplex has four completely separate entrances and the two upper units have their own stairwell. Not only are the property taxes higher on this new property, but my insurance broker told me I will have to insure it via a commercial policy. The cost of insurance is about $800 more a year. The new property is newer and smaller than the one I currently own, so how could it be so much more expensive to insure and why are they requiring a commercial policy? Also, how could property taxes be almost a thousand dollars more each year? Is this really all because of a common area stairwell?

Does anyone have any advice on this or recommendations for insuring it? I currently have Travelers, but according to my broker they won't insure it because they're deeming it a commercial property. It seems like a strange technicality to me especially since there’s more potential liability because of the age and square footage on the current property I own. Are there any recommendations for getting this rezoned as a residential dwelling with the county? Many thanks!