By Salvatore J. Friscia, San Diego Premier Property Management, San Diego, CA

The landlord won’t make timely repairs, the common area laundry room is a mess, or the management company never answers their phones. Three very common complaints found online from renters regarding their experience with property management companies across the country. In the past, potential applicants would only discover these complaints by either word of mouth, knowing someone in the complex, or worse, once it’s too late and they were already experiencing issues first hand. Well, social media has certainly changed that, and with a click of a mouse (or should I say the pressing of a finger against the touch screen), past and present tenants can now comment on their rental experience. Power sites such as Yelp, Kudzu, Angie’s List, and of course Facebook and Twitter, are open forums respected by many that allow reviews, dialogue, and comments that in some cases can have lasting and serious consequences whether good or bad to the property management company against which they are levied. This form of feedback and review seems fair and useful in helping determine which property management companies have built better tenant relations. But should tenants beware when posting something less flattering or even downright negative regarding their experience with a property management company?

Just recently a woman, Helen Maslona of Chicago, was sued over her posting of a negative online review about a contractor on a leading online review website. These types of lawsuits are becoming more common and are referred to as SLAPP lawsuits (Strategic Lawsuits Against Public Participation). As many as 27 states have Anti-SLAPP laws, but many don’t and leave unsuspecting reviewers vulnerable to backlash from their comment or review. If you plan on making comments or reviews, it is suggested that you take a few things into consideration to protect yourself and also offer the best online review to the public.

1) Tell the truth about the experience.
2) Comment with the intent to help others benefit from your review.
3) Stay clear of vulgarities, heavy opinions, and accusations.

If you do find yourself posting a negative review, allow the property management company to respond and hopefully clear up the misunderstanding. Most reputable companies will try to accommodate their tenants and preserve their online reputation. In kind, make sure you follow up that negative comment with an update showing the resolution. Just remember that reviews on social media sites are both necessary and important but can have consequences, so be careful what you post out there.

By Linda Day Harrison, theBrokerList, Chicago, IL

It is a tough time of the year for us property managers as many of us are in the process of planning our budget for next year. However, it’s also a perfect time to poll all of your property owners, vendors, customers, and staff to see what might be on their wish list!

What is a wish list you ask? Well a wish list is a reminder of all of the things your customers, staff, vendors, or property owners have wished for that can help your property to improve, save money, or maybe even provide a new service idea!

Simply create a friendly form and title it 2013 ABC Property Budget Wish List. Leave a blank page of lines and explain that you are interested in feedback for ideas to make your property better, greener, or more efficient. Ask them to share their wish list items and suggestions because you may be able to incorporate some of the ideas into the budget for 2013, or into your long range planning for 2014, 2015, 2016! There is no time like the present to start looking out beyond next year’s budget!

Everybody understands budgeting and cost containment. People know that you cannot purchase everything all at one time. But, if you offer everyone on the property team a chance to contribute to the future you are not only giving everyone a chance to be heard, you are also holding them accountable to planning and strategizing for their department or focus area! It is amazing what ideas you can glean from such a request. The wish list for your customers may take the form of a Facebook poll, website newsletter post, or online form. For your staff, you may send an online email form as well! Give everyone a short window of time to respond, say a few days or so, and see what feedback you get.

Once you get all of the results you can look at the list and address some of the suggestions and/or share the suggestions that may be incorporated or not incorporated and why. Also, if you plan for the long term budgets, at least everyone will understand your program and your plan of attack for the future! It will also demonstrate how well you have picked up on the property needs over the last year. You’ll find out that you either have a good grasp on the needs of the property, or a little surprised to learn that you’re a bit out of touch with what other people observe as property needs.

In addition to the budget wish lists, an annual Vendor budget letter, which is a more formal request, should be distributed to all contract service vendors, suppliers, utility providers, and professional services, such as accountants, auditors, attorneys, architects, etc. Every property is different so it may not apply for all property types, but it gives everyone a part in the budget, and it also shows them that you are interested in what they think or their suggestions. When polling the vendors and suppliers you are looking for feedback and recommendations as well as the future projections for price increases next year. This letter provides a written response that can be part of your budget presentation. Even your local city water and sewer provider should receive a request for increase information. No one should be left out as it truly saves time and provides a great documentation trail for your budget. It will also explain why you are proposing various increases.

As far as the contract service providers, the request for next year’s contract is another aspect. Each year you prepare your budget you are also evaluating the contract services as well. Why not incorporate that into the request, and ask for the contract too.

Here is an example of a Vendor Budget Letter.

Even if you are not able to distribute and use these ideas for the 2013 budget process, you now have a year to prepare for the following year. Happy budgeting!

By Carla Toebe, New Century Realty, Kennewick, WA

If you have decided to delve into the world of property management then the banking procedures will be a bit more involved than simply having a bank account, making your deposits and payments, and balancing the register at the end of the month. I want to stress that every state’s laws are different. Much of what I talk about in this article relates to the best practices specific to the state of Washington.

The first rule of business is to establish a trust account with your commercial bank. Oddly enough, once you have sat through the session to get this going, do some telephone banking and ask the representative what kind of account you have set up to make sure it was actually set up as a trust account. Just because they tell you that it is a trust account doesn’t mean it is. You have to follow up to make sure that the personal banker did their job correctly. You could find out the hard way that this account was never in fact a trust even if you were told it was. If it isn’t a trust then it will not be protected from potential seizure in the event of bankruptcy or other issues with separate personal or business accounts. Do your due diligence and don’t rely on the initial set up.

Additionally, you should not have any business operating funds coming into or out of this trust account. The account should only have tenant money or client money. All this money should be attached to a property. You must pay out a monthly commission as stipulated by all management agreements at least once monthly. The checks should also state that it is a property management trust account and the leases should state where and what bank the security deposits are held. If the owner of the property is holding the security deposit then you should hold back rental income in order to keep the security deposit in your trust because you are responsible for that deposit while you are managing the property.

The security deposits may be kept in the same account as the rental income but if you have many units with the same owner then it is advisable to get a separate interest bearing trust account and another trust account for the rental income. If you are dealing with multiple owners that do not have a large number of properties then it is better to get a combined account for both rental income and security deposits. If you have an interest bearing account you should be transferring the interest each month into the regular trust account as interest income to the owner. You will need to transfer the security deposit into the regular trust account before you can pay the owner any money from the refund due to charges as well.

If you keep a combined account, all the security deposits held on account as stated on the balance sheet and the rent roll must match the security deposit liability and the cash in the register must match the accumulation of all the owner balances plus the security deposits. You must balance the rent roll with the balance sheet and the register with the bank statement each month. Failure to do so could put you out of compliance with the state and if you are not in balance each month it could be a serious problem.

There should be two places for receipts, the computerized accounting system and the handwritten deposit ticket for all the payments. Copies of all checks should be kept, whether carbon or photocopied. Copies of duplicate deposit receipts should also be kept once the funds are deposited.

It is always a good idea to write a detailed process and policy for your property management banking to show that you are practicing due diligence with other people’s money held in trust. This way anyone who handles the trust account is fully knowledgeable and accountable about the importance of practicing all the state law requirements.

The rules, regulations, and customary practices vary wildly across the country. As I mentioned above, these are some of the best practices for Washington. For example, in Washington it is O.K. to comingle rent and security deposits in the same bank account, however it’s a big no-no in Massachusetts, and in California it’s customary for rental owners to hang onto the security deposit. Also remember that rules about reporting vary from state to state, i.e. if it’s not customary to get a full month’s rent as security, then your rent roll won’t tie to security deposit liability.

Clients put their trust in property managers and believe that they are doing the right thing. The way you handle your banking will solidify this trust with both clients and tenants, thus keeping you out of trouble!

Editor Note: If you’d like to contribute an article about your state’s best banking practices, please send an email to Justin@buildium.com

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

For property management companies, the month of January signals a time to prepare and issue year end statements to their clients for tax preparation purposes. Consequently, each January the IRS requires that any taxpayers who have made payments in excess of $600 to workers that are not considered employees must prepare Form 1099 – Miscellaneous Income. Property management companies are also federally required to file Form 1099 for their clients regarding rental income received throughout the year. In addition, copies of this completed form must be provided to the IRS. The IRS compares the payments shown on the information returns with each recipient’s income tax return to determine whether the payments were reported as income and done so properly.

-The filing deadline for Form 1099 is January 31, 2012.

-The IRS also requires that you file a Form 1096 to identify all of the Form 1099s.

-The filing deadline for Form 1096 is February 28, 2012.

Failure to issue a Form 1099 and file Form 1096 results in penalties and potential disallowances of deductions for those amounts paid. Thus it is imperative to comply with these filing requirements. In years past, SDP Management would spend a lot of time and resources preparing large bulky paper laden year end packages to meet these requirements. The packages, which contained printed year end statements and other tax required documents, would detail the properties prior year performance and provide necessary documentation for the client’s CPA or tax preparer. All packages would be carefully prepared prior to the end of January and mailed via snail mail (USPS) at a considerable cost. Well, the industry has advanced and those days are long gone. The advent of cloud computing and advanced property management software, such as Buildium, have allowed property managers to formulate numerous detailed reports and provide them via email in PDF format to clientele at a fraction of the cost and time.

These reports also meet state and federal requirements. It has also allowed the tedious and many times misunderstood Form 1099 to be computer generated and scheduled for automated mailing. Not only is this convenient for property management companies, but it also allows clientele to continue forwarding the year end PDF report to their CPA or tax preparer regardless of where they are in the world.

Don’t let 1099s and year end reports get you down, use January to focus on the upcoming year and not the past.

As a property manager, you are expected to be a bookkeeper — even if you don’t have an accounting background. You might not even know if you are using the cash method or the accrual method to keep your books. Below are some great links to help you better navigate the accounting world.

• Self promotion is shameless — our accounting book is a great place to start!
• If you are going to trust anybody with your accounting questions, trust the IRS. Check out the IRS’ take on the accrual method.
• Here is what the IRS has to say about the cash method.
• As long as your accounting procedures are consistent and accurately show your income and expenses, you may be able to use the combination method.
• If your business is considering hiring an accountant to keep your books, here are some tips for finding the right accountant.

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When it comes to keeping the books for your properties and your property management company, we could all use some help–especially those of us without a strong accounting background. Here are some additional resources to help further your understanding of accounting procedures and make keeping your properties’ books a breeze.

• Do you understand how to calculate rental property depreciation? Check out PropertyDo.com’s Rental Property Depreciation Guide to learn how depreciation affects your properties.

• ProfitStars and Heartland Payment Systems have partnered with Buildium to allow property managers to convert paper checks into electronic deposits from the convenience of their home or office. This eliminates trips to the bank and retains employees on-site to deal with customers.

• Your accounting questions have likely already been answered at AccountingCoach.com. Feel free to suggest a question to receive free, easy to understand answers to your toughest accounting questions.

• Still need help? Visit Accountants World Directory of Local CPAs to find a professional in your area.

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Property Management Software Rental Property Management Software Landlord Software HOA Software Property Management

When it comes to keeping the books for your properties and your property management company, we could all use some help–especially those of us without a strong accounting background. Here are some additional resources to help further your understanding of accounting procedures and make keeping your properties’ books a breeze.

• Do you understand how to calculate rental property depreciation? Check out PropertyDo.com’s Rental Property Depreciation Guide to learn how depreciation affects your properties.

• ProfitStars and Heartland Payment Systems have partnered with Buildium to allow property managers to convert paper checks into electronic deposits from the convenience of their home or office. This eliminates trips to the bank and retains employees on-site to deal with customers.

• Your accounting questions have likely already been answered at AccountingCoach.com. Feel free to suggest a question to receive free, easy to understand answers to your toughest accounting questions.

• Still need help? Visit Accountants World Directory of Local CPAs to find a professional in your area.

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As a property manager, you handle other people’s money on a regular basis. For example, when you collect a security deposit, you’re handling your tenant’s money; when you collect rent or pay a bill on behalf of a property owner, you’re handling the property owner’s money.

With all this money floating around, it’s critical to know exactly which money belongs to whom. That’s where specialized accounting software designed for property management comes in. But having the right software is only half the battle. You also need to know your options for handling other people’s money (and the rules that go along with them).

Trust accounting to the rescue.
Your first option is to keep everyone’s money in a separate bank account. It’s the obvious choice and may be the only one you’ve considered. It’s straight-forward and simple, so what’s the catch? Time. Think about how long it takes to balance your own checkbook. Now multiply that by five, ten, or two hundred! That’s the number of checkbooks you have to balance when you have one bank account for each property owner.

So what’s the alternative? A little bit of trust accounting applied to a single bank account. Trust accounting sounds intimidating, but it really entails nothing more than keeping track of the money you’ve received, held and paid out on behalf of each property owner.

A bank vault full of safe deposit boxes.
Think of trust accounting as a bank vault filled with safe deposit boxes, each designated to a specific property owner. Although everyone’s money is kept in the same vault, each person’s stash is separate. Likewise with trust accounting, even though everyone’s money is held in the same bank account, each owner’s money is tracked and accounted for separately.

Know the rules.
As with many other aspects of property management, the first step to setting up a trust account is checking your state’s specific laws; after all, no one wants to be the next Kenneth Lay. Bear in mind that the account should be set up in the name of your company, not under the property owner’s name. In past cases where such accounts have been set up under a property owner’s name, the IRS has seized funds based on a lien against the property owner. Obviously, you don’t want this to happen to you. Remember, an IRS agent won’t be the one to explain why your tenants’ deposits were seized to pay a tax bill. You will.

Don’t commingle monies.
While you’re allowed to hold money from different property owners in a single trust account, you’re not allowed to commingle their money from an accounting perspective. In other words, you’re not allowed to pay money out on a property owner’s behalf using other people’s money, even if you square things up later.

The rules are even more strict when it comes to your money. It’s not enough to keep your money separate from an accounting perspective. In most cases, you must keep your money in a separate bank account altogether.

How hard can trust accounting actually be?
Trust accounting isn’t difficult, but it is easy to slip up if you’re not careful. For example, suppose you’re holding two different property owners’ funds in a trust account. We’ll call these two owners Sam Shortfall and William Windfall.

Now let’s say a washing machine in one of Sam Shortfall’s properties is on the fritz. A pipe bursts and there’s water everywhere. When all is said and done, the bill for all of this is $800. But wai—Sam Shortfall doesn’t have enough money in his trust account to cover the bill. What do you do?

The wrong way: Use someone else’s money.
No worries … there’s enough money in the trust account to cover the washing machine expenses. You’ll pay the bill and withhold $200 ($800 bill – $600 cash-on-hand = $200 “loan”) from Sam next month when his rents come in. Sure, technically you’re using William Windfall’s money, but you’ll square things up next month. No big deal, right? Wrong. For starters, it’s bad accounting. What happens when Sam Shortfall is short again next month? Are you going to continue to rob Peter to pay Paul? If that’s not reason enough, here’s the best reason not to do it: it’s against the law.

Wrong again: Use your money.
Okay, so you can’t use someone else’s money. That makes sense. But what if you use your own money? You’ll just deduct it from Sam’s rents next month. Since it’s your money, you can do what you want, right? Wrong again. Do you really want to be in the loan business? Besides, commingling your own funds is, once again, almost always illegal.

The right way: Ask Sam for more money.
You read that correctly. The right answer here is to ask Sam for more money. As a property manger you may be thinking, “But he hired me to manage his property. He doesn’t want to be bothered with bursting pipes and pesky bills!” Let’s do a quick reality check. Sam may have hired you to manage his property and pay bills on his behalf, but Sam still owns the property. That means Sam—not you—is responsible for coming up with the money and paying the bills.

Use trust accounting.
The bottom line here is that trust accounting works. Fewer bank accounts and fewer signature cards mean less time spent opening new accounts and reconciling each one on a monthly basis. But make it easy for yourself—know the rules and get the right software. Before long, you’ll wonder how you got along doing things any other way.

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