Managing Home Maintenance Costs

Property asset management is an important part of the property management job. Not only is property management responsible for managing  tenants, renting units, paying common expenses and letting contracts to complete repairs. They are also responsible for managing both fixed assets as well as non fixed assets.  Rent units and sign contracts with tenants. In addition collect rents on a monthly basis either by check or by electronic means.

This is the common most understood portion of property management. In addition keeping track of all of the assets is part of the job. Completing an inventory every year or more often if needed is also necessary part of the job. Replace missing items. This can represent an additional cost to the owners. As a result of an inventory audit of the asserts, further action may be needed to investigate chronic problems.

Property Asset Management

Property asset management is another major part of the job. Managers prepare asset reports on behalf of their clients. Management of fixed assets includes repairs, painting, and plumbing etc. this includes both interior and exterior portions of the building. Management of non fixed assets also is needed for assets in common areas of the buildings. Also assets in each unit that is rented and assets that are needed to allow for properly maintain the building.

These items could include tools, ladders, cleaning supplies and supplies typically needed for routine repairs. This also includes items such as refrigerators, stoves and cook tops, dryers, washing machines and dish washers. Common areas might have chairs and tables, a stove and refrigerator in shared common rooms or club houses etc.

Keeping Records

Record repairs and purchases as expenses. The larger items accounted for in the asset management system being employed by the property management income company. This is required to keep track of how much money is spent on various categories. Also for the larger items that  depreciate as well. This is necessary for tax purposes. Take the appropriate tax deductions to avoid paying too much tax under the tax law. Each asset may be in a different tax class. Reflect any repairs and changes accordingly.

Property managers need to have all of this material recorded in the asset management system. In addition contracts between the owner and the property manager must stipulate the requirements for tracking purposes. Don’t forget to include reporting of income and expenses. Make information available to the owners accountants for audit purposes. As well as for preparation of the tax statements at the end of each year.

Manage Contracts

Include  reports on a monthly basis as well as on an annual basis. Most will include rental income, rental expenses, rental records, lease records, and income statements. In most cases the report will include or report the value of assets at the beginning of the period. The additions and removal of assets during the period. Then the value of the final assets at the end of the period. The property manager should also be able to report an inventory of all assets as well.

This is pretty standard for property managers and expected by client owners. Many owners will review these reports regularly as part of their due diligence. They provide an over view of the property that they own. Owners will also query anything that looks out of place and any large expenses that may be reported.

Property managers should be prepared to deal with these questions. They should even provide a narrative report routinely addressing anything that owners may be concerned about. They should be preparing these exception reports as a matter of course. Hence, they should focus on questions that the owner is likely to have. This saves time for everyone.

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Many residential rental property owners are focused on the income and expense side of the equation since this is the primary cash flow that will impact their ability to pay all of their expenses associated with the property that they own. There is another element of property management that needs to be discussed. That is assets property management.

Some units will be rented without furniture. However there may be the basics such as fridge, stove, microwave and possibly a washing machine and clothes dryer. There will be screens on the windows, lights, faucets, toilets and chandeliers. This may seem extreme in terms of asset management. Some property owners have found much to their frustration that these things are missing when they come to inspect after the tenant has moved out.

Assets Property Management

Fully Furnished

At the other extreme, some rental units will come fully equipped with furniture. Beds and bedding, kitchen utensils and basically everything that a person needs to live. All you need to do is bring your clothes. This is a far more complex asset property management situation. As a result there are a lot of items to inventory and keep track of. Tenants look for cleanliness and good quality utensils, clean linens as basic requirements. Property mangers often hire cleaners to go in after tenants leave to clean the place. They will make the cleaning fee a part of the charge for renting the property. In addition to whatever is charged on a per month or daily basis.

In addition there may be other items in or around the property that must be tracked and included in the assets of the property. There are several reasons to keep track of all assets that are in and around a property. These are:

• Track assets for tax purposes for deductions and depreciation purposes.
• Track all assets for inventory purposes
• Ensure nothing is stolen when tenants leave.
• Track assets from an expense perspective to report on the books for income statements etc

Contract property managers  to track all of these items on behalf of a owner client. Or the owner client may track these things themselves. Use proper tools if the property manager is responsible for this element of asset management. In addition they must record the date of purchase or the date first entered into the record. Also the value of the item and a description of the item all linked to the unit that this asset is located in. Record all additions and removals as well.

Informal or Formal Asset Tracking

Some property managers will perform the function of asset property management informally and use a camera to record everything and perhaps focus on the major items in the home. Others may perform and maintain a very detailed asset property management function. Evaluate the benefits of a detailed inventory vs. the cost of maintaining such an inventory.

Most companies will focus on the major items and leave the details of smaller items to the owner. However asset property management is extremely important  for tax related reasons. Write off assets against income either from a depreciation perspective or from a total write off perspective.

Assets Property Management – Year End Reports

Year end reports will cover income and expenses for the property. These same reports will also show the total value of assets at the beginning of the year, the additions and deletions during the year and the final total assets at the end of the year.

Owners and clients will monitor all of these reports as part of their ongoing management of the property and the services provided by the property management company.

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