Prop Mgmt Charging Overhead On Cleaning, Repair Bills
I have rental properties in separate LLCs and a management company set up in an LLC as well. The rental properties are completely separate entities from the management LLC. However, all the LLCs are owned by me. When a tenant moves out, the management company contracts out the cleaning, painting, and repairs to different vendors. When my mgmt company receives their invoice, we add 20% to cover our our cost of contracting, inspecting, setting up and verifying that the work was done. We then charge the property LLC the original amount plus 20%.
When tenants disagree about their security deposit computation and ask to see the original cleaning bill for example, they get upset about the 20% mark up for overhead and dont understand (i run college housing so sometimes repairs and cleaning can be quite high). I dont think I am being unethical. If I was to hire a separate mgmt company they would do the exact same thing. Why should it matter if the mgmt company is owned by me? Plus,because I ultimately am resposnsible for a lot of the repair bills that get billed back to the property LLCs, I am a heckuva a lot more conscientious about costs than a typical mgmt company who doesnt own properties. Has anybody run into this problem before? If so, I would love some advice about how to figure out this problem. Thanks.
When tenants disagree about their security deposit computation and ask to see the original cleaning bill for example, they get upset about the 20% mark up for overhead and dont understand (i run college housing so sometimes repairs and cleaning can be quite high). I dont think I am being unethical. If I was to hire a separate mgmt company they would do the exact same thing. Why should it matter if the mgmt company is owned by me? Plus,because I ultimately am resposnsible for a lot of the repair bills that get billed back to the property LLCs, I am a heckuva a lot more conscientious about costs than a typical mgmt company who doesnt own properties. Has anybody run into this problem before? If so, I would love some advice about how to figure out this problem. Thanks.

Comments(0)
" If I was to hire a separate mgmt company they would do the exact same thing. "
I have not seen outside vendor invoices marked up.
I would just issue and invoice from the management company that includes the mark-up.
The fact that you own both companies seems like a shady deal.[ Edited by cjmazur on Date 01/11/2009 ]