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.
" 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 ]