Linking Mortgage to Property Manager

[callum.newton]

Goodafternoon All,

I am about to rent out my first property and have been interviewing PM's in the local area. One of them mentioned that I could have rates etc. linked to the trust of the real estate agent so that, the cost of the rates etc. would be deducted from my rental income before I was paid at the end of the month (Obviously for an additional fee?)

My question is, does anybody have their mortgage setup to also be "auto-deducted" by their PM from their rental incomes?

Assuming that the property was positively geared, what impact would this arrangement have as far as the ATO is concerned? What about as far as centrelink is concerned for calculation of my final annual wage?Would they simply view it as a reduced form of income?

Many thanks for any suggestions and hearing my first question!

C

 

[Twitch]

No way would I do that, paying (or rather not paying) a mortgage is too important. What if the tennant is late with the rent, or there are some larger expenses that month leaving a shortfall?

 

[marg4000]

Same with other bills.

Our rates bills receive discounts if paid by the due date.

We prefer to pay all bills ourselves so that we know it is done correctly and on time.
Marg

 

[LynnH]

I agree with the others - do it yourself: at least you know that it's been done ... and on time!

Cheers
LynnH

 

[Sheryn]

Callum

I have the IP water bill sent to the PM so that they can bill the tenant.

Rates I pay myself from rental income account.

No extra charge.


Regards
Sheryn

 

[Alabex]

Most PMs should be able to arrange to pay your mortgage from the rental monies. If systems are in place properly your bills should always be paid on time, and if rent is late then the PM should be contacting you so you can make alternative arrangements for important payments.

 

[Property Mogul]

I pay my own mortgage but the PM pays all other bills...rates, water, emergency services levy etc. Never had any problems.

 

[Xenia]

Paying bills as part of a property management service is common. Our agency does this as part of the management not as an extra service. The idea behind property management is "leverage of time". Most sophisticated investors just hand the keys and a bank account and allow their property manager to do the rest.

One key advantage is that it allows the investor to have a record at the end of the month of all expenses related to the month as it all appears on a statement. Makes tax easy.

The disadvantage is lack of funds in the account which means that some bills will need to wait until the next rent period to be paid. We prioritise bills based on importance or ask landlords to put in extra amounts to cover bills in that period. A common one is a new hot water service. Landlords put money into our trust account so that there is no shortfall at the end of the month when we need to pay that bill.

We do not have any properties where the mortgage is paid and can't see how this could be possible given that most properties are negatively geared! Most people make mortgage payments as direct payments from a LOC so I don't see how handing it to a pm could make it any easier!

 

[Mooze]

We're doing this (minus the mortgage) for our second IP, however its also run by the company that does hubby's payroll/financial advice/tax & accounting (He's a contractor). Ended up cheaper than most other PM services in the area, and makes tax time very easy.

 

[callum.newton]

Thanks for all of your suggestions. I'll probably end up linking the rates to the account but keep everything else in my direct control.

Cheers

C

 

[jasper]

I have the PM's pay the rates, water etc from the rent, never had a problem and I don't get charged extra but I always handle the mortgages myself.

 

[boomtown]

I would never let the PMs handle anything except the rent.

The mortgage is on automatic payments so I dont have to actually do anything - I just check the statement from time to time. The account has a healthy cash float.

Rates are like 4 times a year and body corps are 3 times a year. That 7 bills total per year. When you have internet banking it takes you about 30 seconds to pay a bill.

3.5 minutes of time per annum per IP is not exactly a significant time imposition.

 

[callum.newton]

Thanks ladies and gents,

I have been interviewing PM's and the one I thought I was going to go with has been a hassle to track down and get the ball rolling on my IP which is not a good sign...especially since I haven't even signed any contract with his agency yet!

It would seem that everyone agrees that getting a PM who charges an extra 1% or so is worth it for the peace of mind. Still, the difference between the original 7.7% fee from the lousy PM and 9.9% fee from the better PM makes a difference, especially as I am just starting off...

Decisions decisions...

C