Should I Give Keys to Tenant/Mgr?

Rehabbing, Fix and Flip, Rental Properties
1

I have 46 unit in escrow and live out of state. There is a guy that comes with the property who is the handyman/mgr/tenant. He does everything from keeping the halls clean, to collecting rents, and preparing a unit for rent. He does all this for free rent.

Question: Should he be given a set of keys for all the units, or does he have to be “bonded” first.

The delima is hiring a property real property manager will cost around $15,000 a year, while this handyman/tenant/mgr is only $4740 per year. Any suggestions?

Question: Should I let him collect rents and deposit them into my account? He’ll have my account number.

Thanks, Jag

2

Jagster,

These are some of the issues when you don’t manage the property yourself. How will the manager do his job if he doesn’t have the keys? What will happen to you if the manager uses the keys to break into a tenant’s apartment and rape her (this happened recently and the landlord lost a BIG lawsuit). What happens if the landlord collects all the rents and then skips town? Is this theft or a civil matter? (you might be surprised at the lack of interest local prosecutors have in dealing with these types of cases) Will the manager clean out your bank account if you give them your account number? How will the manager pay for materials and repairs if you don’t give him access to your checking account?

WHEW! Landlording is hard enough. I’m glad that I don’t have these problems.

Good Luck,

Mike

3

It is common for absentee landlords to have tenant managers, at least around here for small 6 to 8 unit buildings. where they live rent free, or at least 50% rent free.

If you want to minimize risks, you should pay a nominal salary, such as $100.00/month, besides free rent, put him on the payroll, make the deductions, pay the payroll taxes, workmen’s comp etc., and then buy adequate liability insurance.

To be absolutely safe, have a professional employee background check done, and keep it on file. You could have big problems if this guy is a pedophile, you gave him the keys, and he molested some tenant. With a professional background check, at least you can blame the company doing the checks.

This way, if he’s hurt shoveling snow, you’re covered, he assaults a tenant, you’re covered.

Be also careful of this guy doing favors for tenants such as installing window AC’s. If it falls out the window, and hit someone, you’re on the hook.

I run a small business where it is common for employers and employees to be “off the books”. But because I insisted that we be “on the books”, there was a serious accident a while back, the employee was covered under workman’s comp. Under state law, he’s not even allowed to sue when he’s covered under workman’s comp.

Had he been off the books, I, or at least the corporation would be wiped out. But I got liability insurance besides.

4

Frank is right, in MA if you give discounted rent to a tenant to complete certain tasks then he is considered an “employee”.

You have to decide what risks you want to take.

5

I never knew that if I discounted rent to a tenant, they are considered an employee, so I might as well do it right by putting them on the books and paying for workers comp. Thanks!

My concern is, I live out of state, and his former landlord just lived two miles away, so that is huge cause for good behavior. He’s been there for 3 years, and I was concerned about any liability that may occur as a result of his negligence or wrecklessness. I hear he’s great but you always have to be one step in front of the game. So I hear you on the workers comp.

How should I set that up or learn more about iworkers comp? And how much more does it cost me to have workers comp? Do I have to file a tax in return in that state as well as Caifornia. Can my CPA handle it, or does he prearrange a schedule with all the taxes and WC take out so that I know how much of a check to cut each week?
Jag