I’m involved with a 5-star MHP in California. This is a terrific property with a pool, clubhouse, gym, and many other amenities. Lot rents are around $500/month. Our monthly gross is over $100,000. We have an on-site husband-and-wife team that do the management and maintenance. We pay them $5,000/month (e.g. 5% of the gross).
The issue we are having is that almost every month the maintenance man will go to Home Depot (where we have a corporate charge account) and make purchases like a $400 stove to put in a POH, or $2,000 worth of roofing materials to repair the clubhouse roof, or $3,000 worth of new parts for the pool pump, or something else equally expensive. It seems that every month we get hit with about $3,000 in repairs by surprise.
These bills then get sent directly to our bookkeeper who just pays them (never questions them), and usually books them all as expenses, rather than capitalizing them. (I’m arranging a $3 million dollar refinancing, so it is important to maximize reported profits and capitalize all expenses that we legally can.)
My questions are:
How do you control costs in a situation like this where you are paying someone a flat salary to maintain the property and you are not on-site to inspect the problems the repairman says are necessary?
How do you insure that items are properly categorized as ‘expenses’ vs. ‘capital expenditures?’
I’d like to hear from folks that employ a maintenance man on a salaried basis.
Thank you all,