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.
It does sound like you need to talk with them both, and explain your expectations. Set up some SOP’s that must be followed for the maintenance couple, and by all means put a cap on his spending. $400-500 limit, and anything over that he needs to take pictures or a video of the problem, and forward to you for approval.
We purchased a 125 space park that the previous owner had a full time maintenance man. He was paid by the hour and always worked (supposedly) 40hrs a week. Manager said there was so much work to do we had to have a maintenance man at the park. First thing we did when we took over was fire the maintenance guy. Amazingly, all that “work” went away. Whenever we have a repair that needs to be done in the park, we get 2 bids and go with the lower bid, we then make them take before during and after pics of the work. Salary and hourly pay does not work unless you are onsite all the time, and even then you will have problems.
Jefferson, at first glance the items listed seem to be priced reasonably… a 5 star $500 lot fee park resident rightly expects a high level of service and no differed maintenance- as should the investors. Now, if it is your intention to eliminate the pool, the clubhouse, and not replace appliances in POHs- then clearly communicate that intention to your staff.
You either have to pay an on site manager and then deal with that manager, or continue to deal with the maintenance man making the day to day decisions.
As for the book keeper, you can probably teach them and they will do better- but you will always need to look over the reports and make sure that data is entered in the correct account.
We use a private forum to manager our properties. Anytime a manager wants to purchase something- they must ask and have it approved. Some only have access to our Chase Debit Cards, and we can dial the limits up and down to match what they might be buying. So there is a process- every house has a build out sheet- stating what it needs. The request in the forum is titled by space #, we cross check the build out sheet- then approve the purchase. They must scan in the receipt so we can see it the same day as the purchase.
our managers can not fill a gas tank without asking, if they do- we pull the charge card.
We do not give our home depot card to managers, they gather the stuff, and then they must have to store call in for he charge #.
This question comes down to a matter of trust. I personally trust no one completely. A maintenance couple on salary can easily become untrustworthy over time without checks and balances. Someone, preferably a owner, should be doing follow up inspections on a regular bases to insure all work and material is as stated.
I believe a surprise inspection should be made in the near future to confirm the level of trust you have is warranted as a starting point.
I would also no longer be basing his wage on park income.