Consumption and Real Estate
Regarding an apartment building investment, payroll vs. property management ?
Question : Regarding an apartment building investment, payroll vs. property management ?
I’m thinking of purchasing an apartment building, and plan to have the property maintained by someone (or some company) I pay.
On property evaluation/analysis sheets, two of the expense line items that I’ll see time and again pertain to 1) Payroll and 2) Property Management fee. What Rule of Thumb should I use to determine when I put a staff of folks under “Payroll” versus if I simply pay a fee to a Property Management company? Should this be determined by the # of units in the property? If so, what would the unit threshold be? Thanks – in advance – for any assistance with this question.
investment property management
Best answer:
Answer by schwildcat1977
First of all you need to know that it is illegal for just anyone to manage your property for you. Anyone managing property they do not own, must have a property management or real estate license.
That said- payroll would only be for maintenance workers and things like that and the property management fee would be just that.
I would say “Payroll” is for owners that have a lot of properties were it makes sense to have real full time employees to help you run the operation. Having employees is a whole different ball game tax wise then just owning properties and doing the management your self. With employees you have to record and figure the whole tax withholding thing on pay checks with monthly or quarterly payments to the IRS. Don’t forget unemployment insurance and other labor laws depending on your state or county laws.
I would advise avoiding having employees if you own less then, say 50 to 100 units. Having a management company and paying contractors for maintenance and repairs is much more straight forward. You write off the costs at the end of the year with the canceled checks and or recites as proof for the IRS and they are responsible for reporting your payments as income to their business.