As a condo owner or board member, having a rental pool is a decision that should be contemplated carefully. There are benefits and drawbacks that must be considered before a decision is made.
With that being said, the value of having a single point of contact between owners and renters, in addition to being in greater control of rules and regulations, is an opportunity that’s hard to pass up.
Try to visualize a situation where you are able to pool the rental income with other owners and share some or all of the expenses. Rental Pools give you the option to amalgamate a group of rentals into a single financial portfolio that evenly shares expenses and income. This investing helps guarantee owners a monthly payment regardless of market fluctuations, turnovers or other unknowns.
A rental pool is created by a group of owners who decide to pool (combine) rental income from all their units and share the expenditures of all units. The owners will also share any profit or loss from the rental pool. A rental pool can have its own Board of Directors, and property manager to gather rent, maintain the units and pay unit expenses. The Board of Directors for the rental pool may vary from the condominium Board of Directors – although a single property management company could manage both the condo and the rental pool.
There are some main benefits of being a member of a rental pool. Firstly, the management costs are usually 1 percent to 4 percent cheaper than single unit management. Regular management fees commonly start at 10 percent of collected rent. Since all units of the rental pool are in the same place, there are shared sets of accounting records which make it easier to manage, and the savings are passed on to condominium owner. Other returns include administration charges, shared banking fees and the advertising of your property for rent.
There are also monthly fixed costs that the rental pool pays. These include condo fees – the rental pool pays these on behalf of the owner – resident manager pay if applicable, and the management fees. There are other costs as well, which include unit repairs, appliance repair or replacement and painting. The rental pool does not cover the mortgage, insurance premiums or property taxes.
If you decide to obtain the services of a property management company to manage the common property in a rental investment pool, consider utilizing this template property management agreement:
- The property management company representative is required to attend all regular meetings of the strata corporation and the strata council.
- The corporation will provide the property management company representative with reasonable access to the shared property at all times.
- The rental pool is comprised of a group of owners whose units will be rented out. The revenues from those rentals will be shared to cover the owners’ expenses.
- The property management company representative will be paid a monthly fee for maintenance, management and administration of the common property for the rental pool owners.
- The manager’s duties consist of the preparation of annual budgets, procuring contracts, arranging for repairs, the collection of assessments from owners, commencing legal action for non-payment, paying contractors and suppliers, supervising contractors.
- The corporation indemnifies the manager against claims and damages with the exception of those arising from negligence or willful misconduct on the part of the management firm.
Looking to hire a licensed property management company?
Braden Equities Inc. has been successfully managing condominium buildings in Edmonton since the 1970s. A lot has changed since then, but our commitment to the residents living in each building we operate has not. Contact us today.