What challenges should I expect with managing multiple residences?
Managing multiple household staff is just one of the many challenges that homeowners of multiple residences face. In addition to human resource matters, property maintenance, vendor management, family confidentiality and liability, insurance and security are also areas ripe with issues that homeowners with multiple properties need to consider.
Let’s take them one by one and identify the issues, then suggest some of the best practices to address them.
A best practice we have used successfully is to appoint a property manager for each location. This could be a housekeeper who has been with you for 20 years, a caretaker or even a trusted contractor who can oversee the property.
Having one party responsible for the location makes the task more manageable. This person can be responsible for budgets, coordination of bill payments, management of staff, the bidding process for hiring contractors and overall property maintenance. This should be someone who is on site or in the local area and has the proper qualifications.
Another best practice is to manage payroll at each location. Appoint one employee as the point person for tracking time for hourly employees, calculating overtime, organizing work schedules and training staff. Maintaining proper employee files, with résumés, offer letters, confidentiality agreements and new-hire forms, is also important. Have employees sign confidentiality agreements when first hired and screen new hires by doing deep background checks. Consider establishing benefit plans for long-term employees.
A useful document we often create for clients to record human resource policies is an employee handbook or manual, with policies covering things like a code of conduct, the nature of employment, paid time off, discipline, benefits and harassment.
Many clients will often purchase their property through a limited liability company or LLC to provide anonymity regarding the ownership, and to limit exposure to potential lawsuits. Another benefit is that ownership in the LLC can even be transferred to heirs over time.
The proper accounting for each residence is important for many reasons.
Keeping track of the property’s tax basis will mitigate the gain on the future sale of the property. Additionally, it is helpful to know what it costs to run a property annually, for planning and cash flow purposes. Have the property manager accumulate and approve the monthly vendor invoices. This individual will know what work was scheduled, and the negotiated price for it. He or she can then forward the approved invoices to you or your bill pay service for payment. The property manager can also update you on how the budgeted expenses compare to the actual costs, so you can make any decisions needed on property management.
Finally, homeowners insurance should be reviewed periodically by a qualified insurance agent to assess the adequacy of the coverage. Insurance companies will often make a home visit and do the review for you. Choose an insurance company with a high rating for financial strength. Ask your insurance agent about special coverage options needed, such as flood, earthquake or collectibles coverage for fine art and antiques. The right agent will be able to assist you with these options. Coverage should be tailored to your location and to the possible perils that could occur in your area.
While many concerns come along with ownership of multiple residences, they can be managed with some planning, the advice of some trusted professionals and the hiring of some key employees to assist in the process.
This article is distributed with the understanding that CBIZ is not rendering legal, accounting, or other professional advice. To the extent anything herein could be construed as tax advice, such advice is not intended to be used and cannot be used to avoid penalties under the Internal Revenue Code, or to promote, market or recommend to another person any tax-related matter. This information is general in nature and may be affected by changes in law or in the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.