Some of you who have rental property and are using only a property management company that purported offers as “in-house” accounting services should be advised that is not an ideal practice. You are entrusting a group with your investment and with funds to manage this. Too many times in Costa Rica, there are property managers who either by mistake, incompetence or willingly misappropriate, obfuscate or steal funds from unsuspecting owners. The property management companies work for their own benefit – they earn fees through rental commissions, markups on services they offer and even get referral fees from outside providers. For example, if they authorize a cleaning charge or maintenance items, they may receive fees for that. As such, they may authorize providers to perform unnecessary or inflated services in order to make additional fees and the owner pays for it.
Another area of concern is what happens if the property manager disappears or the company goes under. What happens if your property manager is working in Costa Rica illegally? Has your property manager actually provided you a copy of their cedula – do they have the condition of being free to work? – what happens if they have “personal habits” that get them into financial or legal troubles?
Having an additional layer of control over the property manager, helps alleviate the risks delineated above. An outside CPA works directly for you and is independent of the property management company. The outside CPA can review the bank movements and flow of funds, provide financial statements, offer unfettered advice and keep you tax compliant. They have the knowledge and experience of the local business climate and tax laws. They are there for you in the event that the property manager or his company has legal or personal issues.
Leaving your investment and control over your funds in the hands of one party is tempting for abuse. You, the owner, who lives thousands of miles away, are subject to significant problems and risks that can be devastating.
Do not be fooled or lead to believe that your property manager is your friend or is looking out for your interests. They are not – many will try to claim that they can save you money by not using an outside CPA or that you should use their person or in-house accounting services. This might sound tempting as it is on the face a potential money saving tactic or a way to consolidate services.
The outside CPA is the best way to make sure your funds are monitored correctly, that your investment is protected and that you have outside and independent person to help guide you through compliance issues and be there in the case of emergency.
If you would like to have a conversation about these matters, please contact us at robert@richcoastaccounting.com.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.