Is Your Property Manager Earning the Fee? A 7-Point Monthly Audit for Out-of-State Landlords

Hiring a property manager is supposed to buy you peace of mind on a rental you can’t drive past. But most small landlords never check the manager’s work beyond glancing at the monthly deposit. That’s a problem: the owner statement is a document the manager produces about themselves. This guide gives you a 30-minute monthly audit, plus a clean exit plan if the numbers don’t hold up.

The misconception: “The owner statement proves the money is there”

An owner statement is a summary, not proof. In California, the Department of Real Estate’s trust-fund guide tells brokers to reconcile their trust records against the bank statement every month, and to keep a separate ledger for each owner (CA DRE Reference Book, Ch. 21 “Trust Funds”). The DRE’s 2025 enforcement advisory names commingling and failing to reconcile trust accounts among the most common violations it sees. Other states have their own rules, but the lesson travels: you are the only person checking the manager on your behalf.

The 7-point monthly audit

1. Confirm the license, once a year. Many states require a real estate license to manage rentals for someone else. Texas, for example, requires one for anyone who controls rent on a single-family rental, meaning they can spend it on management services, decide where it’s deposited, or sign checks on a trust account (22 Tex. Admin. Code §535.4(h)). Look the company up on the state’s free search (Texas TREC, California DRE, Florida DBPR) and check for an active status and any disciplinary history.
2. Match the statement to your bank. Rent collected minus fees minus repairs should equal the deposit that hit your account, to the penny. Check the timing too: if the agreement says owner draws go out by the 10th and they keep landing on the 20th, ask why.
3. Recalculate the management fee. Is it 8% of rent collected or of rent due? The difference matters in a month the tenant pays late or partly. Look for fees you didn’t expect: “technology,” “inspection,” renewal or lease-up fees. Every one should trace back to a line in your signed agreement.
4. Ask for invoices on every repair over your limit. Your agreement should set a dollar amount the manager can spend without calling you. For anything above it, ask for the vendor’s invoice (not the manager’s re-typed version) and before-and-after photos. If the manager adds a markup or “coordination fee” on vendor work, it should be in writing.
5. Know exactly where the security deposit sits. Ask, in writing, which account holds the tenant’s deposit and in whose name. California’s guide treats rents and deposits as trust funds, and it calls mixing them with the broker’s own money “commingling.” That’s a violation.
6. Track vacancy and days-to-lease. Nationally, 7.3% of rental housing was vacant and for rent in Q2 2026, according to the Census Bureau’s Housing Vacancies survey. That’s context, not a target for one house. The useful number is your own: how many days from move-out to a signed lease, and was the rent set using comparables you can see?
7. Review the work-order log. Ask for a list of the month’s tenant requests with the date opened, date closed and cost. Slow responses turn into bigger repairs and tenants who don’t renew.

The year-end check most owners miss

A manager that passes rent through to you must report it on Form 1099-MISC, box 1 (IRS Instructions for Forms 1099-MISC and 1099-NEC, Rev. December 2026). For tax years beginning after 2025, the IRS raised the reporting threshold for rents from $600 to $2,000. Compare the 1099 total to the sum of your 12 statements. If they don’t match, ask before you file. (Questions about how this affects your return belong with your tax professional.)

Illustrative example: where the money goes

Illustrative, not a quote. Say rent is $1,650 and the fee is 8% of collected rent ($132). If a $240 plumbing invoice is billed as $290 and nobody catches it, that’s $50. Add a $15 monthly “technology fee” the agreement never mentions, and you’ve lost $230 a year on one house before anyone talks about vacancy. None of this means your manager is dishonest. It means the monthly check is worth 30 minutes.

If it’s time to leave: a clean exit

Interpretation, not fact: most problems at a manager switch come from loose ends, not lawsuits. Before you give notice:

1. Re-read the termination clause. Find the notice period, any termination fee, and whether the manager keeps earning on a lease they placed.
2. Request the file in writing. Ask for the signed lease, tenant ledger, deposit amount and where it’s held, keys and codes, vendor list, warranties, open work orders and move-in photos. In Florida, a licensee who fails to account for or deliver money or documents when the person entitled to them demands it can be disciplined (Fla. Stat. §475.25(1)(d)), so a written demand matters.
3. Move the deposit deliberately. Get written confirmation of the amount transferred to you or the new manager. You will owe it back at move-out, under your state’s rules (see our move-out deposit guide).
4. Tell the tenant one clear date. Send written notice of who to pay, how, and starting when, so rent never goes to two places (our rent collection system covers the setup).
5. Line up the replacement first. Use the questions in how to hire a property management company, or decide whether to self-manage from a distance with a vetted handyman.

Monday checklist

• Pull last month’s statement and bank deposit and make sure they match.
• Recalculate the fee against your agreement.
• Email the manager three questions: where is the deposit held, can I see the invoices over my limit, and can I get this month’s work-order log.
• Look up the license on your state’s search page.

This article is for general education only and is not legal, tax, financial or investment advice. Licensing and trust-account rules vary by state and change over time; check the current rules for your property’s state and consult a qualified professional before acting. The featured image is an AI-generated illustration, not a photo of a real property or company.