While a highly unlikely scenario, this can and does happen in the USA and indeed other cities around the world, so it's worth being aware of the risk. There are bound to be a few bad apples in any market and this further underlines the importance of vetting your property management company before entrusting your investment over to them.
It's very easy to be taken in by a fancy
website and an attractive fee structure, but it's worth digging a little deeper. One of the first things to look for is how long the firm has been
in business, which will usually be revealed fairly easily through
an Internet search. Ideally, your property
management company will have been operating for several years at the very least.
As a rough guide, a company that was formed before the US housing market crash in 2007 and has weathered the storm should have fairly sound financial practices in place.
Having selected the right company to go with, an easiest way to safeguard yourself against any malpractice is to ensure that your tenant's security bond
and monthly rent are both paid into a separate bank account and not an account belonging to your property management company. You need to have online
access to this account and be able withdraw funds from it at will.
Any company that
advertises keeping your money in their “own watertight account “
should be avoided as you will have no access to it and will have to ask
them to release your own money. Your manager will ideally operate a transparent, online
portal where you can see all the incomings and outgoings regarding your rental
A key piece of advice is not to let too much rent accrue in
the account into which rental payments are made. Transferring the money
over to your primary bank account at regular intervals will limit any
potential loss of earnings.
Bear in mind, however, that payments for insurance, HOA fees, utility bills etc. will often be paid out of this account. You will need to grant your property management company access if you want them to manage these payments on your behalf. As long as they are transparent in doing so, there shouldn't be a problem.