What is a contingency reserve account?

Do you know the difference between contingency reserves and operating funds?

Operating funds are funds that our property management and real estate business uses to pay for our business. Operating funds are our money.  Still, escrow funds are different.  Escrow funds are monies that Nesbitt Realty is holding on behalf of tenants, landlords, buyers and sellers. Escrow funds are not our money, but they are monies that we are trusted to safeguard. At any given time, Nesbitt Realty has hundreds of thousands of dollars in escrow accounts.

In Washington, the Commonwealth of Virginia requires that all real estate licensees manage escrow funds in a particular manner. Most importantly the Commonwealth requires that escrow funds are properly accounted for at all times. In additional all escrow funds must be kept separate from operating funds.  The biggest portion of our escrow funds are tenant security deposits, but also hold deposits for purchasers (and sometimes sellers) as we'll as contingency reserve funds for real estate investors.

Contingency reserve is a special type of escrow.

A contingency reserve account is money that is held in savings to pay for repairs and other incidentals that occur during rental management. Although the money is in our escrow account, the money belongs to the landlord. When the property management ends, that money is promptly returned to the landlord.

When a repair bill arises we use money in the contingency reserve account to pay that bill.  When bills are paid in this manner the account is depleted.  When the account is missing funds, at the end of the month when new rents are paid, Nesbitt Realty replenishes the count with money withheld from this rent. As property managers, Nesbitt Realty prepares a statement each month to show if/when money is depleted and how/when money is replenished into the contingency reserve account.

Landlords do not pay us money to set up the contingency reserve account. Instead, Nesbitt Realty withholds money from the first month of rent in order to set up the account.

 

Washington Rental Management Resources

Basics

Basic info about what rental managment in Washington.

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Getting Started

Learn more about getting started with rental property management

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Find A Tenant

List your property to rent to find a great renter in Washington fast.

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Accounting

How does Nesbitt Realty keep track of income and expenses for landlords?

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Cost

A breakdown of fees associated with property management services in Washington

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Vetting

How Nesbitt Realty checks the backgrounds of tenants for our clients.

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Reserves

What is a contingency reserve account?

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Territory

Where does Nesbitt Realty manage rental property?

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Clients

Who uses Nesbitt Realty management services?

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Contact

Call (703)765-0300 to speak to a property management specialist now.

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Do you want know more about this local real estate market?

Our Guide to Real Estate is a free tool for anyone who needs to investigate real estate facts about Washington and neighboring areas.  The Guide to Real Estate includes facts about what has sold and what is for sale, and a couple of compelling facts that you may not know.  Not to mention, our Guide features quite a few of the benefits of living in Washington.  Definitely, most of this is useful for purchasers and sellers, but rental investors and renters may also find the facts to be very enlightening.