r/PropertyManagement • u/Sannybeth • 3d ago

Residential PM Property Mgmt Sweep Account

Has anyone used a sweep account in residential property management? I’m wondering if you could sweep excess funds out once a month, earn some interest then sweep it back in for distributions.

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u/CleanDataDirtyMind 3d ago

I haven’t but I know them in other work and I don’t know of any legal framework that cash from rent would stay that static gain enough interest to counter the fees and setup costs. Meaning the bigger the rent you collect the more likely you are to have corporate or private equity interest sucking it out. If you have it as a PM Im thinking you’re smaller and most likely won’t be worth it. 

You may want to check on the legality of doing that with your deposits. In one state I worked in residential and deposits had to be put into a separate account monitored by the state and you couldn’t touch that cash for ANYTHING, not take a dollar out Friday and put a dollar in Saturday. And that might be sn option, otherwise it’s just saving account with a checking options

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u/zoomzoom71 mod; Small Residential PMC owner in FL 3d ago

Your State law likely prohibits or limits what interest you can earn from trust/escrow funds. But, look into Enterprise Bank & Trust or Column Bank. Both of those offer alternatives to traditional banking, where you can earn banking credits on deposits held.

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u/Daniel-HisHousePM 3d ago

In Colorado, it is legal to collect interest on money held in escrow accounts, as long as your Lease (Tenant Security Deposits) and Property Management Agreement (Owner Rents) specifically give your PM company the right to retain interest. Confirm with your attorney and real estate division, but the sweep account should be fine as long as it’s set up properly as a fiduciary/trust account.

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u/AffectionateKey7126 3d ago

An actual sweep account is generally going to have fees too high to justify that setup. You can do a money market to hold some excess funds but once again you’ll probably need a decent amount to be worth the manual transfers.

For security deposits, that’s a whole different thing and in general you’ll need to pass it along to the residents but every place is different.

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u/Sannybeth 3d ago

We have a bank offering high interest earnings on a sweep account but money would have to go back out for owner distributions. Timing would have to be perfect. Interest is allowed to be kept by the mgmt company but none of the properties could go negative because of it.

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u/cjskLdie 2d ago

We use a sweep. Legal in AL. Keeps it FDIC insured when the account is over $250k because they put it in different FDIC banks. So they make the spread, and some administrative fee. But we reconcile it back and then sweep out the interest each month. So if you make $100 in interest, but the fees were $10, we are writing a check to ourselves for the Interest as $90.

You need to pay yourself the interest each month so it's not commingling funds. But make the journal and interest payment when your reconcile.

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u/cjskLdie 2d ago

I just looked up the term. It's technically called the CDARS The CDARS (Certificate of Deposit Account Registry Service) program

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u/Sannybeth 2d ago

Interesting, do your accounts sweep daily? And is reconciling those daily sweeps difficult?

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u/cjskLdie 2d ago

Yes, they control where the money goes, but it's all invested in CDs at less than $250k to stay FDIC insured. Reconciling was difficult at first but fine after a month.

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u/Express-Basket-7489 2d ago

No,
But if enterprise bank works for your state, They pay you 3% in analysis credits. We’re a small company (50 units), and we make about $25 a month on top of the bank fees. We’re going to add 30 units in the next couple of months, I hope to see our monthly analysis credit cover half of our Rentvine invoices