Hi, there! Joe White here from Grow Property Management, your trusted property management company in Philadelphia.
I just had an owner terminate our property management services before we even got started. He owned a duplex in considerable distress, ceilings caving in, serious disrepair, just a mess overall, and while that’s not entirely uncommon, it’s deeply telling about his approach and mindset as an investor.
Now, the core issue here, and why I’m even sharing this, is over something pretty standard: the property reserve. For anyone unfamiliar, every legitimate, established property management company, especially in a city like Philadelphia, is going to require a reserve. That’s your money as the owner, but we hold onto it for essential property-related expenses. This is standard practice, it’s not law, but it aligns with state best practices, and more importantly, it helps us avoid commingling funds, which could land us in hot water with the state.
Let me break this down. When something happens, maybe the roof leaks, a tenant calls about a broken furnace, or we need to pay for a rental license with the City of Philadelphia, we can’t and shouldn’t be fronting that cost for the owner. That’s seen by the state as a loan from us to the owner, and they frown upon that. And for good reason. If I loan Owner A money to fix their property, and I’m waiting to collect it from future rent, but that rent check bounces, now whose money did I just spend? Potentially Owner B’s. That’s the kind of thing that can get property managers in serious trouble, even if they had the best intentions.
So, the solution is this property reserve. We hold onto a flat amount, $600 in our case, so that when something comes up, we can act fast, pay the vendor or city without delay, and keep operations smooth. It keeps the property running and protects all parties involved. Most companies I know of, and I’m active in mastermind groups with property managers all over, charge between $500 and one full month’s rent per unit. So, in fact, our $600 is pretty modest. And again, it’s still the owner’s money. We’re just holding it to cover legitimate, often urgent, expenses.
So here’s what happened with this owner. He signed our agreement, knew about the reserve requirement, but once onboarding began, he suddenly pushed back, refused to pay it, argued that it wasn’t necessary, said he couldn’t afford it, or just didn’t want to. He wasted our time and his own, dragging out a process that should’ve taken 24-48 hours into a week and a half of back and forth. Meanwhile, his unit remained vacant. And that’s where the math comes in.
Let’s say both units in his duplex could bring in $3,000 per month total, though realistically, that’s conservative. That’s $100 per day he’s losing while it’s vacant. Even if they only rent for $1,500 total, that’s still $50 a day. Meaning, 12 days of vacancy equals the $600 reserve he refused to pay. So in trying to “save” that money, he ended up losing it, and more.
And now? He has to go find another property management company. Guess what? They’re also going to require a reserve. Probably between $600 and one month’s rent, which in his case might mean $800, $900, or more. So now he’s delayed again, more vacancy, more onboarding time, and more lost rent. All because he refused a standard industry practice that would have actually protected him.
And this is where I shift from venting to teaching. This isn’t just about one owner, it’s about mindset. Investor mindset vs. emotional mindset. This guy came to us with a ceiling literally falling in, showing signs of not maintaining his property proactively. That’s already a red flag. And then he makes an emotional decision about money, refusing the reserve, not understanding the math, the logic, or the consequences. That’s a second red flag.
An investor’s job is to think metrics first. Always! What is this going to cost me vs. what is it going to cost me if I don’t do it? It can’t be about what feels painful or annoying in the moment. It has to be about numbers. What’s my return? What’s my loss if I delay?
In this situation, his refusal to pay $600 is going to cost him weeks of lost rent. And in the bigger picture, that’s the mindset that fails in real estate investing. If $600 feels like a non-starter, are you really ready to be a landlord? Do you understand what it takes to run rental property like a business?
In my company, we pay contractors every Thursday for work completed. We do this because it builds trust and long-term relationships with vendors. If they know they’re getting paid quickly, they prioritize our jobs. That means better service for our owners and quicker turnarounds. But to do that, we need funds on hand, your reserve, to pay them. We’re not waiting for rent checks to come in before paying for emergency repairs or required city inspections. That would be irresponsible, and frankly, dangerous for everyone involved. And the state agrees. Whether it’s Pennsylvania or any other state, the idea is to avoid commingling funds and maintain ethical, professional financial practices.
The reserve isn’t a trick. It’s not a fee. It’s not even a cost. It’s a safeguard. We’re not spending your money on anything unnecessary. And if you ever terminate our services down the line, that money is yours. We return it, minus any legitimate property expenses that came up during management. It’s as fair as it gets.
But again, this comes back to the mindset. This guy was trying to fix a sinking ship with duct tape, emotionally reacting to a $600 hold instead of calculating the opportunity cost of his delay. He wasn’t thinking like an investor. He was thinking like someone who wanted all the benefits of professional property management without understanding the basic mechanics of how it works. And that’s not how success in real estate works.
Being an investor means constantly asking:
- How much will this cost me?
- What will I gain?
- If I don’t act, what do I lose?
- What’s the long-term ROI on this decision?
Every choice, from painting a wall to hiring a management company, should be filtered through that lens. Numbers first, feelings second. If painting costs me $800 and bumps my rent by $100 a month, that’s a solid return. If ignoring that $600 reserve costs me 20 days of vacancy at $50/day, that’s a $1,000 mistake.
So that’s why I hit “record” today. Because there’s a deeper message here. You’ve got to treat your rental property like a business. And you need to act accordingly. That means removing emotion from decisions. That means trusting standard industry practices, especially when you’ve signed off on them. And that means doing the math.
So whether you’re onboarding with my company or someone else, just know: the property reserve isn’t optional. It’s essential. It’s your money. It’s for your property’s benefit. And rejecting it doesn’t save you anything; it costs you time, money, and opportunity.
Anyway, I’m just a humble Philadelphia property management company owner, trying to share what I’ve learned. I’ve seen owners thrive, and I’ve seen them crash and burn. And the difference is almost always mindset.
Think like an investor. Make decisions with data. And always, always run the numbers.
As always, happy rental property investing.
