Once you find a potential manager for your RV Resort or Campground, the work is still not over. Questions such as background checks, credit checks, how much to pay them, what their responsibilities will be, are they an employee or contractor and others still need to be answered.
Should you obtain a background or credit check? The right answer to this question is probably yes. Does everyone do it? No.
My personal thoughts on this are that you should obtain these background checks if you suspect any reason to do so. I have only performed a few background checks over the years and have been fortunate in finding good campground and rv park managers for the most part. I currently have some excellent managers that I am sure have terrible credit.
When I am interviewing potential RV Park and Campground managers and making my selection I rely on my gut feelings more often than not. If the potential manager needs this job in order to survive that has been a good indication that they may not be a great manager. They will constantly be looking for a raise and if they need money that bad, then it opens the door to theft. My worst managers have been the ones that did not have at least one spouse working elsewhere and their compensation was only from running the park.
Other indications that I have found of poor quality managers have been those that are constantly talking and say they know how to do everything. They have worked in every trade known to man. Once they get the job, you find out that they don’t know how to send a fax or replace the inner workings of a toilet even though they may have been a plumber for 5 years. I would much rather have someone that knows their limits and is not afraid to disclose those limits up front.
So, a background check is a good idea but the real key is interpreting what they say they can do and forming your opinion of how well they will do it.
One other note on the background checks… The reason that you should obtain this stems into potential future liability issues. You don’t want to hire someone as the manager that may have had issues in the past as sex offenders or other crimes that can come back to haunt you. If you hire an offender and then he/she has a problem with one of your residents, you don’t want to face a potential lawsuit.
Another important question that I receive quite often is do you treat your managers as employees or as independent contractors?
The answer to this question is almost always that I treat them as employees. You can check the different ways the IRS gives you to choose between an employee vs independent contractor but in 99 out of 100 times the typical manager should be treated as an employee.
If you treat an employee as an independent contractor and get caught you are liable for penalties and interest and the back taxes.
Most people that are asking this question want to hear a different answer because they would rather just write on check to the manager and be done with it. Some people may only give their manager free lot rent. They don’t want to have to set up state and federal payroll taxes which they are responsible for as an employer and hassle with all the reporting. I will admit that I didn’t like the answer either but it is the right way to do things.
If you want to take your chances with the IRS you may never be caught but there is something that is more important to consider other than just the hassles of setting up the payroll taxes. This has to do with the potential of your manager getting injured on the job. Even though you have them sign an independent contractor agreement and it states that they are not an employee, what happens if they get hurt performing their ordinary management duties? That agreement will often be thrown out in court when it is determined that they meet all of the IRS guidelines (or state guidelines) of being an employee. So not only will you then be responsible for the back taxes, you will most likely be a defendant in a lawsuit.
Since you treated them as an independent contractor you probably failed to get worker’s compensation insurance and will now be held liable to pay for their medical bills, lost wages, and other damages.
It doesn’t matter whether you give your manager $50 off of the rent or $2,000 per month, you need to setup your payroll correctly and obtain valid worker’s compensation insurance. The risks are not worth taking. If you don’t want to hassle with the payroll, there are services out there that will do everything for you.
On the issue of contractor vs employee, perhaps you can also address casual labor and workcampers. We sometimes use park residents for lawn mowing, snow plowing, repairing park owned homes, and odd jobs around the park so they can earn money and it is usually cheaper for us than hiring from the phone book. Do we have to add all of these people to the payroll even if they only work a few hours per month? I’m guessing other park owners are also in this situation.
This is an excellent question and I have struggled with this as well over the years. I have used so-called part time labor many times. There are really two issues to look at. The first is whether or not you have to collect payroll taxes on this casual labor. The general rule for the IRS is that anyone that should be treated as an employee should be setup as such and payroll taxes should be withheld. In the real world, if you hire the teenager down the street to pick up trash or mow a lawn in your park, you will probably not set him up on your payroll system if it is a one time occurrence where you pay them $20.. However, if they are doing this type of work every week, then it would be advisable to go by the letter of the law. Here is a link to Publication 15 on the IRS website for more info.
The real issue to me is whether or not this casual labor person will be covered in case they get hurt. If you are going to hire this casual labor then make sure you have worker’s compensation and that your policy will cover this labor. If you have a worker’s compensation policy that covers your park manager that policy will be assigned a class code that covers certain types of work. If your manager does only office work and your policy is assigned the class code that pertains to office work, then you may not be covered if you hire other types of work done. If Mr. Bailey in space 15 is looking for some extra money and says he will go through and cut down some branches or install some skirting on one of your rental homes and cuts off his finger or worse, you better hope that you are covered for this under the worker’s compensation insurance. My insurance agent in Texas said it all boils down to the class codes of the policy and I would guess most states will have similar rules.
In summary, I would guess many park owner’s out there have these little instances of casual labor and the real issue to me is that I don’t want to risk a large lawsuit just because I was helping out a resident or teenager earn some extra money. Be sure that they are covered in your worker’s comp insurance policy.
Another Comment (from Brian)
It has always been my understanding that the key factor in determining an employee from an independent contractor is the amount of control you exercise over their day to day activities. Do you set their hours of work? Do you direct the method in which they work? Have you given them a guideline of policies and rules that they must adhere to? If so, they are probably an employee. In my parks, my involvement is basically in setting business objectives and reviewing results. Are my rents collected? Is the park clean and safe? Are the homes in good order? Are expenses in line with my projections?
My managers work as they deem necessary to accomplish the objectives, are given no instruction on how to accomplish their tasks (unless help is solicited) and are paid straight commission on the rents they collect. It may sound like a loose run organization, but for me, it has been effective.
The key and the challenge is in finding the right manager who is experienced, self disciplined and honest with a strong work ethic. If you do the hard work on the front end of hiring right, and you may have to do it several times before finding the right fit, your manager would pass muster on an IRS review of their independent contractor status. The primary benefit though is not in the ease of pay and being able to forgoing withholding, etc. The primary benefit is the peace of mind derived from having a competent individual who absorbs the headaches for you.
Thanks for the comments and you really hit the nail on the head. If you find and hire the right person for the job, you will be on the right track. Just as in buying the park, you need to spend the time and diligence on finding the right manager. In my experience, a good manager will be the determining factor of whether or not I enjoy owning a certain park.
By Dave Reynolds and Frank Rolfe
Dave Reynolds and Frank Rolfe are mobile home park investors and together own and operate over 100 parks. Frank also teaches about RV Park Investing through www.RVParkUniversity.com.
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