The right property management team can make it easy to turn a profit on rental properties. However, investors who want to get the most out of their real estate need to clearly define their arrangement with their property managers. Here are some important things that should be included in every property management contract.
Clearly List All Services Included in Management Rates
Most property management teams will perform a base set of services for a percentage of monthly rent rates, and then they will perform additional services for a fee. A contract should detail all the services that a property manager should do without charging extra. Some basics to include are collecting rent, dealing with regular maintenance, enforcing compliance with any property rules, managing court cases against delinquent renters, evaluating applications, and staying up to date on insurance policies.
Rethink Clauses About Sales Transactions
Carefully check the contract to see what it says about sales transactions while a property manager is still employed. Some property management agreements state that the manager gets a commission if the property is sold while they are working there. Some may even have exclusivity clauses saying the property manager is the only one who can broker a sales agreement. If possible, remove these clauses because they can be very limiting.
Discuss How Repairs Are Handled
Talking about how repairs and maintenance should be handled is tedious, but it can save a lot of arguments later on. Explicitly mention who pays for maintenance and repairs and what counts as basic or major repairs. Owners should try to ensure the property manager will work with contractors that they approve instead of third-party contractors who may mark up prices.
Include Options for Terminating the Contract
Make sure that any agreement lists reasons that the owner can cancel the contract. Some good causes for cancellation include things like criminal conduct, failure to manage funds properly, or extreme negligence. It is also a good idea to have the opportunity to cancel the arrangement for any reason during the first 60 days after the contract. This gives owners the opportunity to do a test run and make sure they like working with the manager.