There are plenty of benefits to owning rental properties. For one, it can serve as your leverage when making difficult and possibly costly life decisions. Should things go awry, you have the option to sell your investment or move into one of the units of your rental homes. Moreover, depending on your area, there are tax write-offs that are available to rental property owners.
But even with the advantages of ownership, managing one or more apartment complexes and rental homes takes a tremendous amount of time. Especially if you happen to be busy doing other things, overseeing leases and maintaining the property itself can take a huge chunk of your time. It is a full-time job.
Choosing to outsource property management is a smart way to protect your real estate investments. As a property owner, this option allows the upkeep of your property without having to do it yourself.
If you’ve never dealt with property management companies, this guide tells you which services to expect and what standard contracts entail.
What is a property management contract?
Otherwise known as rental management agreements, property management contracts are legal documents between property managers and property owners that detail the terms of their business relationship. In essence, it’s an employment contract containing the responsibilities of the property management team and their compensation package from their employer, the property owner.
It is important to note that this legal agreement is a requirement in most areas should an owner decide to hire a property manager.
What to look for in a property management agreement?
Depending on your location and the type of property you own, the property management contract can take many forms. However, most contracts are made up of the following:
- Services and fees
The first part of a property management contract often details the responsibilities of the property manager as well as fees for their services. It is very important to read through this part of the agreement to have a clear picture of what you are paying for.
Property managers tack on additional fees for the services that aren’t stipulated in the contract. If the pricing is too good to be true, it probably is. It isn’t a good idea to ignore property managers that charge higher fees. This amount might include every task and service that you’re looking for.
- Responsibilities of the property owner
Owners are still responsible for their property even when they hire a property manager. In addition to the responsibilities of the property manager, most contracts also include the duties of the owner. This may include maintaining a reserve fund and obtaining property insurance.
It is in your best interest as a property owner to stay away from long-term contracts without evaluating the quality of the services listed on the contract. If possible, do not sign contracts that bind you to a team for more than a year.
- Details of termination
This part of the agreement gives a rundown of valid reasons for contract termination from both the owner and the management team, possible termination fees, and the duration of the notice of termination.
What to do when reviewing a property management contract?
When you sign a property management contract, you are essentially agreeing to all terms and conditions stated in the document. It shouldn’t be done in haste. To ensure that you make the right decision, it is ideal to go through these steps:
- Take your time
When it comes to signing contracts, it is important to remember that it isn’t a race. As the property owner in this transaction, you have the upper hand. You can ask for as much time as you need in order to ensure that you understand all caveats within the contract.
- Don’t be afraid to ask questions
Legal documents aren’t the easiest reads. The jargon is twisty and repetitive to the layperson. Short of having a lawyer go through the contract, take note of provisions you don’t understand. Seek to clarify the fine print or confusing stipulations. Especially for first-time investors, don’t be afraid of being thought of as a greenhorn – better to be embarrassed now than face bigger and deeper problems down the road should you sign on.
- Check for ambiguities
There are plenty of reputable property management teams out there. However, there are also management companies that look out for themselves first before their clients’ needs. Make sure to check the contract for any ambiguities. Clarify vague provisions; if they’re not addressed to your satisfaction, thank the company for their time and walk away.
It can be overwhelming to find the right property management team for your rental investments. Sundance Property Management can help. We have been in the business of acquiring and managing investment properties like apartments since 1993. We operate in the states of Ohio, Indiana, Kentucky, Georgia, and South Carolina.