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What To Expect When You Hire A Property Management Company
The purpose of hiring a property management company is actually very simple. It is to take over your job while you go about sourcing for more properties to acquire. You can spend the extra time to travel the world at your leisure if you want to. There are billionaires who manage their assets from a laptop in offshore tax haven territories. You can do that if you choose.
On the flip side, if you do not hire a third party service, you will have to do everything yourself or oversee them while your staff churns out the numbers for you. It is hard to say how many properties you should own before hiring a company to do the job. It depends on your capacity and resources available. But if you are looking at managing a whole building complex with 50 units, why not just outsource the managing of it. The trouble you pass onto someone you hire outweighs taking on the daily operating issues yourself.
Just like signing up for any service, you are going to sign some terms of service when you decide to hire a property management company. This agreement is a critical piece of document that protects both parties involved. So it will benefit you if you spend some time expressly listing down your expectations so that miscommunication can be avoided in future. Here are some of the items you should insert. When in doubt, remember to talk to your advisors or legal team.
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This is a service agreement between you and the service provider. This means that you are hiring them as a third party contractor to do the job. They are not your employees. An arrangement like this helps you avoid a number of responsibilities and manpower issues.
- The relationship and responsibilities between you and the management company is expressly written down in black and white. This also implies that the powers available to both parties is clearly stated.
- The agreement will state the compensation for the management company. You might be paying from a fixed rate agreement or on a percentage of revenue basis. You should be smart enough to know the pros and cons of both fee structures very well. The safe bet is to pay a percentage of collections unless you are very sure you will be better off by agreeing to a fixed rate.
- Business relationships don’t always work out the way you want to. In these circumstances, you will want a way to properly terminate the services. So the agreement have to specify how or under what circumstances can either party terminate the relationship. For example, you could have set a fair target for total collections in 6 months. Failing to reach the target can be a legitimate basis to terminate the agreement as long as you insert this clause expressly into the contract.
In addition to the key terms above, you can expect reputable property management companies to implicitly understand that they are expected to do the following:
- Act with professionalism at all times as long as they are on the job.
- Collect all rental and revenue on a timely basis
- Maximize occupancy with as little vacancies as possible
- As little lag time as possible between a tenant moving out and a new one moving in
- Attend to repairs and maintenance to keep the property functioning property
- Alleviate safety hazards immediately once discovered
- Maintain the aesthetic aspect of the property
- Record keeping of operating procedures and proper accounting
If you are not on a tight budget, consider hiring those that are more reputable and established in the industry. They have well laid out procedures to manage properties with the extensive networks that can be called upon when a sticky situation arise. Would you be able to sleep well at night if your multi-million dollar investment is put into the hands of newbies?