eSign Property Management Agreement Made Easy

Esign property management agreement

so the other day we received an email at our office it was from a prospective owner client and he said I'm thinking of hiring you to manage my rental property but I'd like you to send me your property management agreements and I want to compare that agreement to some other companies in town to make a determination on who I want to hire to manage my property and that is good due diligence because you as a property owner want to know who you're working with well I'm mark Cunningham with greats property management let me share with you what I believe are the eight most important parts of a property management agreement that you as an owner want to review to make a determination on who you want to work with the number one and this is in order of importance the most importantly number one I would say is how easy is it to cancel that agreement if there's nothing else you know to make your decision upon it this could be it they say well what difference does that make on how easy is to cancel because at some point in time you're going to want to walk away from that agreement and if the p.m. company is doing a good job I believe they should be earning your business every day they shouldn't be handcuffing you in to working with them and you can't leave so if it's a twelve month agreement is there something like a termination fee or a termination penalty because I don't believe there should be it should be ideally you want a month-to-month agreement meaning you can leave anytime you want the day they stopped satisfying you or the day to decide to sell you can leave without termination fees or penalties that's a very important part if they believe in themselves and if they're doing a good job for you then you should have the ability to walk away without fees or penalties number two are there are the fees hidden of course there are fees you're gonna pay to have professional property management service done but where are those fees in the agreement see fees that are transparent are gonna be in one little section of the agreement and it's going to list out what those fees and charges are versus a company that's gonna try to hide them all over the agreement and it talks about something over here and there's another fee hidden in page 17 on paragraph five that's a sign the company you're working with may not be transparent you want to broken down in a clear concise section number three was it prepared by an attorney here's why that's important the state of Colorado requires by law that a an attorney prepare a property management agreements specific for your company for our company for grace management and that has to be disclosed in the property management agreement now I see a lot of p.m. companies that just don't do this so it's a good way it's a good indicator on whether or not your PM company is in full compliance and are they operating under the laws requirement so where is the section of the agreement that says for example this agreement was prepared by such-and-such a law firm specific for grace property management if that language isn't in there you may be working with a company that isn't as professional as they should be number four how much is the escrow reserve say when you work with a company and you sign the agreement they're going to collect from you an escrow reserve an escrow reserve is your money but it goes into your account to fund that account and to pay for expenses that may be incurred every month between the time you get your rent and the time that rent comes in the following month if something breaks and a repair has to be made how does that get paid it gets paid out of your s girl reserve so how much is that escrow reserve and that's not a right or wrong but make sure you'd know that before you enter in to the relationship number five how fast do I get my money I've seen companies that will take the rent from the tenant and they don't pay that out to the owner until the following month to run it through their accounting system that's a long time for the p.m. company to be sitting on your money you want that money and you want it quickly so for example when we collect our rents from the tenants early in the month we close out our accounting cycle and that money gets sent out and dispersed to our owner clients around the 10th day of each month the faster you can get it the better but how quickly will you get it number six what is the maintenance trigger what we mean by maintenance trigger is at what point does the PM company involve you in spending money decisions on maintenance now you don't want to be bothered for every little thing that happens for example if the toilet is leaking from the base what you don't want is the PM company calling you and saying hey the toilets leaking from the base what what do you think we should do well I'll tell you what we should do we need to fix the leak so we're not gonna call you in advance of that and say gosh can we spend eighty five dollars to have the wax ring replace no it's gonna get done it needs to get done quickly for the preservation that property the safety of the property and the convenience of the tenant but at what point are we gonna involve you and every company has a different threshold on that well you don't want to be bothered all the time you also don't want to come potentially spending your money that you're not made aware that so make sure they're communicating with you effectively and when appropriate bringing you into the decision-making process on maintenance number seven are there guarantees if the PM company places a tenant in that tenant has to be evicted does the PM company step up and say hey we kind of messed up we let somebody in that may be I guess we shouldn't have because they're getting evicted but sorry mr. owner now you're stuck with an attorney fee as well as no rental income so for example if we place a tenant and if we have to evict that tenant because of non-payment of rent we grace management we pay the attorney fee on your behalf why because we want to step up we have some skin in the game we believe we have an obligation to place a good tenant that doesn't always happen most the time it does we've got a good screening process but we're gonna pay that attorney fee on your behalf if we place a tenant and that tenant has a pet that we approve and that pet doesn't damage above the amount of the deposit we grace management will pay up to $1,000 of that damage for you why because we believe we have an obligation to do so so what are those guarantees especially as relates to things like pet damage and evictions because those are the two most scary potentially unexpected costs you could be incurred you could be incurring as a landlord so ask your p.m. company if they help out in either of those ways and abrade who handles evictions there's a trend in the industry a bad trend that PM companies are becoming more and more lower levels of service and if something goes wrong what we're seeing is they just push the problem back to the owner well sorry mr. owner the the tenant didn't pay rent this month here's an attorney we recommend good luck hope it works out for you that's not a proper property management company in our view you want a company that's gonna handle the problems that's the reason you're hiring a property management company is to fix the problems when they come up so make sure that the PM company is doing all of those things on your behalf and not having to make you take care of the problems that they may have created if you pay attention to those eight things you're gonna be able to make a good decision but here's the most important thing the management agreement doesn't tell you what doesn't it tell you it doesn't measure things like integrity things like honesty professionalism response time see I rec to owners these are the things you really want to look at in making a decision because of the fact that in Colorado the property management agreements have to be written by an attorney what that means is 90% of our agreement is going to look like every other company in town and so it's hard to make a decision so look beyond the management agreements don't only look at the management agreement to make your decision look at things like online reviews has the company been audited by the real estate commission have there been complaints with the real estate commission what is the average lease renewal rate of the company what's their rent collection rate how quickly do they respond how long have they been in business those are the things that the management agreement isn't going to address our management agreement looks 90% exactly the same as another company here in town that I think does very bad service but all right you wouldn't know it from our management agreements you wouldn't know it from that so don't only look at the management agreement look at these things as well these are the important intangible things they're gonna make the difference between a successful relationship and then doing a good job making you a lot of money on your property versus you doing them doing a bad job and you thinking oh I made a mistake I shouldn't have hired that company if you've got questions on that we were happy to be a resource whether you work with us or not grace property management reach out to us at rent grace calm we'll provide any information we can to help you make your property a successful investment