Property Manager Hiring Guide ebook stacked multiple

A good property management company can easily become one of your greatest assets.

But deciding on a company to protect your investment can feel like rocket science. Gain the knowledge you need to confidently evaluate and hire a property management company.

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Contract Termination

Continuing the theme from our previous article, here are more items to pay attention to in the property management contracts you review:

Term (a.k.a. “Duration of Agreement,” “Retainer Period”)

Most property management companies require a 1-2 year contract period, with very few offering month-to-month services. Bear in mind that the contract will be legally binding upon its execution (signing), even though the start date or “effective period” may begin later. After the initial, or “primary,” term is over, the contract may automatically renew itself for another term, repeating the process each time the expiration date occurs. 

Find out how long of a term the auto-renewal will commit you to. It could be longer than the initial term, which is important to know. Also, in the event that you want to prevent this automatic renewal from taking place, you might have to provide written notice at least 15-30 days before it takes place.

Owner Termination

The termination clause is a very important piece of the contract. It will dictate under what circumstances you or the property manager can end the relationship prematurely, and what penalties or costs you will incur. Without an exit plan, you might find yourself trapped if the relationship doesn’t work out. 

Find out how much notice the management company requires before allowing termination of the contract (30 days is normal, but some companies require up to 90). Also, does the contract require “cause” as a prerequisite to being able to provide this notice? If so, the agreement needs to spell out what exactly qualifies as “cause.” 

Will there be any fees or penalties for terminating the contract early? Not all managers charge a fee. If they do, it’s either a straightforward flat fee ($300-500) or something conditional. Conditions can vary widely—from having to pay a fee if you cancel during the initial vacancy period, to only having to pay a fee if you cancel after a tenant has been landed or within the first 12 months. 

Worst-case scenario? We’ve seen contracts that, even in the event of early termination, still require the payment of monthly management fees for the duration of the remaining lease term(s). We’ve also seen others that require the total management fee for the life of the contract (based on scheduled rents) to be paid upfront as a prerequisite to early termination. 

Ideally, you want a contract that allows for termination without cause with 30 days notice. Bear in mind that while this clause is a legitimate way for property management firms to protect themselves from making upfront investments and then having owners bail, it also speaks to the company’s faith in its ability to satisfy its clients’ needs. If the property manager has to implement extreme switching costs (termination fees) in order to retain clients, then this is a bad sign.

You should also see some provision to allow you to exit the contract without penalty in the event that the manager doesn’t secure a tenant within an extended period of time (3-4 months).When you do decide to terminate, make sure that your written termination date reflects the exact contract term expiration date. Otherwise, you could be liable for the penalties mentioned above.

Agent Termination

Pay close attention to the circumstances in which the management company cancels the contract, the notice they agree to give you and the financial implications that it will have. Below are some excerpts from real contracts that describe circumstances that allow the property manager to elect to terminate the contract:

“ … if the agent in its sole discretion deems the continuation of the agreement subjects itself to liability or is in breach of its duties to the tenants or any other persons.”

“ … if Broker determines that Broker cannot continue to effectively provide leasing and management services to Owner for any reason at any time during this agreement. ”

“ … should Owner fail to promptly fund repairs required by any city, county, or state law, regulation or ordinance and/or to maintain the condition of the property being rented in a habitable condition as required by either the rental agreement and/or applicable California code sections or appellate decisions, of if the Owner fails to promptly comply with any government issued Notice of Corrections or court orders.”

“ … Owner has made any misrepresentation of material fact regarding the real property, the tenant, and/or the status of the landlord-tenant relationship, if any, or has been or is not acting in strict conformity with this Express Property Management Agreement and Authorization, or fails in any way to cooperate with the Agent in managing this real property.”

Bear in mind that some contracts don’t even contain an agent termination clause. But if they do, they can include a very broad and general list of circumstances. Make sure that the contract entitles you to adequate notice (30 days) in the event that this does take place. Lastly, find out what the financial ramifications of agent termination will be. Worse case scenario, you could be dealing with a situation like the one outlined below:

“In the event that this (name withheld) Agreement and Authorization is terminated for cause as allowed by this section, said termination will not release nor relieve Owner of its responsibilities for payment to Agent of expenses and management fees for the full term of this (name withheld) Agreement.”

Duties Upon Termination

Once you or the property management company have decided to sever the relationship, some important things need to happen to achieve a clean break. Owners need to make a final payment to the management company to settle the account, and the contract should cover the following tasks for the management company:

  • Provide owner with a final financial report, along with remaining rents on hand, minus agents fees and funds needed to cover all outstanding expenses the manager has incurred in the course of managing the property. There should be a time parameter dictating how quickly this will take place after termination. Also, check if the contract contains a clause giving the manager permission to withhold owner funds, either all or a portion (like the reserve), for a certain period of time. This is usually for 30-60 days and is done to make sure that all expenses are paid, such as those already incurred but not yet invoiced.
  • Provide owner with necessary records and documents. This would include a list of tenant security deposit obligations, copies of tenants’ leases and other instruments entered into on behalf of the owner.
  • Provide owner with a record of tenant security deposit obligations.
  • Transfer security deposits either to the owner or the owner’s new agent, minus the relevant deductions as dictated by the contract.
  • Provide tenants written notice of the exact dollar amount of the security deposit and inform them that the owner or owner’s new agent is now responsible for returning their security deposit.
  • Provide tenants written notice that they are no longer managing the property, and provide them contact information for the owner’s new agent or designee.

Default

If either party breaches the contract, how long will they have to fix the problem before the other party has the right to terminate the contract? (Traditional ranges are from 0 to 30 days.)

Mediation and Arbitration

Does the contract specify the use of a mediator or arbitrator to resolve disputes? If so, who presides and what is the process? Who pays for their services? Note that there’s a difference between mediation and arbitration.

Attorney’s Fees

In the event that legal proceedings are required to settle a dispute about the contract, will the prevailing party be entitled to reasonable attorney’s fees? Check to see if the contract puts a cap on this amount. If so, the entity with more cash may have an inherent advantage in the event of a dispute. 

In our next and final post in this series, we’ll give you an easy-to-understand description of some of the common legal clauses and concepts covered in the contract.

* * *

The Realty Medics are the nation’s leaders in “Rocket Science Renting”: Rocket Science Renting is about keeping your life simple by letting someone else handle the complex work of property management for you. It’s knowing that your property is running smoothly, with no hiccups or glitches. It’s hyper-responsive customer service that gives you property management peace of mind. It’s advanced technology that could only be designed by a former NASA engineer like our owner, Ben Sencenbaugh. And it’s knowing that you’re always getting maximum value and ROI for your investment.

Orlando Property Management Hiring Guide

Let us handle the rocket science of renting for you!

CONTACT US

The Realty Medics
10027 University Blvd
Orlando, FL 32817

Phone: (321) 947-7653
FAX: (407) 965-3312

The Realty Medics are the nation’s leaders in “Rocket Science Renting”: Rocket Science Renting is about keeping your life simple by letting someone else handle the complex work of property management for you. It’s knowing that your property is running smoothly, with no hiccups or glitches. It’s hyper-responsive customer service that gives you property management peace of mind. It’s advanced technology that could only be designed by a former NASA engineer like our owner, Ben Sencenbaugh. And it’s knowing that you’re always getting maximum value and ROI for your investment.

A woman smiling while holding a phone looking to here computer screen

11 Questions for Determining if You Need a Property Management Firm

While every investor’s situation is different, certain factors typically predispose owners one way or another.

The following questions will help you determine whether or not to hire a property manager.

1. How far do you live from your rental property, and how frequently can you visit the property on a regular basis?

If you’re close, you might be able to make the regular visits required for maintenance, inspections, collections, etc. Otherwise, the farther you live, the higher your travel time and expenses will be. The longer the distance, the more temptation there will be to NOT keep a close eye on things, and that can be a recipe for disaster. You should plan on making frequent visits, as well as for those middle-of-the-night emergency calls that require your immediate attention. In the long run, is this feasible for you?

2. How do you deal with stress? Do you consider yourself to be a tolerant person?

This is a tough one. We all like to think of ourselves as level-headed and even-keeled, but at the end of the day, it takes a special kind of person to deal with the ups and downs of property management.

Behind the seemingly simple task of collecting rent every month is a litany of unpredictable problems that can push people to their limits. Ask yourself how you would react in the unfortunate event that your tenants:

  • fight with other tenants or neighbors;
  • have domestic disputes;
  • conduct illegal business in the dwelling;
  • throw late-night parties or violate noise ordinances;
  • try to sneak extra people or animals into your home;
  • decide to sue you;
  • trash your property;
  • incite the wrath of your HOA because of repeated deed restriction violations; or
  • refuse to pay the rent because they are a “professional tenant” and know how to work the legal system for the maximum amount of free housing at your expense.

3. Are you currently overwhelmed with your property(ies)?

Managing rental properties can become quickly overwhelming, even for experienced investors. Something always requires attention, and things can quickly get out of hand. Hiring a property manager can help you regain control and restore stability to your properties and your life.

4. How many rental properties or units do you have?

As your portfolio grows, so do your management challenges. It becomes easier for things to fall through the cracks. Investors with large portfolios stand to reap significant benefits by leveraging the efficiencies a property manager can provide. Portfolio size can also constrain investors’ ability to consider purchasing new properties if they’re already maxed out managing their current holdings.

5. How much experience do you have with maintenance and repairs?

If you can’t do it yourself, do you know who to call? Finding reliable handymen and contractors can take a while. In the meantime, you may unknowingly hire people who are unethical, uninsured, do poor quality work, overcharge, etc. Maintenance and repairs are significant components of landlording, and if you question your ability to ensure that the work is done quickly and well, you might want to consider hiring a property management company.

6. How quickly are you able to get your unit rented?

Advertising, fielding calls and showing the unit can quickly eat up your time. But because vacancies can quickly eat into your profit margins, they’re critical tasks. If you question whether you have the skills or time to make this happen, OR if you have historically had an unacceptably high vacancy rate, you may want to consider hiring a property management company.

7. Are you capable of handling the accounting and record-keeping for your property?

From profit and loss statements to tax deductions, this area needs special attention and becomes increasingly burdensome for owners of larger portfolios. Some owners (especially those with a background in finance) will do just fine. Others may opt to hire an accountant to help with the bookkeeping. If you feel like this might be a weak point for you, you might want to consider hiring a property management company.

8. Are you willing to be on call 24/7/365?

It’s important to answer this question honestly, because ignoring emergencies at your property is NOT an option. Your special event, important meeting, vacation or personal crisis doesn’t relieve you of your obligations to your tenants. These emergencies don’t happen all the time, but when they do, you’re obligated to handle them immediately. Can you handle being called at 2 a.m. to fix someone’s overflowing toilet?

9. Are you willing to confront tenants about late payments, and evict them from the property if necessary?

Many new owners dislike feeling like the “bad guy” in a landlord-tenant relationship, so they go out of their way to make exceptions to the rules. The problem: This only invites additional abuses and excuses by tenants. Late payments must be dealt with immediately, and while sometimes a friendly reminder is all that’s needed, other times it can be a very confrontational process that needs to end in eviction. Unlike running a charity, running a successful rental business means enforcing the rules—even if it means evicting a single mother who lost her job and won’t be able to pay the rent anytime soon.

10. How well do you understand the laws governing landlording?

Ensuring that the property is run in accordance with the law is critical in preventing lawsuits and shielding yourself from liability if you’re sued. Familiarity with contracts is also very important, as your rental agreement is the only binding agreement between you and the tenant.

11. From a financial standpoint, is managing your property the best use of your time?

Ultimately, your decision to hire a property management company should hinge on whether or not it fits your lifestyle and makes good financial sense. Individual investors will have to assess the opportunity cost of both options based on their unique circumstances.

Property Management Hiring Guide

Let us handle the rocket science of renting for you!

CONTACT US

The Realty Medics
10027 University Blvd
Orlando, FL 32817
Phone: (321) 947-7653
FAX: (407) 965-3312

The Realty Medics are the nation’s leaders in “Rocket Science Renting”: Rocket Science Renting is about keeping your life simple by letting someone else handle the complex work of property management for you. It’s knowing that your property is running smoothly, with no hiccups or glitches. It’s hyper-responsive customer service that gives you property management peace of mind. It’s advanced technology that could only be designed by a former NASA engineer like our owner, Ben Sencenbaugh. And it’s knowing that you’re always getting maximum value and ROI for your investment.

Areas We Serve in Florida

We’re happy to serve many of the surrounding areas here in Central Florida. Below are the current cities and locations that we operate in. If you don’t see your area listed, don’t hesitate to reach out to us and we’ll see if we can work together.

The Realty Medics Guarantees

We are very proud to be the highest rated and most reviewed Property Management company in Central Florida. We guarantee results and have the lowest rates to support our results-driven philosophy.

14 Day Rental Guarantee

If we don’t rent your home in 14 days you get one month FREE management.

90 Day Money Back Guarantee

If you, the Owner, is unhappy for any reason, we will refund your management fees

6 Month Tenant Guarantee

If a tenant is removed in first 6 months, We find you a new tenant free of charge.

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CONTACT US

Phone: (321) 947-7653
FAX: (407) 965-3312

LOCATION

The Realty Medics
10027 University Blvd
Orlando, FL 32817

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