See my responses below, but I would definitely contact them about anything that makes you uncomfortable for either explanation or changing. The worst thing they can do is say no.
Originally posted by Mehran Kamari:
I am reviewing a property management contract for the PM company that works with a turnkey provider I'm thinking of doing business with for a property in Indianapolis.
1. First month's rent, not to exceed $1000 for tenant placement fee (Wouldn't this pretty much be an incentive for tenant turnover?) -Is this the industry standard? Or is this company just, for lack of a better word, "tripping"?
I don;t think there is any such thing as "industry standard" when it comes to property management as it is so loose and will vary from state to state and even within the city. However, if this is an incentive to provide bad service to you as an investor and just churn tenants for income, I would think they would have trouble staying in business. We too charge first months rent not to exceed $1000 in both the cities we operate, but our average length of stay per tenant is now approaching 31 months. If they are a quality management company, I would have no problem with that charge. Ask them what their average length of occupancy is.
2. Tenant resign fee for resigning a new lease and the end of a good standing lease term = half of monthly rent. - Again, is this the industry standard?
This one I'm not so sure of. I can understand a nominal charge of between $100 and $250, but a half month's rent - depending on how they are compensating the person who negotiates the rental contract extension and how successful they are, may be just right or it may be high. Ask for specifics as to how successful they are at resigns and ask what percentage move out and what percentage resign each month.
3. Expenditures in excess of $400 require owner approval. - Should this amount be lower? I've read in other posts people mentioning $200.
I have seen this number between $300 and $400. Usually is depends on how large the company is and what their typical clientele prefers. Often times, investors using turn-key operations do not want a lot of calls on smaller dollar items and many think less than $400 is smaller dollar. Of course, that is all relative. If you are purchasing a property with a rent of $600 and receive $550 after management, $400 is practically the entire rent an I would be fired up if I did not receive a call on anything up to that number. So consider the rent of the property and the reasoning behind the policy and I think this is a great thing to ask for a little negotiation on.
4. Wording Regarding termination of contract.
"Either party may terminate this agreement at the end of the contract period by giving 30 day written notice. Failure to give written notice of cancellation shall renew this agreement for a like period under the same terms etc." -
I'm no lawyer but this seems like I cannot just give a 30 day notice whenever I feel unhappy, that I must wait til the end of a contract period and give 30 days notice before the contract is up, just to get out of the contract?
I have never seen a contract that was not able to be terminated with a 30 day notice. I'm not sure of the legal language, but I am certain you can terminate with a 30 day notice at any time. If I am wrong on one or more of these points, then this may not be the right company. Often times, you just need to open the dialogue with them and get to the reasoning and the meaning behind each of the points.
I'm not sure if it is within forum rules to link to the document, but I can email it to anyone if they want to take a look at the rest of it to help out.
The name of the PM company is PARC Property Management. If anyone has used, or is using this PM company and wants to chime in, I'd appreciate it big time also!
Thanks so much in advance