I just purchased a multi-unit apartment complex that came with an onsite property manager. What agreement should I do with that person? I want to be fair so the person live rent free or should I compensate like an hourly employee. Person responsibilities will be to handle all calls, collect and deposit rents. Will handle all aspects of renting property.
Any repairs done by property manager will be compensated at an hourly rate. Will also provide oversight on remodels and emergency repairs.
Any guidance will be great. Did a internet search but did not find what I was looking for.
Is this property manager experienced? Can he do electric, plumbing etc? I would talk to the seller and ask about the property manager. I would look at the "repairs" he has previously made. I would also listen to tenants. I've had bad luck with supposed property managers who can talk the talk but not walk the walk.
If you are satisfied with him, I would make sure I cover all bases when writing out an agreement. First thing, I would give him a free apt. and no wage. He has much more to lose if he doesn't do what is agreed upon if he has a free apt. as opposed to wages. A free apt.is worth a lot of money to him so that is more than a fair exchange.
Write out a list of the property manager's duties, from clerical to maintanence every month. Be specific. Will he do lawn care? What does lawn care include? Then write out a "seasonal" list, ie.. snow removal, cleaning gutters, etc. Then write out an "occasional" list such as exterior painting, etc.
Make sure you include what he needs to do when a tenant leaves, carpet cleaning, etc and inspections so the tenant can get the deposit money back.
Specify things you might not think of, such as who is responsible for advertising vacancies, who will run credit checks etc. Ask him what else he thinks should be included in the agreement. If he is experienced, a good property manager is gold.
I am not a fan of "incentives" for on-site management.
Let's say you allow them to live rent-free in exchange for management. If they suck at the job, you have bad results AND no rent income. In other words, you've paid twice.
I would prefer you make them pay full rent and then pay them for services rendered just like any other employee or contractor. If they fail to perform, you don't pay them but you still have the rent.
I can see it both ways but tend to lean toward Nathan simply because you can't evict for non-payment of rent which is usually easier than evicting for a lease violation or breach of contract in this case.
It was great input from everybody and enjoyed everybody’s view. I plan on doing the following:
- 1.PM will pay 50% of standard rent but will identify duties he has to do for 50%.
- 2.Develop Property Manager Agreement for emergency and routine repairs and come to terms on compensation. Will hire an attorney to review agreement as I want to limit my liability exposure of injury while working. Going to ask my CPA if I can 1099 the PM for repairs conducted because I was not planning on having payroll or workers compensation.
- 3.Develop a post inspection process on repairs before any compensation is released. Need to implement my checks and balances.
- 4.I am considering creating a special LLC for operations and maintenance of all my rental properties to limit my liability exposure. Will ask attorney and CPA about this.
Thanks everybody and I will keep you posted on what I develop over the next few days.
@Joe Blow Congrats on the property; tell us just a bit about the building you got? How many units?