M2M agreement with PM, legitimate?

Question

Hi investors/pms/good people :)

I am about to do my first agreement with PM. I read some property management contracts; In all of them, the agreement was for a YEAR period.

How common is to make an agreement on MONTH to MONTH base?

Since it's my first SFH in the area (64138 KC, MO), I want to judge the PM by performance/personal experience.  Sound legitimate? Can I expect PMs to agree to this kind of request? (starting with Month to month contract)

Thank you very much!

Kenny Dahill · Answer

Hi @Idan Narotzki, good question.  I'll do my best to provide insight but please note I'm not a PM.

Blunt answer:  Any PM who claims to be self-respecting will not do a month-to-month contract.  Not that all who claim to be great are great, but the actual great ones will probably not accept.  They will use their contract and make you succumb to their terms, afterall they've got enough other clients and can't manage various contractual terms.

Here's why PM's will say no.

Leasing:  It's not uncommon for a property to sit vacant during the leasing period.  What happens when they are working hard but on Day 27 you tell them you're firing them.  There's no protection for their sunk labor costs.

Great Tenant:  Let's say they do finally get an amazing tenant!  Understand PM's make half, if not more, of their earnings through leasing.  If they landed a great tenant that is easy manage, that's money in the bank.  That's the difference of spending 5-10 mins per month vs 1-2 hours if they're difficult.

1 vs 100:  Chances are your PM will have dozens, if not hundreds, of clients.  They  can't make exception for just one of you, or else they'd have to do it for everybody.  Especially if you only have a single property and just starting with them.  I alluded to this earlier, but PM's have their own lawyers write their contracts.  This allows the PM to master their contract.  It wouldn't make sense to operate under numerous contract variations.

Termination Fees:  This might not be popular opinion, but PM's can benefit when their landlord fires them.  Every contract will declare a termination clause, typically owners have to give 60 days and PM has to give 30 days.  Along side the termination notice, often the landlord has to pay a termination fee.  That fee typically consists of their remaining contractual fees.  Unfortunately that is a lose-lose for landlords: pay for 2 PM's in 1 year or stick with them and they know you're going to fire them at end of contract...  Yikes.  They put these notices/fees into their contract for protection.  While I agree with the intent, I think they should be a percentage of the remaining balance and not necessarily the entire remaining balance.

So who would do M2M?  There are alternatives and you can message me for some additional information.  However, here are a few.

Starting Out:  To be a PM, most states require you be licensed.  You might find an individual who is attempting to start/grow their own firm that would be willing to accept M2M.

Realtors:  Some states only require a real estate license to be a PM.  Realtors might consider managing a few properties to create steady monthly income or to grow their potential client base.

Reggie Maggard · Answer

Ok, Im some dude over here in blue springs, watsup.  PM in this area blows, like these people dont care about your time or property, so if you go with pm, get used to that.

The month to month things is fairly common. I charge an extra $20-30 if someone wants m-m. And they still gotta give notice, make sure that lease is tight. It depends on if you have a place that is difficult to rent, Im in a hot area so I dont sweat it.

I like your 'make them earn it' approach, I just don't think most will go for it. They got big fish and a one unit investor will barely get their attention, just my opinion. I have fired about three companies/managers...I do it myself, its easy with technology these days. The hard part is finding handymen and vendors, but after that, get phat.