When you're investing in a different market and you have a management company handling the property, how do you management paperwork? From the books I've read, the advice is to keep paperwork from tenants and applicants for years after in case of lawsuits. If you have a property manager, do they send you paperwork from applicants or do they have a responsibility to choose tenants and handle all aspects of building management? For context about me, this is my first post and I am just now getting into real estate investing. I haven't purchased any homes or buildings yet.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
3y
Aloha,
It will be somewhat dependent on the "norm" for PM's in the area. Some apparently are required to have Owners named on Rental Agreements; I have only operated where the Rental Agreement names only the PM company and the Tenants. Either way, you should get timely, complete, monthly financial reports showing all income and expenses, as well as copies of invoices/contracts for every single expenditure. YOU need to hold onto those, in an organized fashion, 7 years for tax purposes generally. Rental Agreements and renewal addenda can easily be provided and should be specifically noted in your Management Agreement. If only the PM is named on Rental Agreements, you have no right of access to credit reports in particular, and "private" tenant information generally, based on the Fair Credit Reporting Act. For states where you, as Owner, are named on the Rental Agreement, that would be a question for a local PM. Management contracts that I have always worked under stated that we our "duties" included "management" of the property. In other words, you are not hiring an employee...we work for multiple Owners and in general have systems in place for the routine tasks.
You can certainly LIMIT a PM's authority with the Management Agreement through discussion and negotiation, your results will vary. Typically our only limitation is a cap on expenditures that can be made without approval. We require that number to be at least enough to handle an appliance or water heater replacement without causing undue delay. Of course ANY major project or renovation is closely coordinated with an Owner who is also required to sign any accepted contract.