My wife and I are new to the rental game, but have been following BiggerPockets for the past 2 years religiously. We live in Houston, TX where I'm a Mortgage Lender, and she owns a Travel Agency. A large reason why we want to invest is due to the tax benefits that this will bring us for years to come.
We knew from day 1 that we weren't going to manage these ourselves, so it was always part of the plan to hire a management company to do the work for us. The duplex has Section 8 tenants in both units (unit A tenant has been there for 9 years, and unit B tenant has been there for 3 years). Our preference would likely be to stick with the current management company, due to their relationship with the tenants (based off of our interviews with the tenants) and their ability to keep to have low occupancy rates. The units cash flow decent enough for us with a 7% COC and 6% Cap.
I'll preface this by saying that my knowledge of reading contracts only goes as far as what I do when doing a mortgage loan. The current company sent us an agreement over the weekend to look at, and a few questions came up immediately. Any help would be greatly appreciated.
1) "Contract states that management company is to receive "100% of one full month's rent" each time the property is leased to a new tenant."
2) "Fee if Buyer is Procured through Broker: If during this agreement, Owner agrees to sell the Property to a person other than a tenant who occupied the Property and Broker procures the buyer, directly or through another broker, owner will pay broker a fee equal to 6%." I'm reading this to say that when I want to sell, I'm going to be forced to use them, because I'm going to have to pay them 6% regardless.
My questions are, A) Are these normal? Since I've never done one, I'm not sure if it's par for the course, or if these are high, and B) if it's normal, how do I factor these costs into my Financial Analysis?
Thank you
