REIV Exclusive Leasing agreement - HELP



From: Sheldon Lipschitz

I've been quietly reading the posting s over the last couple of months. The excellent advice from the wise "old" heads has helped me get my feet wet.
I am in the process of appointing a real estate agent to tenant and manage my first IP. He has presented me with a REIV exclusive leasing agreement. (Standard contract ploy?)
Can anyone tell me if there are any clauses that may be traps for the unwary in this agreement? Phrases like "The agent is irrevocably authorized ..." make me a little wary.
Also, what leasing fee and management fee is considered reasonable? What level of service should I expect for this?
Thanks in advance to anyone taking the time and trouble to reply.
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Reply: 1
From: Jeremy Jacks

Make sure that you are not giving an exclusive licence to the RE agent even after the first lease has expired.

Add a clause stating that the agent has exclusive management rights for the period of the lease only.

Then advise him/her that they will have first rights if the property is retenanted with less than 2 days vacancy. You then sign an agreement on the same terms as the first agreement and so on.

This way the agent knows that you can and will go elsewhere if they don't work for you, rather than just for themselves.

Management fees should be somewhere between 6.5%-8.5%, no more. 1 week's rental at most for letting fees.

Finally, make sure that it is the agent who has to deal with arranging maintenance, repairs etc, not you. You'd be surprised what some agents aren't willing to do. Of course the costs are still borne by you.

Hope this helps.

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Reply: 1.1
From: Michael Yardney

In addition to the points Jeremy covered, I would add the following:-
1. Nothing wrong with given them an exclusive agency - if they don't have one they are unlikely to work hard for you.
2. Management fees can be as low as 5% -if you don't ask, you won't get it.
3. Make the length of the initial exclusive period 30 days. The rental market is slow in Melbourne at present, but if they don't let it within that time you are able to change agencies.
Michael Yardney
Metropole Properties
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Reply: 1.1.1
From: Sheldon Lipschitz

Hello Jeremy and Michael,
Thank you very much for the advice, this helps very much giving me confidence on what factors to negotiate.
This, as with most things, is a little stressful first time around, and your reply helps reduce my stress levels as well.
Kind regards...Sheldon.
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From: Rixter ®

Also watch out for the Period of Agency clause in the contract. I've noticed alot of PM agents are looking to sign you up in an
exclusive management agreement where by you are bound under the contract to stay with them for a set period...ive seen dates on them that lock you in for up to 2 years...

The way I get around this is when you receive the contract for signing, I place a line through the "from & to" dates, initial it, then write in "for term of lease". This way you are not contractually bound to any PM agent until they have a tenant signed into a lease. ..

I also get 3 lots of keys cut and distribute them to different Property managers in the local area. Doing it this way you can get several looking for a tenant with the understanding of who ever finds a tenant gets the property management rights....thus getting it leased quicker..

Happy Investing,
Rixter :)
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From: Sergey Golovin

Good on you Rixter.

I do like that - for term of lease.

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From: Anonymous

In my experiences as a Property Manager and as a landlord, the best agents do not negotiate discounts unless you have quite a considerable portfolio. If you are offering them say 5% of $300 is $15.00 per week, or 5% of $200 is $10.00. Put yourself in their shoes. How excited would you be in an offer like that?
I believe you should be prepared to pay for the best representation and care. In fact I would be inclined to offer them more, say 10% plus 2 weeks rent if they get me the right tenant and a great price. You are more likely to get results if you offer them incentives. All your expenses are tax deductible anyway.
I agree with the others, your contract with the agent should be valid for the duration of the lease. Ask if they receive any kickbacks from the advertising they will place in the papers on your behalf. Work out how much they will receive and use it as a negotiating tool. Also, you should decide on how much repair work($500, $1000, etc) they are authorized to carry out on your behalf without notifying you first. It can be what ever amount you want.
There are no rules. It is a contract that you and your agent should negotiate to suite both your needs.
Good Luck
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