What should I look for in a property management contract in Texas?

The most important clause in the management fee section is whether the fee is calculated on collected rent or scheduled rent. 'Collected rent' means the PM takes their percentage only from what the tenant actually pays. 'Scheduled rent' means they take their percentage on what should have been collected, whether the tenant paid or not. On a $1,800/month rental at 9%, the difference is $162/month that you may or may not owe depending on whether your tenant is current. In Tarrant County, most professional PMs charge on collected rent. If a contract says 'scheduled rent,' ask why and consider it a yellow flag. Also confirm whether the management fee applies during vacancy. Some PMs charge a flat monthly fee or a reduced percentage even when no tenant is in place.

The placement fee (sometimes called a leasing fee or setup fee) is charged when the PM places a new tenant. In Tarrant County, this typically runs from a flat $250-$500 to as much as one month's rent, depending on the company. Ask three things: How much is it? When is it triggered (upon lease signing, upon move-in, or upon first rent payment)? And what is the refund policy if the tenant breaks the lease or vacates within the first 60-90 days? Some PMs will pro-rate or waive the fee if the placement fails early. Others will not. A tenant who leaves after 45 days is costly regardless of the refund policy, but a PM who stands behind their placement with a partial refund is signaling something about their screening confidence.

Every PM contract should specify the dollar amount above which a repair requires your explicit approval before work proceeds. The standard range in Tarrant County is $150-$500 for non-emergency repairs. Some contracts set it as low as $100; others allow the PM to authorize up to $1,000 without owner approval. Emergency situations (a water heater failure, a broken HVAC in July) typically have a separate clause allowing the PM to proceed without owner approval regardless of the cost. Understand both thresholds before you sign. If the non-emergency threshold is set too high, a PM can authorize significant work without your knowledge. If it is set too low, you will get approval requests for minor items that should just be handled.

Texas PM contracts are typically 12-month agreements with automatic renewal. The termination clause determines how you can exit and at what cost. Look for: required notice period (30, 60, or 90 days), whether early termination triggers a fee (common: one to two months of management fees), and what happens to your current tenant if you terminate. Some contracts include a 'tail clause' that entitles the PM to their management fee for the duration of any currently active lease, even after termination. This means switching managers mid-tenancy may still cost you fees to the outgoing PM through the end of the lease. That is not unreasonable, but it needs to be understood before you sign.

Some property management companies have in-house maintenance staff or affiliated maintenance companies. When they do, their labor rate may be higher than market, or they may charge a markup on materials. Other PMs use third-party vendors but add a coordination fee of 10-15% on top of the vendor invoice. Neither practice is necessarily dishonest, but both need to be disclosed in the contract. Ask directly: 'Do you add a markup or coordination fee on vendor invoices?' and 'Do you use any in-house or affiliated maintenance services?' Get the answer in writing before signing. Over the course of a year with typical maintenance activity, a 15% markup on repairs can add $300-$800 to your operating costs on a single-family rental.