A US Property Management Agreement: What It Must Contain, Fees and Common Traps for Remote Investors

1Why is the management agreement a critical document for an investor in Israel?

Because from a distance you have no way of seeing what is happening at the property other than what the management company reports. It chooses the tenant, collects the rent, orders repairs, holds the deposit and manages the eviction if needed. Each of these actions is carried out under the agreement, and anything not written in it is left to its discretion.

In “turnkey” (Turnkey) transactions sold to foreign investors, the management company often comes as part of the package, sometimes as a party related to the seller. This is not improper in itself, but it means that the agreement was drafted by the other side and was not always negotiated. It deserves the same reading that the purchase contract receives.

2Does a property management company in the US need a license?

In most states, yes. In Florida, managing and renting a property for another for pay falls within the definition of brokerage activity under Chapter 475 of the state's laws, and requires a license from the Florida Real Estate Commission. In Texas, an Attorney General opinion from 2024 clarifies that Chapter 1101 of the Occupations Code requires a license to negotiate the lease of real property for another for pay.

The license matters not only as a formality: a licensed entity is subject to rules on holding client funds, to supervision and to a complaints mechanism. In Florida, according to professional sources, the management agreement should be signed with the principal broker (Broker) and not with a salesperson in his personal name. Before signing, check in the state's licensing database the name of the company, the responsible broker and the status of the license.

3Which clauses must appear in a property management agreement?

A good management agreement answers four questions: what the company does, how much it costs, what it may do without asking, and how you part ways with it. The following table collects the clauses worth checking.

4How much does property management cost in the US?

According to surveys and publications of industry sources from 2026, the monthly management fee for a single-family home generally runs around 8%-12% of the rent collected, with an average of about 8.5% in one sample. But this is only the prominent fee. The real cost is made up of several components:

The right way to compare offers is to calculate a total annual cost and not a monthly percentage: the management fee times 12, plus the placement fee divided by the number of years a tenant is expected to stay, plus renewal fees and repair markups under a reasonable scenario. A company with a low monthly percentage and a high placement fee may be more expensive, and in addition it has an incentive to turn tenants over.

5What is important to know about tax and withholding at source as a foreign owner?

This is a point that Israeli investors sometimes discover only when the money does not arrive. According to IRS Publication 515, a “withholding agent” is any person who has control, receipt, custody, disposal or payment of income subject to withholding to a foreigner, in whatever capacity - and in practice, a management company that collects the rent on your behalf generally falls within the definition. A withholding agent is personally liable for the tax that should have been withheld.

• The default - rental income of a foreigner that is not connected with a US business is taxed at 30% of the gross amount, with no deduction of expenses.
• The election to be taxed on a net basis - under Section 871(d), the property owner can elect that the income be treated as income connected with a US business, and then he deducts expenses and depreciation and pays tax by brackets, by filing Form 1040-NR.
• Form W-8ECI - in order for the manager not to withhold 30%, you must give him a proper Form W-8ECI and update it throughout the years the election is in effect. The form requires a taxpayer identification number (ITIN), or an employer number (EIN) if the property is held in an entity.
• Annual reporting - the withholding agent files Form 1042-S even when no tax was withheld. According to the IRS, Forms 1042-S for 2026 are filed by March 15, 2027.

On the Israeli side, if you choose the 15% track on rent from abroad, the tax is calculated on gross rent - before the management company offset management fees, insurance and taxes. Therefore the management company's monthly report must show the gross income and all the offsets separately, and not only the amount transferred to your account.

6What are the common traps of remote investors?

• “Guaranteed rent” offered by the seller or by the management company related to it, for a short period, which hides the true market rent.
• Related vendors - the maintenance contractor belongs to the management company or its owners, and the prices are not checked against the market.
• Repairs without documentation - charges with no vendor invoice, no before-and-after photos, and no competing quotes for large jobs.
• A vacant property that is not reported - months of “we are showing the property” with no data on inquiries and views.
• Deposits that are not in a trust account - and at the end of the engagement it turns out there is nothing to transfer. In Florida, for example, the law sets deadlines for returning a deposit or giving notice of a claim against it (15 and 30 days from the end of the tenancy), and a landlord who did not send notice on time loses the right to claim against the deposit.
• Property tax and insurance that were not paid - when the agreement does not define who pays, or when the loan does not include an escrow account for these payments.
• Automatic renewal and termination penalty - an investor who wants to replace the company discovers that he is “locked in” for another year, or pays a fee on the existing tenant.

7How do you keep control of the property from Israel?

1. Check the license, the reviews and the complaints about the company before signing, and speak with two existing clients that it did not choose for you.
2. Require an owner portal with access to the leases, invoices and photos, and not only to the summary report.
3. Set a low spending cap in the first year, and raise it only when trust has been built.
4. Carry out an independent check of property tax against the county website and of the insurance policy with the insurance company, at least once a year.
5. Once a year, order an inspection of the property by a party other than the management company.
6. Make sure the W-8ECI is proper and up to date, and that the annual reports reach the accountant in the US and in Israel on time.

8What to do before signing, and how we accompany you

A management agreement is usually signed together with the purchase transaction, when the investor's attention is elsewhere. This is exactly the moment to stop and read it: to detail all the fees in a closed appendix, to set a spending cap, to ensure a trust account and monthly reporting, to arrange the W-8ECI form and to build an exit clause that allows moving to another company without losing tenants, deposits or documents. We review management agreements for Israeli investors against the law in the relevant state, manage the negotiation of the clauses, and coordinate the tax side with the accountants in both countries.

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The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.