I’ve often stated on this blog that real estate is an endeavor that rests largely on the investor’s ability to build and maintain relationships: with buyers, sellers, real estate professionals, tenants, neighbors, and a host of other stakeholders.

The keys to managing relationships are of course numerous and complex. There is one that we often overlook, however: the contract.

Robert Frost said that “good fences make good neighbors”. The same can be said for a well written contract. Clear, honest communication is one of the things that helps build and maintain relationships, and there’s nothing like putting your intentions down on paper if you want to expose potential future rifts and conflicts.

I just entered into a contract with my Realtor to manage a multi-family property that I bought with her assistance. This is an agent that I’ve worked with for years and we’ve developed a healthy, symbiotic relationship based on trust and mutual benefit. We do a lot of things off the cuff (just get it done and we’ll settle later) just because it helps us to stay flexible and get things done. However, that’s not how I wanted to handle this particular arrangement.

In my opinion there are a couple important things to remember about contracts.

1) Sweat the details and address the hard issues head on. By spelling things out you make your intent clear. Your goal is to write a contract in which there is very little latitude for interpretation. The process of writing the contract can do wonders in terms of partner alignment. In my opinion, the definition of a good contract is one that sign and then stick in a file and never look at again.

2) One size doesn’t necessarily fit all. You’ll often start with a standard contract, say for property management or residential lease. Don’t be afraid to adapt or modify to suit your unique situation. For example – what I need from a property manager differs fairly significantly from the service that most full service property managers offer (I’ll write about this in a future post) so I’ve tailored our agreement appropriately.

For critical agreements (like joint investment partnerships, etc.) it’s always important to get counsel from a qualified lawyer (which I’m not). But some of this stuff you can do yourself. There are great references on the web that have contract templates. A new one is the Microsoft reference which has all sorts of contract templates from FindLaw.com, including a Property Management contract .