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GTL Real Estate's Fiduciary Responsibility by GTL Real Estate, GA and FL Property Management - YouTube
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(playful keyboard music)
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- Hi, Todd Ortscheid here,
with GTL Real Estate.
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This week, wanted to just do a quick video
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about fiduciary responsibility.
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That's probably a term
you've heard before,
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but aren't quite sure,
either what it means at all,
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or how it applies specifically
to property management.
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It's not a term that most
people are very familiar with
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unless they work in financial services,
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or real estate, or
something to that effect.
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So there's probably a
lot of people out there
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who are interested in this.
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Basically, what fiduciary
responsibility means
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is that a person, a fiduciary,
who has that responsibility
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to you, as a client, is required to handle
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your situation in your best
interest to the detriment
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of even their own interest.
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So, basically, what that
means is they always need
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to be looking out for you.
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Even if that means that it
might make someone mad at them,
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or it might make them a
little bit less money,
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or whatever the case may be,
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their responsibility is ultimately
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to do what's in your best
interest to make sure
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that you get the best
return on your investment.
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So in property management,
what that basically means is,
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when we're managing your property,
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when any property management
company is managing
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your property, the actions that we,
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or that management company, must take
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have to be in your best
interest as the landlord.
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So, that means you
sometimes have to do things
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that will get a tenant upset at you
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because you're having to enforce the lease
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on behalf of the landlord.
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Which might mean collecting a late fee,
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filing an eviction,
refusing to do a repair
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that is not required by
law or isn't justified.
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Those things will make
the tenant, sometimes,
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pretty upset with us as the
property management company,
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but we're required to do that
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because our responsibility is
solely to you as the landlord.
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Our only responsibility to
the tenant is a responsibility
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of what's called, fair
dealing, which basically means
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we have to be honest with them,
we have to follow the law.
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We can't tell lies to
them, that sort of thing.
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We can't withhold information
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that's considered material facts.
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For example, if we knew the
house was filled with mold
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you can't tell us not to
tell the tenant about,
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or a perspective tenant, about that.
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We have to disclose that to them.
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That's required by law.
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That's just something
that we would have to do.
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So, that's kinda the limit
of what our responsibility
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is to someone who's not our client.
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So the landlord is our client,
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in a property management relationship,
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so our responsibility is to you,
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to make sure we represent
your best interest.
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Now, of course this
doesn't necessarily mean
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that we have to do whatever
the landlord tells us to do.
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Obviously, there's limits
on that responsibility.
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In fiduciary responsibility doesn't mean
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that we have to follow
directions from the client,
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it means that we have to do
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what's in the client's best interest.
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So if the client tells us to do something
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that is not very smart to do, for example,
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if a landlord told us, "My
tenants not paying the rent,
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"I want you to go and take the door,
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"the front door off the hinges."
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Well, we're not going to do
that because that's illegal,
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and it's also not in your best interest
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because it's illegal.
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So, for that reason, a
fiduciary responsibility
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doesn't mean that we have a responsibility
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to follow directions from the client,
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it means that we have a responsibility
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to do what's in your best interest.
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So in that situation, if
you tell me to go take
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the hinges off, take
the door off the hinges,
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because the tenant hasn't paid the rent,
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what's in your best interest
is for me to tell you,
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no, I'm not going to do that, here's why,
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and refuse to do that.
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So, you know, that is
what's in your best interest
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even though it might not be
what you've told us to do.
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So that's an important distinction there.
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Another limitation on that
fiduciary responsibility
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is what's in the contract between us,
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or between you and
whatever management company
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you may have working for you.
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So the contract, that
management agreement,
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will have a certain list of
responsibilities, duties,
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limitations on responsibility,
all that sort of thing
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that lays out how that
business relationship
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is going to work.
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So, for instance, you're
required to pay certain fees
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for that service, so
obviously, it could be argued
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that it's in the landlords best interest
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to not charge them any
fees, if you're a fiduciary,
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but because we have
that contract that says,
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these are the fees for our services,
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this is what you have to pay
for us to manage the property,
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obviously you would have to pay that
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because that's part of the contract.
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Also, the contract will
probably lay out certain things
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about how the management
company does business.
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It might even just have a blanket
across the board statement
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like ours does, that says
the property will be managed
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according to our normal
policies and procedures.
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A lot of management companies will have
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that sort of provision in their
contract with their clients.
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So basically, what that means is,
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the landlord can't just demand
that the property manager
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do something that's
outside of their normal way
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of doing business.
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For example, we charge tenants late fees
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after the second of the month.
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So if a landlord came to
us, one of our clients,
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and said, "I want you to charge late fee
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after the first of the month,"
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we would say, "No, we
don't really do that,
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"we wanna keep everybody
on the same late fee.
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"That's our standard
policy and procedure is,
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"after the second they
get charged a late fee,
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"and your contract with us
says that we're able to use
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"our standard policies and procedures."
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So those are kinda the limitations
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on fiduciary responsibility,
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and what a fiduciary owes
to you, as the client.
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So you have to keep that in mind.
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But in general, your fiduciary,
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your property manager,
your real estate agent,
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your investment manager,
anybody who has a fiduciary
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responsibility to you,
unless you're asking them
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to do something illegal
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or something outside of the contract,
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then that person should be doing
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what's in your best
interest and not in theirs.
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So, where does this come
into conflict, sometimes?
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I see some property managers
who will say things like,
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"You know, I'm not
gonna charge that tenant
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"for that damage they did on move out
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"because I don't wanna get a bad review
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"from that tenant online.
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"I don't wanna get them upset,
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"so I'm just not going to do that."
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That would be a violation
of that property manager's
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fiduciary obligation
to you, as the client.
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Sometimes those property
managers will say,
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"Well, I don't file
evictions until tenants
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"are 30 days late because
it makes it easier for us
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"and it makes the tenants less angry
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"that we're not filing evictions quickly,
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"so we don't do that."
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Now, if it's in their contract with you
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that says they can do that, they can,
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but our view is, that's a
little bit to the extreme side
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of what should be in a contract.
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They should be looking
out for your best interest
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and not theirs.
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Certain limitations, like I
said, on policies and procedures
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are reasonable, that any
management company should have.
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They have to have their
way of doing business
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but it needs to make sense.
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If they're telling you,
we don't file evictions
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for 30 days after a tenants past due,
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my statement to them would
be, "How can you justify that
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"in representing your client?
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"What is the justification for why
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"that's in your clients best interest?"
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And I don't think there is a justification
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for that, personally.
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So that's not how we do things.
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So, that's sort of what
you need to think about
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when it comes to fiduciary responsibility.
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The fiduciary, the property
manager, in this case,
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should be doing what's in your
best interest not in theirs.
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Not just what makes their life easy,
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not what just reduces their cost,
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not just what makes the tenants happy,
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or whatever the case may be,
it needs to have a rational
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basis for why it's in your
best interest as their client
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within the bounds of the contract
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that you have with them, of course.
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So, if you have any
questions about any of this,
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send us an email at
[email protected].
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Our website is gtlrealestate.com.
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If you wanna contact us
about managing your property
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please feel free to do so.
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And have a good week.
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(playful keyboard music)
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