Negotiating with agencies -- letting fees, up-front rent payments etc.

[korneevy]

Hi all,

As I am just about to rent my first IP out for the first time and I wanted to see what more experienced people can advise in terms of negotiations with Property Managers. I will be able to source the tenant on my own but still wanting an agency to manage the property on my behalf. Main reason for going though agency is the ability to get a landlord insurance cover (as the place is brand new). Also, the potential tenant is a friend of a friend and for this reason I’d rather have agency dealing with any maintainance requests etc.

Basically, before discussing this with agents in detail, I wanted to see if you think that:
1. Is there a possibility to negotiate with them to cancel the letting fee (apx 500$ in my case) as I have already found the tenant?
2. I am also not really sure if they include the cost of preparing a Condition Report in their letting fee and how much would they normally charge for this if asked to prepare it separately?
3. The tenant is willing to pay 6 month rent in advance – they are coming from the overseas and have just sold their property there so have plenty of money. I have read somewhere that the agents normally transfer only the first month's rent and then keep the rest in a trust account hence preventing the LL from accessing the funds. Is this the case and can this be negotiated? I’d really like to have access to the full amount as it will help with cash flow situation .

Will also appreciate any other hits/tips that can help to lower their overhead going forward.

Thanks so much in advance.

K

 

[benjamber]

6 mths rent in advance

Hi , not sure about a few of the other topics but in relation to the 6 mths rent in advance my tenants for my ip paid 6 mths in advance and the real estate took their managment fee and put the remainder in my account so i am sure it can be done but maybe dependes on the real estate agency. This was kg and associates in Palmerston (NT) Which i must say are great property agents as opposed to MPRE -carrum downs (vic)

 

[tobe]

Everythings negotiable. I always delete the item where they charge to re sign exisiting tenants up for another term. There is no harm in asking if they will waive their letting fee, the worst they can do is say no. The problem with the agreement is it relates to all letting fees, like ones in the future as well, so you would have to have a clause that only the first letting fee is waived....

 

[silversands]

Hi,

Regarding landlords insurance, just for the record, I self manage and getting landlords insurance was not a problem. So long as this is not the only reason you wish to engage a pm though, then I guess it's irrelevant to you.

Regards Jodie

 

[korneevy]

I self manage and getting landlords insurance was not a problem.

Hi Jodie,
Which insurance provider are you using? I was recommended Terri Scheer Insurance and they clearly say that cover only agent-managed properties.

 

[wylie]

We also self-manage and also have had no issues with getting insurance, though I know Terri Scheer is not one we can use.

Recently we changed from CommInsure to AMP.

 

[silversands]

Hi,

We are with CGU. FWIW 2 days after taking out first policy we had a huge storm that demolished the shed. They had no qualms about paying up. All the best. Hope this helps

Regards Jodie

 

[Jason Rose]

As far as let fees are concerned they vary from state to state. Here in Queensland the most that can be charged under the Property Agents & Motor Dealers Act is 1 weeks rent plus GST. I do believe they charge 2 weeks rent plus gst in Victoria??

Discuss the let fee with your agent. Do you still want the agent to do all the reference checks, employment checks, affordability checks and also get the tenants signed up on the lease and pay the bond to the residential tenancy authority and complete the entry condition report?

Check with your landlord protection insurance company. Different companies have different requirements. ie Terri Scheer Insurance & MGA Insurance (2 specialist companies that we use with our clients) ask as part of the claim for the tenancy application. A bit of a grey area if the basic checks have not been done on the tenant before occupying the property.

Most of the time if one of our owners finds the tenants and we still do all the rest of the stuff, we will only charge the client 1/2 weeks rent plus gst.

p.s. when you are getting Landlord Protection insurance make sure that you read the fine print in the PDS(product disclosure statement) for what you are and are not covered for, what the excess will be and if there will be an excess for each part of the claim you make. some companies will charge you an excess for each part of the claim you make. ie loss of rent, damage, cleaning and some companies will make you use the bond 1st before they payout a balance to you. (by the way the PDS make some great bedtime reading just like the agency agreement)

 

[Dazz]

by the way the PDS make some great bedtime reading just like the agency agreement

Exactly right. Seeing as though both organisations have spent considerable time and alot of expense getting their legal counsel to draft the agreements, with strict instructions for their clients - insurance co's and REA's respectively - that they would be a fool to modify the agreements as written.

Any modification will be to the detriment of both the ins. co. and the REA as the other party to the contract is the Property Owner.

Try negotiating with them - give it a crack - it's quite good fun. The Solly's have told the Principal not to negotiate. The Principal's tell the REA's and PM's not to negotiate. You as the Owner walk in like a woodduck and you get hit with successive larger brick walls.

I ignore the first two and head straight for the Solly's. May as well save your firepower for that argy-bargy.

Of course, they always offer you to walk elsewhere - where guess who is waiting - another fully paid up REI member with....surprise surprise the same form. Excellent choice. Good Luck.

 

[tdh78au]

Hi K,
in 4 weeks i'm about to settle on a property that comes tenanted and wanna change the PM over to the selling agent. I will most definitely be negotiating on the letting fees, etc in this case before I hand over the new business to him ... specially since it's existing lease well into next year.

On the insurance front, in my personal case, I'm going for a combination of landlords building insurance with aami ($327) and tenant cover with rentcover (RentCoverUltra: $255). aami because they cover the building replacement upto whatever it costs & rent cover ultra seems to offer much better features than most of 'add-on' tentant cover options. I found this combination to be of really good value (in my personal case).

good luck

 

[Jason Rose]

Hi K,
in 4 weeks i'm about to settle on a property that comes tenanted and wanna change the PM over to the selling agent. I will most definitely be negotiating on the letting fees, etc in this case before I hand over the new business to him ... specially since it's existing lease well into next year.

On the insurance front, in my personal case, I'm going for a combination of landlords building insurance with aami ($327) and tenant cover with rentcover (RentCoverUltra: $255). aami because they cover the building replacement upto whatever it costs & rent cover ultra seems to offer much better features than most of 'add-on' tentant cover options. I found this combination to be of really good value (in my personal case).

good luck

Just check with your agency. why should you have to pay a let fee if there is an existing tenant & a lease in place?

 

[Bandita]

Hi Jodie,
Which insurance provider are you using? I was recommended Terri Scheer Insurance and they clearly say that cover only agent-managed properties.

We use Terri Scheer for one of our properties (which is managed through an agent) - but for another one we use ANZ - one fee that covers landlord and property insurance combined, they did not seem to care (never asked) if the property was managed by an agent.

Cheers,
Jen

 

[tdh78au]

Just check with your agency. why should you have to pay a let fee if there is an existing tenant & a lease in place?

probably could have worded my statement a bit better.
That's precisely my thinking ... not to pay any letting fees since it's got an existing tenant & lease in place.

 

[boomtown]

I negotiate everything with PM agreements. Im a pain in the ***.

But Im make sure theres still enough meat left in the sandwich to keep the PMs interested and keep them happy - I do value their services. They gotta make a living too.

 

[Clara]

No Property managment contract.

Any one in a situation where there is no property managment contract in place. My IP has been managed by a PM for years , but we never signed a contract. I have not been very happy with the service lately and want to change. I would like a new PM, and wondering about possible hiccups.

 

[sailor]

One thing is very important to me about my PM's. They MUST communicate with me. And even then I get very frustrated with their inability to read my emails.

Example for this week (and tis only Wed):

PM: Have a tenant. Will pay $225 and sign 12 month lease.
ME: Ask tenant for $225 for 6 months, and $230 for six months.
PM: I was just confused with your previous email did you mean 12mths at $225 and 6 months at $230??
ME: NO.
1. Give the man a 12-month lease.
2. In the lease, specify the rent is $225 for the first 6 months.
3. Also in the lease, specify the rent for the final 6 months is $230.

Spare me!

 

[LynnH]

Can understand your frustration, sailor! I didn't think it was possible for someone to be that ?thick? - and still hold down a job as PM.

Cheers
LynnH

 

[s_t]

No offense Sailer, but in defense of your PM I think it was your communication that was the problem in this instance (assuming what you wrote was the full extent of the conversation). I don't see how you could expect someone to determine exactly what you wanted based on that one liner. Some small changes to the choice of words (eg...... and $230 for second half of the 12 month lease) would have made it much clearer.

One thing is very important to me about my PM's. They MUST communicate with me. And even then I get very frustrated with their inability to read my emails.

Example for this week (and tis only Wed):

PM: Have a tenant. Will pay $225 and sign 12 month lease.
ME: Ask tenant for $225 for 6 months, and $230 for six months.
PM: I was just confused with your previous email did you mean 12mths at $225 and 6 months at $230??
ME: NO.
1. Give the man a 12-month lease.
2. In the lease, specify the rent is $225 for the first 6 months.
3. Also in the lease, specify the rent for the final 6 months is $230.

Spare me!

 

[sailor]

No offense Sailer, but in defense of your PM I think it was your communication that was the problem in this instance (assuming what you wrote was the full extent of the conversation). I don't see how you could expect someone to determine exactly what you wanted based on that one liner. Some small changes to the choice of words (eg...... and $230 for second half of the 12 month lease) would have made it much clearer.

To quote my email: "How about 6 months at $225 and 6 months at $230?"
How vague is that then?

 

[jasper]

Negotiate all the way!!!

I can't tell you what all property managers do but when I have found that if you get your own tenant and the property manager just has to draw leases and do condition report it's about $60 for the lease and $90 - $100 for the condition report.
Careful of the extras that are sometimes charged statements from your agent can vary considerably in price as well as rates for attending tribunal should it arrise etc.
Look at the whole package carefully and ask the agent you meet wheather they personally will be handeling the property or a collegue. Often you will meet with the Senior PM and then your property will be handed to an assistant PM who you may not like dealing with.
Good Luck...