redwing said:
What do you think... ? 
Let's try some rough sums for a country town with a population of 30 000 (multiply the figures by 3 for a REA in a largish suburban area serving 90 000)
Pop: 30 000
Number of homes: 10 000 (assuming 3.0 people per house)
Number of privately-owned rental homes (30%): 3 000
Number managed by a REA (67%): 2000
Number of agencies in area who manage properties: 5
Number of properties per agent: 400
Average rent: $200pw ($10k pa assuming 2wks vacancy)
Total rental income collected per agent: $4 million
Assume 12.5% management fee (incl other charges): Income $500k
TOTAL INCOME FROM RENT ROLL: $400k
---
No properties per manager: 100
No PMs: 4
No admin staff: 2 (50% shared with sales)
Managers/Supervisors: 2 (50% shared with sales)
Total staff: 6 (devoted entirely to property management)
Assume $40k salary, $20k costs per staff member
Total wages bill: $360k pa
Office rent (main street of town): $100k pa (?) - 50% = $50k pa
Misc costs, power, REI memberships, etc: $40k pa(?) - 50% = $20k pa
So far we have:
Income: $500k pa
Expenditure: $430k pa
Profit = $70k pa
Profit margin: 14%
So unless any of the figures are significantly out, it looks like a high-volume low margin but stable income stream that would balance up the more volatile sales revenue. 100 properties per manager might be low, and some agents might try to manage with 200 per manager, with very lucrative but not particuarly good results.
Some other points:
1. The relationship and rationale between fixed percentage (eg 9.35%) and variable fee-for-service costs such as (say) a $6 per month admin fees might also be interesting to look at.
Dependence on a lot of flat fee for services increases variability for the landlord (and thus their ability to budget) and makes smaller properties comparatively more expensive than larger properties (and not the same as if all charges were covered in a single 7-8% charge, as appears to be the case in the eastern states).
2. There is also a question on whether there is a degree of cross-subsidy between high-maintenance properties and/or those with bad tenants and low maintenance properties with good tenants that require very little of the PM's time. If so, this may be built into an artificially high charge that penalises astute landlords who only buy properties that attract good tenants.
3. The universal 9.35% amount (in WA) smells like a cartel, with the differences being in the fine print (the inspection, paperwork, admin, letting and other fees) being less tangible, and others, such as quality of service being intangible until after you've signed up.
Rgds, Peter
