4% + GST Management Fee

Hi there,

Has anyone managed to secure an ongoing management fee of 4% + GST with their property manager for multiple IP's?

I'm at 5% + GST (for 4 IP's), and I'm not sure if asking them for 4% + GST will be insulting to them (for 5 IP's)?

The service is good, so I don't want to ''devalue'' it by asking for such a low fee... ? But they will have 5 IP's...

Maybe I'm being too soft?!

There's no re-leasing fee, advertising fee or statement fee at present.

Leasing fee is 1.5 weeks rent, but I am going to ask for 1 weeks rent.

Blood from a stone.....much

I haven't given all my IP's to one property manager - probably not feasible given some of the geographic constraints. I do have two IP's at 5% with one PM, but there is a family connection with the principal of the business. I wouldn't expect this to be achieved if there wasn't.

Focusing purely on management fee is IMO shortsighted. There are other costs such as their performance in getting a new tenant when there is a vacancy. How does 1% of your rent in PM fees compare to an extra few weeks of vacancy?

How well they follow up any rental increases in time for when they should be passed on ie not waiting until a few weeks before the end of the lease before mentioning about rental adjustment, instead of 65-70 days before. (Of course, as a LL you should be across this anycase, but a good PM is a good backstop in this case).

5% is excellent, especially when there are no other fees etc you mention. I would just hope they continue to be able to perform and stay viable so you can take advantage of that extra % savings to the 'normal' rate.

By the way, what is 1% actually going to save you?
I would definitely insist on 1 weeks re-letting fee.

I reckon 4% for having 5 properties with the one agency is fair enough. If I had 5 with the one agency, I would try it.

Assuming $250 per week rent. Then on a monthly basis they are getting $270 for banking the rents. At 4% its $216.
Unless your properties rent for over $1000.00 pw I would say that at even 5% comm, that that would be very close to break even for the PM Company. They must be taking shortcuts with inspections etc to do it at that rate - no matter how many you had. In my exp with PM's, the peanuts and monkeys saying holds some truth.:)
the reality is that even though you have 4 properties with them it is still 4 properties to manage regardless of the fact that they are all under the one landlord, there is no less work involved.

5% is already bloody cheap is is generally about the break even point.... now you say that your PM is doing a great job and you are happy with them so you would like to reward such service by giving them less????

If i had a landlord who requested i drop my fees AFTER proving that i am worth it then i would tell them to take their properties elsewhere, it is insulting and it devalues the value of the rent roll.

As for the letting fee well it depends on what the properties are leased for in the first place.. if they are $200 per week properties then again i wouldnt drop my fee to one week, that wouldnt even begin to cover my time to process the application and do the condition report. Why do always people expect that they can pay nothing and get everything??

Sorry perhaps you have caught me on a bad day, but i work damn hard, it is rare that i leave the office before 7:30 at night and i work six days a week to service my clients well, so to read that there are clients out there would would like to reward that with even lower than break even fees kills me.

but go ahead, most agent will continue to drop their pants because you have 4 properties.. chances are they will accomodate you
Agree totally with everything NotallPMsRbad (spelling?) said. A good PM is worth their weight in gold . They will save you a fair bit of the commission they charge you annually by vetting tennants well, spotting maintenance issues before they cause grief etc etc. Not forgetting that it is also tax deductible too:D
5% is a bargain as it is IMO.

I'm paying 5.5 - 7.

Are your IPs in the same geo area? I've got one amazing PM and want to give all properties to her (she says she can do them) but two are 30kms away.
What they all said. ;)

My lowest is 5.5 % and whilst that PM has four, they are under the one roof so some economy of scale there.

I am also paying 6.6 % for a couple, 7.7 % for a few more and one is at 8.8 %. :eek:

JIT, if (as you've intimated) their service is good, trying to negotiate them down another 1.1 % is likely to jeopardise their attention to your properties from hereon.

Personally, I wouldn't (unless it is less labour intense than resi, such as a CIP); it is the cost of doing business and is therefore deductible against the income received.

To date, I am very satisfied with all my property managers (despite the range of commissions I pay) and wouldn't jeopardise that service for the sake of saving "beer money" off the management fees.

If I were unsatisfied, then when I approach another firm, I may negotiate for a skinnier commission if I were transferring several IP's to their books.

Don't ruin the rapport you now have with the PM's you are using. :( Even if they disagree to your request (highly likely), you will taint your future relationship with them. :cool:
I say whilst 5% is already low. Why not ask? Simply asking should not taint the relationship with the PM if its done professionally. Its all part of the negotiation. Now if the relationship with the PM can be jeopardised but such a request I say that the PM has serious issues.

5 properties is different from 1 properties and brings scale to the rent roll.
I always find this squabbling over 1% or so on a management fee funny. You will get what you pay for! and at the end of the day 1% equates to a few dollars each week.

I had a horrid experience in the past with a mainstream real estate agency (who i won't name), they offered me a competitive rate, but gave me no service! At the end of the ordeal i went through it had cost me a lot more money to fix the problem then a few extra dollars each week for a quality service would have cost.

I now happily use a specialist property management agency (Just Rent Sydney), still pay a reasonable rate and receive a fantastic service.

Do yourself a favour...hire a quality PM and rest easy.
5% is a bargain as it is IMO.

I'm paying 5.5 - 7.

Are your IPs in the same geo area? I've got one amazing PM and want to give all properties to her (she says she can do them) but two are 30kms away.

Sorry to hijack the thread, but if you don't mind saying publicly could you let everyone know who your amazing PM is in Melb? I will be looking for a good one for an upcoming purchase.
I would say why not!!! Its business and you can always put it up intelligently to them so as not to be insulting.

And i really find this argument of getting what you pay for bit annoying. Whether i pay 8% or 4% i still expect the same service, simple. If they don't perform they just go regardless...

Its just pure business, there is nothing insulting about negotiating, you are just using the economies of scale...
..............And i really find this argument of getting what you pay for bit annoying. Whether i pay 8% or 4% i still expect the same service, simple. If they don't perform they just go regardless.....

For the most part, however that is why there is a disparity of pricing for many goods and services. Some things have a higher value (perceived or otherwise) than others.........and sometimes it is reflected in the quality of the good or service in question. ;)

You are unlikely (in most situations) to receive the same level of attention from the cheaper vendor than with one who charges double the cheapest price. There may be exceptions, however in the service industry ostensibly you get what you pay for (most of the time).

On the basis of your reasoning (and I'm not saying it's necessarily wrong) all investment properties, regardless of their worth, location, complexity of tenure, etc., should be managed for a flat rate fee.

Why have a percentage anyway? :confused:
Everyone mentions the %fee but no-one mentions other costs.
I find a big variation in this.
On a low rent property it can make a huge difference.

You need to compare ALL costs.
Eg one agent was 8.8% $4 postage etc PM.

On a $200 p/w rent that is 9.3% total
You need to also look at new tenant fees etc. Some charge for resigning an existing tenant, some don't, same with advertising. All these things add up.

I think 1 1/2 weeks rent is too much. Most are 1 week. I would ask to reduce that. My new one is only 1/2 weeks rent.
On a low rent property it can make a huge difference.
I worked it out on mine to be around 20%, with 15% just being the weekly fee. That's enough of a hit to make me really want to self-manage, as I'd rather have the house making MONEY for me (or have someone buy it, which is more money)
I always find that it is landlords with around the 4 or 5 properties who want these really low fees.. and i am not sure why that is? I would be happy with 5% and there is no way i would allow managements for any less than this in our office.

We have three landlords with 10-20 properties all pay 6%, full letting fees, all the advertising etc and have never tried to negotiate the fees...