Agent Fees - Opinions Please

[Jody in Darwin]

Hi all,

I've been pondering what to charge and how to deal with many of the issues that I have seen in previous jobs when I go out on my own (Residential Property Management - just me - and eventually 1 support staff member) and would really like some feedback.

I've considered the 2 extremes as well as a middle of the road option:

Extreme 1: a single percentage management fee - no other fees - no letting fee - no postage & sundries - no renewal fee etc. Obviously though the fee would have to be quite high - i.e. 12-13%

Extreme 2: a fee for absolutely everything - postage & petties - leasing - renewal - rent receipt - maintenance etc. & allow people to pick & choose what they want done - I.e. just a condition report, or just inspections or just rent receipt etc. BUT this would remove a great deal of property knowledge from the manager & make the overall management ineffective.

Middle of the road (currently my preferred option): 12 month quoted management agreement covering everything. The idea is that I view the property & estimate what it will cost me to manage it then quote a fixed figure accordingly which can be deducted from credit card monthly (I have credit card facilities (& therefore more points - if you are on one of those schemes) - very unusual for an agent & landlords would then receive the rental amount without the management fee deducted). The idea here is that landlords can budget more effectively, I don't waste my time with really time consuming properties that don't return a good income to anyone and people with ideal tenants and problem free properties aren't subsidising landlords with poor invesments (which happens a LOT). Then at the end of the year, I review what the management actually cost and quote an amount for the following year based on how the first year went...etc.etc.etc.

I would really appreciate opinions from both landlords and other agents on this.

Kind regards,
Jody Foster

 

[womble66]

Middle of the road seems OK except for the credit card business.

I would want my fees deducted from the rent payments so if the tenant ain't paying the rent then the PM ain't doing their job and therefore ain't being paid either.

Why should the PM get paid before me. I see the CC as just a method to ensure the PM cash flow is not impeaded due to bad tenants.

Just my POV and trying to be constructive from a LL POV.

 

[Propertunity]

Hi Jody,

As a LL myself, in relation to your options:
1. I would not pay you or any other PM 12-13%, ever.
2. Neither would I pay you a fee for everything....and not only that, if I chose not to have you, for example, do a condition report, then who is that helping? You would leave yourself as a PM open to being sued by the tenant, if for instance a balcony railing collapsed and they were injured because you are not doing your job of regular inspections. I don't think you have thought this through.
3. Middle of the road: This sounds like what every other PM does. Takes on decent properties with decent tenants, in the hope of making some money. Your only point of difference here seems to be that you wack your PM fees on my CC so I can earn points. But:
a. Either way I am paying you the money. I don't see how that assists with budgeting?
b. $1,000 - $1,500 per year on my CC points does not amount to much of anything.
c. Why as a LL would I want to choose a 1 man/woman operation? What if you stop answering the phone? Where do I go? What do I do?

Also bear in mind that although you might inspect the property & check out the tenants:
a. Good tenants can turn bad following a job loss or relationship breakdown.
b. Unless you are a building inspector, you have no idea what kind of maintenance issues may arise over time, on any particular property.

None of your proposals in their current form would be attractive to me as a LL.

 

[jezza]

JOdy

Ican see you are trying to do something different to others but neither of these would work

Extreme 1. 12-13%, the only person who would pay this are those that buy properties off Henry Kaye

Extreme 2. Are you saying you are going to wear the maintenence costs, so when a pipe under a house breaks or the tenent leaves and the carpet is in poor condition your going to pay for it. Well sign me up

Middle of the road. Very simliar to what goes on today, however your point of differnce is you withdraw cash after the event from a CC. I see what your offereing however it just isn't some sort of value add that is going to swing people.

With 2 people you are offering a niche experience but you seem to only be after places that won't take up too much of your time. Welcome to PM world and this is what everyone wants and is probably that and the low wages why the job turns over so many people.

Once I make a decision on which PM and sometimes as it may be a neighboring suburb I just go with a existing PM. So the only chance of moving properties to another PM would be if I had lost confidence. I see and get calls from other PM's offering gimmicks such as 3 free months but that does not sway me.

Charge a reasonable fee, keep the landlord informed, ensure the tenent is never forgotten about and keep the process simple. That is what makes a good PM, not gimmicks!

Jezza

 

[Jody in Darwin]

Ouch!

Thank you for the honest opinion - definitely what I am after.

I am well aware of the hours required to manage a portfolio properly - I have been doing it for some time and regularly work long hours.

Yes - I would be trying to get rid of problem properties - I have no trouble with time consuming as long as I am being paid for the work being done. My biggest issue with the current percentage fee system is that someone paying $20 a week ($1040) management fee is getting the same amount of time, skill and effort (& often the cheaper, low end properties can take more time - maintenance, type of tenant etc.) as someone paying $60 per week ($3120 per year). If all we have to do for a property is collect the rent - $60 a week seems like a lot to me.

Re liability - I have put a lot of thought into this and all I can say is I've seen a LOT of property managers with full managements on properties in larger offices that don't have a clue what to look for at an inspection (think leak under sink & ruined vanities at the end of the lease), who write up ineffective condition reports due to time constraints or just not knowing what is required and the attitude is either - oh, well it's just a job or doesn't matter we have liability insurance. Option 2 would mean ineffective management though - which I am not comfortable with.

I have been reading comments from people on this forum regarding issues with fees - i.e. renewal fees & amount paid when the property is problem free & good tenants are in place and thought any one of these pricing structures would get around that.

Good point re 1 person office. I wanted to keep it small so that nothing would fall through the cracks but it would be fair for a landlord to take that into consideration. May need to consider growing to at least 2 PMs.

I agree - 13% is pretty high. My thinking here was to include everything in the single fee so there are no surprises. Even though this may be equivalent to what some are paying once all fees are taken into account its a high number considering the aim of purchasing investment in the first place.

Budgeting - easier because the same amount is charged each month. No fees for inspections, attendance at tribunal. Not having your renewal fee suddenly turn into a letting fee. Most people are fine at making allowances for this but I would regularly get calls from landlords a few years ago when their annual letting fee was charged asking where the rest of their money was (it was listed on the statement) - & I though perhaps this may be a helpful way around that.

Appreciate the feedback - would like some more if anyone else has any opinions.

Kind regards,
Jody

 

[rugrat]

I definitely prefer a single % fee - no extra costs (exception of services like tribunnal attendance - which hopefully wouldn't be a normal performance anyway). I think 12-13% is WAY too high for this though.

My PM is changing a flat all inclusive rate of 8.8% - now she has lower overhead costs because she works from a home office. I would possibly be willing to pay upt to 10% for a flat rate charge.

As for option two - that in my opinion is called 'double dipping' (and seems to be very popular here in Canberra, where they charge 8% and then charge for absolutely everything on top of that: I hate it and refuse to go down that path. It is just a way for the PM to be sneaky about how much money they are actually going to take from you.

Your third option... meh... why would I want to pay you from a CC when I have to pay interest on that money??? Just take it out of my rent - so long as I am aware of all the charges beforehand and you are not adding a fee for every tiny thing you can think of on top of this, and you are upfront about this - there shouldn't be a problem.

If you are having people complain because more was taken out then they thought should be - it means you have bad communication skills and haven't been effective in making them aware of the payment structure. (this is the reason I prefer option one, because there are no hidden fees going to come and slap me in the face).

 

[Jody in Darwin]

Hi Rugrat,

Thanks for the comments - much appreciated.

I am making a real effort to scrap the 'hidden stuff' as people call it and option 2 is all about fixed charges for given services - scrapping the percentage fee entirely.

The calls I got were on an inherited portfolio - any appraisals I did while there it was made very clear that there were only 2 charges - % based management fee and annual letting fee & that the annual letting fee is taken every year on the anniversary of management. It was also written into the management agreement. I think some people just got busy & 12 months later after a smooth running management it is easy to forget. I am big on communication and have made the effort to contact all landlords before their first end of month payment to let them know what they will be receiving & why. One of the new managements we have taken on was trashed by the previous tenant & the owner has been receiving a running tally on costs, showings, etc (it's all cleaned up & leased now - 2 weeks).

The credit card option is a flexibility thing - I don't mind whether people use that or whether it comes from the rent. I see what people are saying about it being a guarantee of pay if I am not doing my job but this is not my intention at all & if not offering credit card service proves that then am happy to scrap it.

Thanks all who have contributed so far - has altered my thinking on a couple of points.

Kind regards,
Jody.

 

[bene313]

1. I would not pay you or any other PM 12-13%, ever.

My initial thoughts were that a flat fee of 13% isn't that bad.

I pay 7.7% and after letting fees, postage and sundries it works out to about 12%.

That's for NSW -- WA is higher.

 

[JoshyBoi]

You're right Bene, but most people either don't realise it or think that way...its more the perception that 12-13% is high, when in reality...its ok...

I pay 10.6% + mostly all inclusive but there are some extra services were necessary...

 

[Jody in Darwin]

Thanks guys - yes that was what I had calculated.

Kind regards,
Jody

 

[Propertunity]

My initial thoughts were that a flat fee of 13% isn't that bad.I pay 7.7% and after letting fees, postage and sundries it works out to about 12%.

Yes, I see what you mean.

I am paying 5% (incl of GST) + $0 postage (agreement to do everything email) + $0 sundries. But this is probably a function of the number of properties my PM manages for me.