Jusitifcation for higher management fees across states/areas rant

[TMNT]

me and my friends rant from last night

We all know that some agencies charge a lot higher rates for certain areas due to being a difficult/rough area, thats fine by me and understandable

What gets to me is certain areas or states or regions where EVERY agent has far higher fees, due to no particular reason other then they can and everyone else is doing it, and no one is ballsy enough to change it

and when you ask them why their fees are so high, they cant give a valid justification such as "oh we have to pay rent" or "we have to pay the secretarys salary" or "we work very hard" or "we do a very good job"

Its like they act as though they are the only people in the country who pay rent, or have a secretary or do a good job.

My friend has just got a property managed for 5.5% with 1 week letting fee in Melbourne, this is the agencies standard rates, he didnt even negotiate

for me most of my properties are on 7.7% inc gst,

however, I have a few that I negotiated down from 9.9% to 8.8% through multiple properties, while the letting fee is 2 weeks + gst

I have another agency who refuses to budge down from 9.3% even with the threat to remove all my properties and with the enticement of another property

these properties range from VIC, QLD, NSW, SA

AmI missing something?

Its the agencies that charge 9.9% are the ones that do a good job, pretty much no different to a 6.6% agency but always try and justify their fees by almost being on their high horse as though their job is harder or their rent is higher

that is unless the PMS in the area get paid 50% more then the average, which I highgly doubt

 

[NedKelly]

What get's me is my agency stopped sending me paper statements and just emails them to me. They then increased their "postage & petties" from $6.00 to $7.00 a month, when I queried this the answer was because of all the other post they send out.

 

[Badger]

Settled on a property last December that needed a fair bit of work done to it. Being interstate, decided to choose a property manager that was close as possible to the property ( for the purpose of tradies being able to pickup the keys from the agent easily). My PM inspected the property for me a few times, gave advice on what needed to be upgraded and what the rent after the renos would be. I never physically inspected the property. About a Week Before settlement, I was sent the Management fees. These fees seemed ridiculous ! I asked if it could possibly be done any cheaper, the PM didnt budge one bit . I knew i was up for the standard 8.8% pretty much all across this particular state, however Quarterly Inspection fees? 2 weeks rent up front? i couldn't justify it. I was in a tricky situation as i was hesitant to use this agent, but they had already put in the ground work for me and i felt it wouldn't be right to use someone else. I am currently using this PM but these fees are eating strait into my cash flow. I learnt after this experience to always ask an agents fees up front. And also, to do a little bit of shopping round. - Oh and dont settle on a property in December if you plan on getting tradesman in to reno it. worst time of the year. wasnt rented until the end of Feb!

 

[TMNT]

What get's me is my agency stopped sending me paper statements and just emails them to me. They then increased their "postage & petties" from $6.00 to $7.00 a month, when I queried this the answer was because of all the other post they send out.

Statement fees I dont mind,

I hate agencies that refuse to put multiple properties on the same account and charge $5 per property even though the statement comes in one envelope.

and dont get me started on an email I got about a year ago along the lines of "we have introduced a new software system that will allow breakdowns at the end of financial year statements of maintennace, etc. etc. a fee of $37 will be introduced on top of your EOFY statement fee"

so I responded saying " I do not wish to receive this service"

to which they said "the reports are generated for every property"

no use banging your head against a brick wall

 

[Scott No Mates]

Each agency will base its fees and comms on their business model. You have to ask yourself if paying 5.5% is giving you a better pm than the agency that charges 8.8%

How many other charges are you paying eg. postage, annual statement, lease prep, inspection fees etc?

What continuity of pm are you getting? How long does it take to get issues resolved? Do you hear from your pm when there isn't a problem (business development management)?

How many properties does the cheapy pm look after compared to the more expensive option?

How hard do you have to drive the pm?

 

[TMNT]

Each agency will base its fees and comms on their business model. You have to ask yourself if paying 5.5% is giving you a better pm than the agency that charges 8.8%

How many other charges are you paying eg. postage, annual statement, lease prep, inspection fees etc?

What continuity of pm are you getting? How long does it take to get issues resolved? Do you hear from your pm when there isn't a problem (business development management)?

in my experience, price has got absolutely nothing to do with service, i have the odd not so good PM, but there is no correlation in price vs service,

my annual statements, lease prep fees etc. are all very similar,
if the extra fees were less, then when I questioned them, they would have said, our fees are higher because we dont charge you for X and Y,

in fact, when their management fees are higher, so are generally their other fees, so they never can and do use the excuse of we dont charge you for X and Y

 

[sharpcq]

I'm a firm believer that you get what you pay for...

From my experience the agents that are charging the ludicrous management fee of 5% then you can expect mediocre service, high staff turnover, an inexperienced Property Manager & poor communication.

I think the fees that should be complained about are Inspection Fees, EOFY summary fees, Lease Renewal Fees.

Management & Letting fees are totally reasonable (And let's not forget it's tax deductible)

 

[redwing]

I'm a firm believer that you get what you pay for...

And sometimes you don't get what you pay for

From my experience the agents that are charging the ludicrous management fee of 5% then you can expect mediocre service, high staff turnover, an inexperienced Property Manager & poor communication.

I thought that was par for the course with many PM's, none of my long term properties have the same PM managing them as when I started with the agency, no matter what fee or state they are in

I think the fees that should be complained about are Inspection Fees, EOFY summary fees, Lease Renewal Fees.

Have a look at some of the threads on costs and fee's in WA

Management & Letting fees are totally reasonable (And let's not forget it's tax deductible)

I've found one PM keeps on chasing 6 month leases, call me cynical but to me it appears to be for the 'letting fee'

Funnily enough, the company that charges us the least across the portfolio seems to be 'on the ball' with any tenancy issues

 

[Domus]

One of my favourite topics, fees.

TMNT ? How can I justify higher fees.
1. I simply deliver a better service. A better all round service, from dealing with tradesmen, tenants, communicating with property owners to ensuring that paperwork is completed.
In our office, everyone (owners, tenants, tradesman, strata etc) knows what is happening at each stage of the process, whether it is leasing, repairs, quotes, rent increases.
We are an extremely procedure driven office, there is not much which slips through the cracks. Yes, sometimes mistakes happen, that?s human, how you deal with it is what is important.
2. Peace of mind.
3. I add value to your investment. This can be done through various ways, reduced vacancy periods (timing the market, better advertising, getting the price right etc.)
Sharing knowledge, do you know how many of my property investors do not have depreciation schedules or were not aware of them prior to our office taking over their management.
Has your managing agent every done a cost benefit analysis on a cosmetic renovation for you?
Proper repairs and quotes which suit your property e.g. does it need an emergency call out. Do you need a 5 or 10 year warranty on a HWS?. Do you know about the sacrificial anode which can help extend the life of HWS tank.
4. Common sense.

Ned Kelly, Badger, TMNT ? Additional fees for EOFY ? No I do not charge these. When I started in the industry and we had to check these and compile manually there was a charge.
If I have to send you a statement and cheque, then there is a charge. Otherwise email and EFT no charge.

As mentioned high fees does not automatically equate to better service.
In a low fee environment, it will be harder to retain quality staff and thus you may have a higher turnover, which could lead to problems.

I think most people obtain adequate PM services, very few investors receive great PM services.

The contributors to this forum are fairly well educated in property matters and may not need the additional premium services. However there is a large segment of property investors who need their hand held and eyes opened. To these people and people who are time poor, premium service is important.

 

[russellpeter]

Stop looking at what % management fees you are paying and start looking at how much per year they are collecting as a dollar amount.

what bugs me is that if you own 2 properties that are managed by the same property manager but have different rents. You are paying a different amount per property for the same service.


I have attached a calculator to show you the dollar amount from a % fee

this should be your point when negotiating fees with an agency.

 

[TMNT]

For the record, none of my properties are 5.5%, one of my friends just called up and got told that

The cheapest I have is 6.6% because I have 5 of them,
One agency I negotiated Down from 9.9% to 8.8% because I have three of them

 

[TMNT]

Stop looking at what % management fees you are paying and start looking at how much per year they are collecting as a dollar amount.

what bugs me is that if you own 2 properties that are managed by the same property manager but have different rents. You are paying a different amount per property for the same service.


I have attached a calculator to show you the dollar amount from a % fee

this should be your point when negotiating fees with an agency.

I'm not too sure what your point is, 99.9% of agents work on percentage management fees, so if your rent is higher, their commission is higher too

I don't think mote expensive properties take more work or less work as a whole so I'm not too sure why % are even applicable

So are you saying that if I had two properties at the same agency, one for 250 per week, the other at 2000 per week, I should have e different expectations because I pay more for the latter?? I consider the amount of work for both is the same unless the 2000 per week is some special lease or clientele,
So why shoukd I expect different

 

[CHAOS]

Ours are 7.7. Some are now charging 8.8 and offered us 7.7 if we swapped the others over. Some are now charging 2 weeks lease fee - I have only ever paid 1. One ip we have been approached by another agency with a 5.5 but current property manager has been very good and so our business will stay. Negotiated today on a new ip - basically I wanted 1 weeks lease fee and reduction in marketing costs which was agreed. The bonus was they even said we will do 5.5. Only time will tell if they do a good job.

 

[Mr. Fabulous]

I'm a firm believer that you get what you pay for...

Hi sharpcq, I too work in the service industry and find that you can split people into roughly two groups. Those that accept the fees you charge and those that whinge and moan. It's almost exclusively the ones that whinge and moan that expect the best service for the lowest amount of fees and holler and howl when they don't get what they think they deserve. Take a look at this thread - someone ringing up the agency and querying a $1 a month increase in postage fees, you've got to be kidding.

Personally, I find that these types of people are reasonably easy to spot and refuse to take them on as clients. They are, quite simply, not worth the stress and hassle of dealing with their entitlement princess mentalities.

 

[CHAOS]

Mr fabulous - those types you refer with the entitlement mentality are no different from the service provider. Both are in business and looking after their bottom line. One difference though is the landlord can't just jack up the rent to cover their costs or increase personal revenue like the agency can.

 

[RetireRich101]

I have a 5.5%, 6.6% and 7.7%, in different states, all with standard 1 week lease fee, and no inspection fees..
They all appear have similar services, but if I have to pick one, I would say 5.5% offered slightly better service.

 

[Mr. Fabulous]

Mr fabulous - those types you refer with the entitlement mentality are no different from the service provider. Both are in business and looking after their bottom line. One difference though is the landlord can't just jack up the rent to cover their costs or increase personal revenue like the agency can.

CHAOS, my post comes from years of experience dealing with people like this. As the old saying goes 'My job would be great if it wasn't for the clients'. Luckily these days, I can pick and choose who I want to wrok with. If they aren't happy with the service they are getting, they have two options:

- find someone else to manage the property
- manage it themselves

 

[Mr. Fabulous]

CHAOS, I'll relay my relationship with my Property Manager. The initial period (first six months or so) was pretty bumpy. I wasn't entirely happy with the service provided. But I thought 'Ah, let's see if things get better' and they did. If they didn't I would have found someone else to manage my property.

Now, I know how much they charge me to manage the property, because they send me a statement every week. Is the charge lower than average/about average/higher than average? I have absolutely no idea and frankly I don't care.

What matters to me is that they provide a good service. I never hear from them, aside from a handful of emails a year. Which to me means that they are doing their job behind the scenes to ensure that I receive minimal disruptions. I think I've initiated contact with them maybe two or three times in the nearly two years they've managed my place.

If they put their fees up, it wouldn't bother me, because they are in business, not running a charity. You say that investors are running a business too, but that's not actually true. They are investors, not business owners. If most property investors ran their portfolios like a business, most of them would be out of business right quick.

Squabbling over a couple of bucks isn't productive for anyone involved.

 

[russellpeter]

So are you saying that if I had two properties at the same agency, one for 250 per week, the other at 2000 per week, I should have e different expectations because I pay more for the latter?? I consider the amount of work for both is the same unless the 2000 per week is some special lease or clientele,
So why shoukd I expect different

You should expect the same service. but why then is it OK to expects different fees.

yes the work is the same and you should get the same service for both properties. but with a % fee the difference you pay in management fees on the numbers above is $7280 per year on the higher rental.

why if the work and service is roughly the same?

 

[TMNT]

You should expect the same service. but why then is it OK to expects different fees.

yes the work is the same and you should get the same service for both properties. but with a % fee the difference you pay in management fees on the numbers above is $7280 per year on the higher rental.

why if the work and service is roughly the same?

So you are saying anything % based is no good?

Should agents charge a flat fee for property sales?

I kinda agree with you,on that one but wouldn't expect a better service for a 250 vs 2000 one