I believe I may have shared this in a previous post. Some years ago, a Sydney investor asked about our fees. When I mentioned 8%, she was horrified, telling me that she paid only 5% in Sydney. I asked what was the rent amount collected in Sydney, she advised $600 per week. The rent I was to collect here was $150 per week. I asked her to do the math, and then tell me who was the expensive agent.
In relation to fees across the country, there is no doubt that agency costs vary quite a bit. Office rents for one, wages another etc. I know that we are now paying approx. 1.5 times per month what we used to pay per year for software. Yes it does so much more, and also the legislation and issues that are now being managed have increased. Safety Switches, Smoke Alarms, Water Usage, Tradie Insurances etc.
On the matter of fixed fee, I know this debate has come and gone over the years. I cannot help but think, the one that the majority think is better, will probably be the one that prevails. The example of a $250 rental compared with a $2,000 rental. So the statement that its the same amount of work. Ok, let me ask the question, are they the same size, ie the number of rooms etc. I would guess not. So if one is larger than the other, then yes the time taken to do inspections etc will be longer, and the documentation/photographs etc levels will vary accordingly.
To take Russells example, The $250 per week, or $13,000 per annum, the management fee is 9.6%, on the $2000 per week, its 1.2%. I would imagine, the owner of the $250 rental may be needing more of the available funds, than the $2000 per week. Now I also imagine, the higher rentals are more likely to be offered a reduction in management fee, so using 8% is probably not accurate.
The next question, is the incentive to increase the rent, on fixed fees is not there. I believe that the same applies to fixed fee in selling commissions. Again, if it were the "best" way, why are more not doing it?
At the end of the day, people who are in business, nowadays, generally have quite a big investment in it, and also commit long hours, so is it wrong that they get a decent return for their efforts. I do agree that price and service are not always connected, however I have seen a lot of people start cheap, offer great service, and then in time realise that what is left does not represent what it should, and then give it up.
I do however encourage every one to talk to their PM's and let them know if you believe there is room for improvement. Some times customers have expectations, they we don't know about. Once we know, we can clearly say, sorry that is not some thing we can do, or hey, yes we can, thank you for letting me know.
