Letting fee?

I have a couple investment properties and i always have them managed by estate agents. But just recently I added another one to the list and I just realised some of the fees they charging me look odd. For example, the first couple I had through them had letting fee of $250+, but the latest one they charged me $500+!! I am not sure what this fee is about, do you guys get that sort of letting fee? I also get charged for $75 as advertising fee. I am curious, what is the letting fee about... Is it reasonable to pay that much?
 
I have a couple investment properties and i always have them managed by estate agents. But just recently I added another one to the list and I just realised some of the fees they charging me look odd. For example, the first couple I had through them had letting fee of $250+, but the latest one they charged me $500+!! I am not sure what this fee is about, do you guys get that sort of letting fee? I also get charged for $75 as advertising fee. I am curious, what is the letting fee about... Is it reasonable to pay that much?
Depending on what your weekly rental is for IP3 that may be right. If your rent is $250 p/w then you may have been charged 2 weeks rent (hence the $500) as the letting fee, where previously you may only have been charged for one! Most agents take between 1-2 weeks rental (plus their usual commission+GST and any advertising costs) although I must have won them over with one of my winning smiles :D as to date, I've never been charged any "advertising" fee to let a property.
 
Depending on what your weekly rental is for IP3 that may be right. If your rent is $250 p/w then you may have been charged 2 weeks rent (hence the $500) as the letting fee, where previously you may only have been charged for one! Most agents take between 1-2 weeks rental (plus their usual commission+GST and any advertising costs) although I must have won them over with one of my winning smiles :D as to date, I've never been charged any "advertising" fee to let a property.

Likewise, my advertising is always covered by the letting fee.
 
Double dipping?

You're right Monopoly, the usual letting fee is 1-2 weeks rent. It used to be always one week on the eastern seaboard and two in the west, but the east caught up and up went the fees. You can negotiate it back to one week in most instances.
Regarding the advertising costs, savvy agents have been charging for this since it was a charge per centimetre column item in the classifieds of the local paper. But you will always an agent that throws it in with the letting charge.
The double-dip comes up when you get charged the first two weeks rent as a letting fee and you also get charged your management fee on those two weeks rent; essentially you are paying the week(s) + the % fee on the week(s).
I've pointed it out to more than one agent and had the fee refunded.
It's worth asking the question...:)
 
I've pointed it out to more than one agent and had the fee refunded.
It's worth asking the question...:)

This is a sticking point with me. It's funny how many PM's don't have a clue about this. When interviewing new PM's with is one of my first questions. Usually the answer is "no we don't charge that, um but I will just check" goes away and asks several people "oh no one seems to know, so I will have to get back to you on that". I have also got "if the computer is programmed that way, then it must be right. :eek:

Another PM said as it was usually just a few dollars they didn't bother, but mine was $30 so it was refunded. Much different when rents were under $200 pw. Now with majority around $300 - $500 pw it makes a difference ($26 - $44).

People say not to worry about the small things, pfft to that I reckon. When PM's are getting slacker and slacker, especially the new young upstarts, but don't start me on that, why pay em more for a job not done properly.

A bit of a rant, sorry I have been "set off" by a PM today. I am sooo annoyed with myself for being with them for so long. I thought I had learnt this lesson - slapping myself hard.

Sunshine
 
The double-dip comes up when you get charged the first two weeks rent as a letting fee and you also get charged your management fee on those two weeks rent; essentially you are paying the week(s) + the % fee on the week(s).
I've pointed it out to more than one agent and had the fee refunded.
It's worth asking the question...:)

PropertyMan66 I don't get your logic, I can't see that it's double dipping, if the tenant is in the property and paying rent for the first two weeks then how can you expect to pay no management fees for those two weeks.

As far as advertising goes realestate.com.au is THE web site to be on; domain, homehound and the others account for only a small percentage of enquireys. The beancounters at realestate.com.au know this and put their fees up twice a year, they know that they've got agents by the short and curly's, it's inevitable that the costs get passed
 
The double-dip comes up when you get charged the first two weeks rent as a letting fee and you also get charged your management fee on those two weeks rent; essentially you are paying the week(s) + the % fee on the week(s).

PropertyMan66 I don't get your logic, I can't see that it's double dipping, if the tenant is in the property and paying rent for the first two weeks then how can you expect to pay no management fees for those two weeks.
I'm with family guy; the % fee is for managing your property - collecting rent, issuing any notices required, arranging repairs, handling tenant queries - all the zillion things that PMs do. They still have to do all this in the first two weeks; the fact they've collected a letting fee is for a separate service.

You'd have a stronger argument if you just said that you thought that a two week letting fee was a bit rich (which I certainly think it is!), but I don't see how you can argue that you should get two weeks' of free property management services.
 
This is our first IP so still learning the ropes.

The original tenants just extended the lease by another 6 months. How much should a PM charge as a re letting fee be? Is there a standard formula?

Thanks
 
Our PM charged a re letting fee of $192.50 when the rent went from $350 to $360 on a 6 month lease
At first I was thinking "bargain - less than a week's rent".
Sack your PM!!!
But based on Monopoly's response, I re-read it.

Are you saying that you'd paid the letting fee (one or two weeks or whatever), then you paid an EXTRA $192.50 simply because the rent went up $10 per week? If so, they've taken $192.50 out of the $260 extra rent!!!! That's 74% commission - I'd like to get a slice of that!

OK, thinking some more... $192.50 happens to be $175 + 10% GST. Are you simply saying that they've charged you a half-week's letting fee (based on the old rent) for getting the existing tenant to re-sign? If so, that doesn't sound so unreasonable at all, given that it should have been $180 + 10% = $198, if the agreement allows for 1/2 week's re-letting fee.

Can you clarify for us?
 
The original tenants just extended the lease by another 6 months. How much should a PM charge as a re letting fee be? Is there a standard formula?
Ah, as I suspected, they've charged half a week's rent as a re-letting fee.

I only pay a flat $50 for re-letting, but half-a-week's rent is within the range of normal, too, I believe (and my rents are per-room, so $50 is still >25% of a week's rent).

If you weren't happy with that level of re-letting fee, then you should have read your property management agreement more carefully and negotiated it before signing.

You can always ask now if they're willing to negotiate it down, and they may out of goodwill, depending on how much they value your business. If your property has been easy for them to manage, and you've been an easy owner to deal with, they may be happy to negotiate it down.

On the other hand, if you have questioned every charge, been reluctant to authorise repairs, and your tenants have been challenging and caused them a lot of work, they may be quite happy to stick to the current fee and hope you'll go elsewhere. ;)
 
This is our first IP so still learning the ropes.

The original tenants just extended the lease by another 6 months. How much should a PM charge as a re letting fee be? Is there a standard formula?

Thanks
Repeat....

SACK YOUR PM!!!

I know some PMs do it, but depending on the kind of landlord you are, how many IPs you bring to their business, etc.

You should not be charge ANY fee for extending a lease, because at the end of the day, the PM will benefit enough with increased commission every week, and (wait for it....) they HAVEN'T DONE ANY WORK that warrants them earning that fee. That is, they haven't had to advertise the property, or screen potential tenants etc!!!!
 
At first I was thinking "bargain - less than a week's rent".

But based on Monopoly's response, I re-read it.

Are you saying that you'd paid the letting fee (one or two weeks or whatever), then you paid an EXTRA $192.50 simply because the rent went up $10 per week? If so, they've taken $192.50 out of the $260 extra rent!!!! That's 74% commission - I'd like to get a slice of that!

OK, thinking some more... $192.50 happens to be $175 + 10% GST. Are you simply saying that they've charged you a half-week's letting fee (based on the old rent) for getting the existing tenant to re-sign? If so, that doesn't sound so unreasonable at all, given that it should have been $180 + 10% = $198, if the agreement allows for 1/2 week's re-letting fee.

Can you clarify for us?

Hi Monopoly & Ozperp

The second option is correct, sorry about the confusion. Thanks for the explanation and advice, much appreciated

TGIF
 
I pay 1 week letting fee to all my PMs. The percentage I pay for management is variable, depending on the PM, ranging from 5.5% to 7.7%. This includes everything. I don't pay extra for inspections. I don't pay an advertisement fee. I don't pay a re-letting fee for existing tenants (this is a big rip-off, they did no work to retain them, just got them to sign a form). I've never even been charged any extra fees for tribunal hearings, although on the management agreement it does have an allowance for it.

The more IPs you have with the one PM, the more room you have (usually) to negotiate. I most certainly would NOT put up with $500 for a letting fee, unless it was an exceptional IP commanding an exceptional rent.
 
What do you think is a reasonable re-letting fee, Monopoly? Or do you expect them to prepare a new lease for nothing? :confused:
Absolutely correct!
Amend the original document....Change the 6 to a 12 have all parties sign it, and give your PM a handshake and say thanks.
If not, take your business elsewhere and happily pay the 1-2 weeks (total) reletting fee!
If my PM charged me so much as 1c (given the number of IPs I bring to his table) trust me, I'd walk without so much as a gesture of goodbye.

If you only have the one IP then NEGOTIATE and appeal to their sense of goodwill.
 
I pay 1 week letting fee to all my PMs. The percentage I pay for management is variable, depending on the PM, ranging from 5.5% to 7.7%. This includes everything. I don't pay extra for inspections. I don't pay an advertisement fee. I don't pay a re-letting fee for existing tenants (this is a big rip-off, they did no work to retain them, just got them to sign a form). I've never even been charged any extra fees for tribunal hearings, although on the management agreement it does have an allowance for it.

The more IPs you have with the one PM, the more room you have (usually) to negotiate. I most certainly would NOT put up with $500 for a letting fee, unless it was an exceptional IP commanding an exceptional rent.
Ditto!

SACK YOUR PM.
 
I tend to agree with Ozperp on this one.

The value in having a new lease signed is surely worth something to us as investors. So if the PM is providing value for you, then surely they are entitled to put a price on that value is warranted.

Particularly if you've signed a contract with them that authorises such fees in the first place.
 
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