Letting Fees (again)

[Luc]

Hi

I have been self managing one of my IP's but due to travelling for 6 months I am passing to a PM.

The letting fee seems quite steep - 8.5% on the term of the lease (up to 12 months). The property will be let at $150 per week and this adds up to $705 per annum (with the tenant contributing $150 only if a 12 month tenancy) - this still leaves $555 and does not include advertising.

Other fees are all plus GST:

8.5 % management
property condition report $80
Bond inspection $50
quarterly inspections @$40 each
Petties $5 per month

How does this compare to others? It is the letting fee that bothers me!

Thanks

Luc

 

[Kathryn]

Hi Luc,

Sounds about right. You may be able to negotiate a bit, maybe .5% or so. If you have more than one property they'll
usually come down a little. Not only do you pay the 8.5%, but you then have to pay 10% GST on the agent fees as well.

We also pay for half lease fees ($15) a month. Postage, stationery is $6 for some, a bit less for others. Some charge us advertising fees, some don't. It all depends on the property manager so best to shop around. Our QLD properties seem to cost us less than our NSW ones, but we don't have any in WA.

Although we pay a lot of pm fees, I don't think I'd like to do it myself. We collected rent from one set of tenants for about 12 months to avoid fees and I had to constantly ring them to remind them the rent was overdue. They had the money, just slipped their mind (all the time). Besides, it's tax deductible and we don't have to play the baddie when there's a problem.

Cheers,
Kathryn

 

[Kevin Hockey]

Hi Luc, Kathryn said her fees on her Qld properties are generally lower and this is because Qld is the only state in Aus with a regulated fee structure still set. Kathryn is also correct that you should shop around on commission rates by agencies, but I strongly advise the cheapest is often not the best. To go the cheapest route could easily turn out as false economy.

Consider this when selecting a property manager
How much experience does the person have
Are they an active agency in the area
Do they have a set procedure for potential problems
Do they keep a list of potential tenants
Ask them why they are worth their fee

Be careful of the termination time agreed. Make sure you can get out of your agreement within a reasonable time frame (max. 1 month) if you find they don't stack up.

www.nundahrealestate.com.au

 

[Joe D]

Luc

For my IPs in WA, the equivalent of one weeks rent seems pretty standard for the owner. If you can ensure the lease term is for 12mths you are obviously better off (ie. only one letting fee as opposed to 6mth lease). Where a property has been vacant for a while and a PM has found a tenant but they are only prepared to pay a reduced rental amount (unfortuneately common in current rental market) I have had my PM also agree to halve their letting fee to help cover part of my costs. Whilst this is simply a trade-off at least it keeps PM honest, gets the property tenanted and ensures they get their 8.25% management fee.

Rgds
Joe D

 

[Glenn]

Hi Luc,

If you are travelling for extended periods, you could reduce you costs by:

1. Having the agent obtain a screened tenant then prepare a lease, property condition report and direct debit authority from the tenant's bank account to yours.

2. Obtain your own tenant and have the agent manage the property for you.

Glenn

ps. I can supply you with the name of a professional agency if you wish, email me @ [email protected] for details

 

[B Rich]

Hello Luc

I am in WA myself and currently only have 1 IP, I was quoted simalar pricing as you have listed. After talking to many PM's and negotiating i got the letting fee down to 1 week rent for 6 month & 2 weeks rent for a 12 month tenancy, with the tenant putting in a week. The management fees i am currently paying is 8%.

Regards

Brian

 

[mitch]

G,day Luc,
there are fees there Ive never heard of.I live in central Victoria and I pay a letting fee of one weeks rent,no matter long or short the lease.My management fee is 7% and this covers my condition reports at the start and end of the lease,an inspection every six months and If I have a "Bond Inspection" then it covers that too.My agent may charge me if there was a legal VCAT type of problem but to date there have been no problems, she does a wonderful job and l take the time to regularly tell her so.
l also use an Agent in Melb and the same fees apply,so comparing our fees it would seem you have a lot of them.l also pay a couple of dollars a month as a" statment/put the money in the bank fee".


Mitch

 

[Jamie]

Hi Luc,

I must admit that while the management fee looks somewhere in the ballpark, the cost for the incidentals etc is very high. Have you tried to negotiate any of the costs? You didnt mention if this was the only PM youve spoken to - if it is, then you might want to shop around and compare yourself. If not, you may have others you can compare them to.

I have to agree with Mad Cow re: the notion that the cheapest may not be the best. A PM that is only charging 7% may seem a fair bit lower but in actual fact you will only be paying $2.75 a week less than the 8.5% youve been quoted (on a weekly rental of $150). This is a small amount of money to worry over when its the management of such a valuable asset. Remember too that all of the outgoings are tax deductible.

One way to ensure peace of mind is to ask the PM if they have current/previous owners who would be happy to vouch for their services. I did this once and spoke to 3 owners who gave glowing reports of the PM. The price was a bit higher, but the service and professionalism were commensurately better.

Remember, EVERYTHING IS NEGOTIABLE!

Jamie

 

[manny]

Hi Luc,

I'm not sure about the going rates up in WA, but in Vic I'm paying 5% plus 1 week letting fee (if looking for new tenant). These management fees cover all advertising (internet & local paper), property condition report 6monthly, bond handling & even representing me at any tribunals (only needed to do this once)... Note: this PM is managing 3 IPs for me & was able to negotiate this... as indicated in other posts, everything is negotiable (but you will have more push once you have over 1 IP with them)...

Cheers,

MannyB.

 

[Kevin Hockey]

Hi manny,

I would be keeping a very close eye on your PM. I can tell you there is no money in it for the agency at those rates and they would be looking at cost cutting in areas to justify those figures. You may have chosen an extremely well organised agency who can afford it, but in my experience, they are few and far between.

I hope it does work for you, it certainly could increase your return if it does.

www.nundahrealestate.com.au

 

[manny]

Hi Kevin,

well we have been with them for around 3 years & have been kind of happy with them (although at times they can frustrate me with silly mistakes they may make, nothing a couple of phone calls can't fix)... well out of the 3 IPs they manage for us they still get a little over $1,500 per annum in percentage fees & a potential of up to $610 in letting fees if vacant & needing to re-let... (I should add GST to this, so agent can potentially get around the $2k mark off me & I would need to pay the extra $200 on GST) which isn't a bad return for them, especially since we are potentially aiming at getting more IPs in that area...

Cheers,

MannyB.

 

[geoffw]

I have 5% PM fees on one property- but it is a block of 9 (quantity discount), and I bought the property from them (and so offered a discount).

Management has been fine in the four months I've had the block.