Propert Management Fees ?

[LearningMan]

Hi all, I am currently paying 9.6% in property management fees for an IP in Carseldine area in Brisbane.

Service is OK and I can't complain. Compared to 5.5% in Sydney this however seems high.

I would be interested to know what others are paying.

 

[urban cowboy]

That is high mate...

most nth bris agents charge around 7.5% to 8% +GST

there are some that charge as low as 4.5%

watch for the overheads too - the only other charge should be first weeks rent fee for new managements - no postage/petties/because we can type charges.

 

[Beef_Hooked]

You guys have it so easy compared to here in the wild west.

I have just extracted myself from a PM that charges, well charges upon charges in addition to the 9.6% + GST. I have detailed the costs in a previous post and just glad I have managed to wriggle out of the contract for what seems like a small price, compared to the 50% of all management fees for the remainder of the contract that is a standard charge for terminating the agreement.

Incidentally, it wasn't a case of you get what you pay for either, the same agent had the property for 12 weeks with no tenant.

I am now changing PM to an agency that charges a basic 16.5% all inclusive except for advertising, and I'm actually feeling good about it. It's a fairly low rent property (approx $230 per week) and when I worked out the previous agent's fees it came out around 26%

And before someone tells me I should have shopped around, believe me I did, they all seem to be colluding on charges and there is very little if any competition.

What astounds me is the WA state govt previously made the charging of 1 weeks letting fee illegal in order to reduce the burden on the tenants when all the media was spouting about the "rental squeeze". So what did the agents do? Double the charge to 2 weeks and stick it to the owner. These excessive charges are only passed onto the tenant anyway, so where was the gain? A brief populist poll push for the state govt and an extra weeks rent straight into the pockets of the agents, I can't see any benefit for renters.

If the state govt. are serious about slowing rents and helping the unfortunate tenants, the agents seem to be the best place to start. Any suggestions on what can be done to drag WA agents into line with the rest of the country? I'm agitating all I can for starters.

Cheers,
Beef.

 

[imonmyway]

geez 16.5% thats freaking robbery

 

[Nards]

You'd just about be better off, in WA, having a DHA leased home, then at least there is no defaulting on rent and they pay for all the maintenence...for the same 16.5%..

 

[Chatto]

Southside of bris 7.5% with 1/2 wk rent for new lease.

R u getting great management? Never hurt to ask for a discount! agencies are scrabling over themselves to get new PM and lock in some income with sales down.

 

[urban cowboy]

Never hurt to ask for a discount! agencies are scrabling over themselves to get new PM and lock in some income with sales down.

that's not quite right - though i appreciate your point - the agencies that can afford to do the lower rates and discount etc. are the ones with big rent rolls. economy of scale is the name of the game in PM and scrambling for an extra one or two is not going to make any difference.

 

[Jason Rose]

that's not quite right - though i appreciate your point - the agencies that can afford to do the lower rates and discount etc. are the ones with big rent rolls. economy of scale is the name of the game in PM and scrambling for an extra one or two is not going to make any difference.

At the end of the day clients will seek out value for money. There are property investors out there that more or less just want an agent to collect & pay their rent. There are others that do not want anything to do with their investment property(that is what you pay an agent for) If you just want an agent to collect your rent then you may as well look after your property yourself(after all why pay an agent for this service).

If someone believes they are getting value for money, then they will be happy to pay for that service.

Our company is not the cheapest Property Management company in Brisbane, but we certainly not the dearest.

We have found that it is not the large companies that are discounting their fees but the smaller ones. Some of the smaller companies believe that the only way they can compete for business is to offer cheap fees. We all know that it is difficult to provide a superior level of service at a discount rate over a long period of time.

At the end of the day you have to compare apples with apples. We have discussed this in previous posts.

I disagree with your comment about the bigger companies worrying about the extra one or two. Every client makes a difference to our business. And a single client with a single property is probably going to have a more positive impact on our business than 1 client with 100 properties. Every time we have positive impact with our clients it comes back multiple times to us with referrals and recommendations. In the 1st 3 months of this financial year we have had over 150 new properties come on under management. To bring this number of properties on you have to be doing something right in the marketplace. We are grateful as a Property Management Specialist Company, that there are a lot of everyday real estate agents doing a very ordinary job in providing service to their clients.

Whilst I acknowledge we are not perfect, we are constantly striving to improve the level of service we provide our clients.

And to the original poster Learningman, whilst you say that you are not unhappy with your current agent, you must being questioning the quality of service that you are getting to ask the question about what other people are paying?

 

[urban cowboy]

I disagree with your comment about the bigger companies worrying about the extra one or two. Every client makes a difference to our business. And a single client with a single property is probably going to have a more positive impact on our business than 1 client with 100 properties.

fair call Jason - but i think you have missed my point...

What i am saying has nothing to do with levels of service, or as a business caring about it's clients... that is a seperate, though related and extremely important issue. Nor was i referring to any particular model of PM - large agency, small agency, independent, specialist PM etc. So i was not comparing apples or anything else...From that side of the conversation i whole heartedly agree - service is everything and every property has an owner and every owner is important and deserves the very best of service.

My point was just the numbers and nothing else - the two biggest discounters i know of on the nth side (the 4%'ers) both have very large rent rolls. An extra one or two isn't going to make a difference to their bottom line - small suburban agencies with 50-150 on their books cannot cope with that sort of discounting without needing sales to prop up the losses...even outside of offering less of a service as you suggest.

I was replying to Chatto's statement about agencies clambering over each other to pick an extra one or two properties to lock in income - even you would agree one or two ain't going to keep a business afloat. (besides offering great service and getting referrals yadda yadda yadda). just a pure numbers game without any other considerations.

Service level and costs certainly can be linked, but they are not joined at the hip - i know locally of agencies that charge high and have crap service as well as agencies that are very reasonable and have superb service levels. it's not purely "you get what you pay for" though that may be a safe place to start searching for a PM.

But again, nowhere in my comments did i refer to service quality or anything else from a good business practice model - only making a point about discounting in small agencies - there is a lot less margin to play with in a smaller rent roll, less properties to spread costs over - we cannot compete at 4% or anything anywhere near it with a smaller roll - even if it was pathetic service it is still not worth the business effort. Saying that, i would stand by the service provided by our PM's anyday at the rates they charge.

my previous agency (an independent in the inner north) used to try and discount to compete - and lost bigtime as they couldn't cover their costs.

 

[Chatto]

Good post Jason quite right.
Urban, I believe every property makes a difference, you dont get to 150 properties under management without adding 1 + 1. What I was refering to was that sales are down and agencies have to keep the income comming in, not wheather one or two properties make a difference. To me every property makes a difference and I like to think that my hard earned money is being managed effectively.
The only thing I like to see is a statement in the inbox once a month and money in the bank, and at 7.5% im happy with that.

 

[Jason Rose]

Chatto,

you are very right. In the traditional real estate agency sales are down, salespeople are leaving the industry in droves and real estate agency owners that have not given a rats about the property management side of the business are now trying to grow their PM departments to prop up their sales businesses. The only problem with this is that most RE agencies owners have a sales background and do not know where to start when they want to grow their PM department, so the first idea they have is offer discount fees to try and win over clients. They try and overload their property managers with extra tasks and try and put the responsibility back onto the property managers to go out and try and win new business. The problem with this approach is that the property managers are out trying to get new clients and they are not concentrating on doing the job they are employed to do. Making sure tenants are paying rent on time, tenants are maintain the properties and maintenance is being attended to.

In the last 7 years we have purchased 9 real estate agencies and the last one we purchased was 2 years ago. We have since realised that there are so many traditional real estate agencies out there doing an ordinary job that it is more cost effective to grow our business organically rather than through acquisition. 95% of our organic growth has come from traditional real estate agencies ie 150-300 properties under management, that promise the world but do not have the infrastructure or staff to back up their promises. I think this is evidenced by the fact that just about every second real estate agency is for sale or the owner is considering selling. It does not matter if you are a small property management company or a large one, a business based on offering discount fees or a company charging premium fees, at the end of the day the business has to be profitable to be able to stay in business and continue to offer a service to their clients.

I know a ramble on a fare bit, but I am passionate about my industry and our business, and it frustrates me the number of times that i speak to a property investor that is getting crap service. It makes us all look bad.

Enough ranting for now.