Property Management Fees-Unreasonable???

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From: Glenn M


Do you think it is justified in Real Estate Property Managers charging say 7% of the RENT earned?

Let me explain....say I have a couple of properties, one rented at $693 per month ($160 per year) and another at $1,733 per month ($400 per year).

Thus the Management fees would be per annum:

Property 1 $8,320 X 7% = $582.4
Property 2 $20,800 X 7% = $1,456

Now, from previous experience, the Real Estate Agency does not spend any additional time on one of the properties compared to the other and the service is exactly the same.


So the question, should Real Estate Property Management Agents be charging a sliding fee scale...or a flat fee per mth per property regardless of rent being earned?

GlennM.
 
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Reply: 1
From: Anonymous


Speaking as a pom who lived in London for most of his life, where fees are more like 15%, obviously I think that 7% fees here are not unreasonable at all, but more to the point:
1) I would guess that a house would need more property management time than a unit of the same rent, so should they charge higher fees for a house?
2) while the agents have a fiduciary duty to get the max rent for the owner, doesn't the %age system add just that little bit more incentive?
3) if an owner had, maybe, ten or so properties, I am sure s/he could do a deal with the agent for a more acceptable fee charging system.
4) how much is it worth to you in $$ not to have to do all the stuff that your property manager does for your properties and who is theoretically available 7 days a week? What happens if you suddenly have to go overseas for a couple of weeks or get run over by the proverbial bus?
Just a thought.
(No, I am not a Prop Mgr!)
 
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Reply: 2
From: Steven Parker


You've raised a valid point, Glenn. I agree with you that a flat fee would be somewhat better, depending on what type of property it is as well. New places, for example, require very little upkeep and maintenance so you would think that PM's would be charging a lower rate for these. Older houses that need the electrician or roof cleaner or handyman out every couple of months seem to be more trouble for managers, as they have to do the run around to keep them in shape.

Perhaps voice your concerns to the PM and negotiate a lower fee. Let us know how you go- love to hear!
Cheers, Jacque :)
 
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Reply: 2.1
From: H T


if you have more than a couple, then you should be able to negotiate 5%

HT
 
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Reply: 2.1.1
From: GoAnna !


Hi Glenn

Wouldn't a flat fee remove the slight incentive that exists with a % fee for the property managers to set the rent as high as possible?

You will find that rates do alter depending upon the numbers of properties you offer them, how easy they are to let and manage as well as the level of service offered.

Negotiate negotiate negotiate :eek:)

GoAnna !
"Obstacles are those frightful things you see when you take your eyes off your goal."
-Henry Ford
 
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Reply: 3
From: Property Investor


Glenn,

7% (excluding GST) is not unreasonable.
However if you do have two or more properties you should be able to negotiate a better deal.
For example most of my Property Managers if you have 1 property with them will charge you around the 7%, if you give them another property it will be at 6%, in addition to that property number one will also be now reduced to 6%, if you give them a third property it will be at 5%, in addition property number 1 and 2 now become at 5% as well.
Now if you give them a fourth property
(keep dreaming) there will be no more negotiating.

I hope this makes sense, and by the way this is in Melbourne anyway.

Regards,
Mannie.
 
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Reply: 2.1.1.1
From: Lotana Von Amor


Is it just my luck or market conditions differ geographically a lot, but in the area where my IPs are (Randwick, Maroubra in Sydney) PMs charge 4.5% which you can usually negotiate down to 4% even for 1 property. They do add about $5/month for sundries though.

Regards,

Lotana
 
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Reply: 3.1
From: Glenn M


Sorry guys...I didn't mean to confuse anyone, but the 7% was used only as an example. I currently have negotiated lower rates than this on the properties I do have.

The main point I was raising was that Property Managers are receiving a lot more money from managing some properties than others due to the fee being based on the rent without necessarily anymore "service" or time spent on these higher rented properties.

GoAnna had an interesting point where the fee % is more as a reward for Property Managers gaining a higher rental in the outset, rather than actually "managing" those properties............

But shouldn't market forces in the first place dictate (within reason) the rentals of those properties anyway? Shouldn't the task of gaining the highest rental be part of the contract with the Property Manager (and hence a flat based fee)? If the Property Manager isn't performing their duties, get rid of them (healthy competition).


Just my thoughts.......



GlennM.
 
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Reply: 3.1.1
From: Ayesha Todd


We have recently just started letting a place in WA through a property manager. When shopping around we found out the rates over there are quite a lot more than Sydney or Melbourne. Also while most places charged 8% plus then a letting fee, inspection fees, sundries etc on top of the 8%, we found a few that charged 15 / 16%, seems extremely high doesn't it?, but when we did the sums, unless we had the same tenants for more than 2 years (which being a unit we thought unlikely) the 15.4% management fees that includes everything (no extra's on top) actually worked out cheaper than the 8% + other things. It is still a lot to pay but since we are in Newcastle, we thought 4500Km is a bit to far to travel every time there is a problem, and it gives us restful nights at this point of the game. When we are able to buy more property over there we will be in a better position to negotiate the % rate lower.
The point is, just because on the outside one % is lower than the other, when the sums are done, sometimes they are not the cheapest in the long run.
 
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Reply: 4
From: Bruce Graham


G'Day,
I don't have a problem with property management fees, but strata management fees.
Every year up goes their charges.On the Northern Beaches of Sydney there are only
three agencies. All three are absolutely
useless.
I tried to take over their duties, but no one else supported me.Although everyone bitched about the increases.
I still think buying units is straight out
stupidity.From this time on it's only going
to be houses.
Bruce G.(Sydney)
 
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