Property Management Fees

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From: Paul Clarke


This is my first post, have only recently stumbled upon this great forum... hoping some experienced campaigners can offer some suggestions about what the "going rate" (acceptable) is for 'Property Management Fees.
The reason I ask is that my brother has recently bought an Investment property in Brisbane. He has a 'Property Management Agreement' with Ray White (which he has not signed yet. They are quoting a Management fee of 8.5%!! (Made up of Letting Fee - Equiv to 1 weeks Rent, "5% Rent Collection" and 3.5% Management Fee). I figure they have 'cleverly' split the fee like this as it sounds better than saying 8.5%!
Now I reckon this is just a bit high. I do not have an IP yet (working up to it), but I rent in Melbourne and I rang the agent I pay rent (big Firm)to and they charge 7% (and they do all Ray White are offering) which sounds more realistic.
Therefore, I am wondering if I should suggest my brother 'negotiate' this fee, and the best way to do this (e.g. should he ring a few agents in Brisbane to see what the 'going rate' is? etc) and then get back to Ray White and use this to help negotiate a better deal? Suggestions/Comments Appreciated.
Lastly, on the Agreement it has a section for "Special Instructions To Agent" and "Special Conditions For Tenancy" which are blank. Are there any suggestions as to what might be worthwhile Inclusions (if any) in these sections of the Agreement? Again Comments/Suggestions appreciated...

Regards

Paul
(A Converted Property Investor - well soon to be)
 
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Reply: 1
From: Asy .


Paul,

The 7% you have been quoted is pretty much the 'Melbourne Standard' rate. But, you can probably do better.

A couple of tips:
Check out several of the agents in the area you have your IP, ask them for information, and also to actually speak to the property manager, ie: the person who will be handling the property day-to-day. Tell them you are comparing several agents, and ask for their card (to call them back later). Also ask them what the best rate they are able to offer is, also hint (not too subtlely!) that there will be more properties in your portfolio soon!

Decide which agent you want to use, and call them to let them know that, whilst you felt at ease with them and they obviously knew what they were doing, your hands are tied, and your 'partner' insists that the bottom line wins, and since the agency down the road (insert name here) offered you a 5% fee, with no statement fees, you would have to deal with them. Hey, hang on, I wonder, is thare ANY way you could match their fee structure? (If they want a letter from another agency let me know, I can probably do one for you). That way you would be happy with the management, and your 'partner' (or accountant, or whatever 'bad cop' you want to use)will be happy with the fees.

Make sure you let them know what a nice, approachable owner you are, and how committed you are to the maintenance of the property. (there is nothing more frustrating to a PM than an owner who won't do maintenance).

Anyway, I hope this helps, it's just my opinion, I'm sure you will get others from the 'seasoned crew'!

Happy hunting!

Asyral.
 
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Reply: 2
From: Paul Barnett


Paul,
As a Property Manager in Qld (Gold Coast), I can tell you that the "going rate" is 7.5% i.e. 5% rent collection and 2.5% management fee. Yes, this is negotiable, however, you would need to check with any company offering a lower rate as to what services they offer. My boss is under the impression that "you get what you pay for" and that any company willing to offer a lower rate must cut corners in order to offer you a lower rate.
You should check with different companies for such things as advertising (who pays?), Letting fees, renegotiation of renewal (is there an additional fee just for asking the tenant if they wish to renew?), etc.
I often speak to people who say "it's cheaper in Victoria", or "it's different in NSW", so obviously each state varies.
It is interesting to know, however, that a new Auctioneers and Agents Act commenced today in Qld which states that commission on sales and property management fees "can be negotiated downwards".
In conclusion, I would suggest that the first thing you (or your brother) do is contact a few agents in the area and ask about their rates and services. You will then have a better understanding of the "going rate" in that area.
Good Luck,
Caz
 
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Reply: 2.1
From: Rixter ®


Also watch out for the Period of Agency clause in the contract. I've noticed alot of PM agents are looking to sign you up in an exclusive management agreement where by you are bound under the contract to stay with them for a set period...ive seen dates on them that lock you in for up to 2 years...

The way I use to get around this is when you receive the contract for signing, I place a line through the "from & to" dates, initial it, then write in "for term of lease". This way you are not contractually bound to any PM agent until they have a tenant signed into a lease. ..

Plus doing it this way you can get several agents looking for a tenant with the understanding of who ever finds a tenant gets the property management rights....thus getting it leased quicker..

Hope this helps

Happy Investing,
Rixter :)
 
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Reply: 2.1.1
From: Paul Clarke


Thanks for the very useful suggestions guys...Most helpful, I will take them all on board and use the ideas to help negotiate a bit better rate.

By the way, any suggestions about the last part of my original post... namely:

"Lastly, on the Agreement it has a section for "Special Instructions To Agent" and "Special Conditions For Tenancy" which are blank. Are there any suggestions as to what might be worthwhile Inclusions (if any) in these sections of the Agreement? Again Comments/Suggestions appreciated..."

Thanks again guys

Paul
 
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Reply: 2.1.1.1
From: Russell H


I would make sure the agent is clear on how much authority he has on arranging repairs - with and without quotes etc. In vic ( i guess other states too) the tenant has the right to arrange emergency repairs to a limit ( $200??) if the agent can't be contacted, but you want to make sure the agent either has to refer to you or get quotes ( not just use his usual mates) at least until you are happy......
 
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Reply: 2.1.1.1.1
From: Jakk Bass - The SLUM LORD


In regards to "Urgent Repairs" in Victoria,
the Residential Tenancies Act states

"the landlord is liable to reimburse the tenant for the reasonable cost of the repairs or $1,000, whichever is less"

Section 72(2)(b)

regards
Jakk
 
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