Property management fees

[parkerdilosa]

So much more

...to consider

A good PM is worth so much more than what you are suggesting. Yes, don't pay more for one poor PM than another poor PM but you shouldn't be thinking of using a poor PM regardless of how much (or little) they cost. If you don't pay much, you can't really expect someone to really look after your property.

You need a PM that will really assess a potential tenant. You need a PM that will really keep an eye on the property. You need a PM that will really ensure that the rent is being paid (and follow up damned quickly if it isn't). You need a PM that will really fight your corner if you need to use the Tribunal to get repairs or back rent paid for.

A good PM should find the right tenant who is happy to stay for a long time and look after the property. In these circumstances, the re-letting fee is irrelevant, the advertising costs are irrelevant and associated costs of turn-overs are irrelevant. You negotiate their fee, and they will (silently) negotiate their service.

Trust me, 1% or 2% is such a small factor in your property investment finances that you should not be concentrating on it. By all means concentrate on finding a good PM but don't get distracted. It is far more to do with finding someone you can trust than it is about number crunching.

By the way, I am a landlord not a real estate agent and I have had to deal with PM's for over 20 years and no, I still don't get it right all the time. But cost is such a small factor in trying to get it right.

 

[Puppeteer]

My experience here in WA, is that without exception, the property managers with higher fees have been clearly inferior. Maybe I'm lucky, but the property managers with the lowest fees have always given me the best service.

It's about the people, and the specific property manager, not how much money you pay.

I'm searching for a new agent for one of my properties at the moment. The original manager is no longer with the REA, and the service has gone down hill rapidly since she left. Their latest fee structure is significanltly higher than the old arrangement and I've been waiting for months for them to return my call to discuss their proposed authority agreement (which is still sitting on my desk unsigned).

If they want to jack my rates up by 15-20%, (on top of the increased money they get from the higher rental), then they can explain to me what additional service will be delivered, and why they should be getting bigger increases than the CPI.

The way I see it, is that not only is the pie getting bigger, but the property managers want also want a larger slice. Sorry, not on. I'm not paying you 25% of the rental, period (which is what some of them are asking once you take into account all of the fees and charges)

I've mapped out all offers for management I've had and the total cost as a percentage of rent ranges from 15.76% to 25.3%, at $400 per week rent. This assumes 1 tenant per year on 6 monthly leases.

The worst had a management fee of 9.9%. The extras took it up to the 25.3%, so be sure to check the other costs, before signing on the dotted line.

My cutoff is currently 17%. If it's more than that, I'll manage it myself. Coincidentally, I've been very happy with the service of all the agents that come in under the threshold, and been unhappy with the service of the others I've used (before I started analysing this).

 

[Jamie M]

now I feel grateful mate
I thought that I am paying way to high for that. Because in Sydney area, the PM can be as low as 4.4% inc GST

That's pretty decent - in good old Canberra it's usually pushing closer to the 10% mark and vacancy rates are usually quite low so I couldn't imagine it being too difficult to fill rentals.

Cheers

Jamie

 

[JohnHenry]

That's pretty decent - in good old Canberra it's usually pushing closer to the 10% mark and vacancy rates are usually quite low so I couldn't imagine it being too difficult to fill rentals.

Cheers

Jamie

Yes, in Wollongong its around 7.7% inc. GST that is what I got the best price so far with local agency.

 

[Nathan]

Ill be leasing out my properties (front house and granny flat) in the coming months with an agent. (Chester Hill). Having never done this before, what are the expected “norms” for fees?
I visited 2 agencies and they have all said they are open to negotiation.
Here is a comparison between the two. (company 1 vs company 2)
* Management Fee: 5%+GST vs 6%+GST. I have managed to bring down the fee for company 1 to 4% +GST as I bought the property from them.
* Admin + sundries: $5+GST per month vs $6+GST per month
* Letting fee: First week rent +GST (initial) for both
* Subsequent letting fee: Half a weeks rent vs 1st weeks rent
* Income and expenditure report fee: $20 + GST vs $0
* Advertising: NIL vs $?
* Tribunal application fee: $36 vs 0
* Representation at hearing: $NIL for 1st appearance, then $50/h thereafter vs FREE.

What else should I negotiate and which one seems better? Is there any difference in choosing between different agencies really?

Personally 5% or 6% or 7% the agent is what is important, $50pw extra is better then saving $2 or $3pw.

Just food for thought.

 

[Of The Vultures]

total cost as a percentage of rent ranges from 15.76% to 25.3%

PM fees in WA are exceedingly high. I just signed with an agency for an all inclusive fee of 12% and I'm still reeling as it's so much higher than over east.
Also had another all inclusive quote of 15%.

The PM is important but 25%? No way.

 

[buzzlightyear]

PM fees in WA are exceedingly high. I just signed with an agency for an all inclusive fee of 12% and I'm still reeling as it's so much higher than over east.
Also had another all inclusive quote of 15%.

The PM is important but 25%? No way.

Lack of competition aside, is the some regulatory or business costs imposts which are different in WA compared to the east?

 

[Of The Vultures]

Not that I know of Buzz. They seem to do it because they can! The PM did tell me that PM salaries are substantially higher here in WA than those of their counterparts over east so perhaps that has something to do with it.

 

[Puppeteer]

I've had a few requests for my calculation method for comparing PM's.

Here's a modified version of my spreadsheet. All the PM identities have been removed and a number of the figures have been changed a bit, but it shows you the methodology. The figures are close to actual WA property management offers I've received, or have used.

To use it, set your rent, at the top, and fill in the black numbers for a PM with the numbers in the contract. Change the number of occurences on the left of the sheet and it will calculate the total % at the bottom of the sheet. The orange cells are calculations.

It overestimates the actual costs in many cases, because I assume that I have a new tenant every year and I assume that a lot of the costs will be incurred each year, even if they aren't, but the sheet is there to compare PM's between each other, and it does that job well.