Property Managers Fees

[Grum]

Hi, I'm new to the investment game and have only just started looking at properties to buy.
I've have read up a bit about the subject and browsed the forums and it seems that the consensus is to have a manager look after your property. The general feeling is that it's worth it considering the cost involved.
However I was looking at a unit that is $98000 to buy and renting for $125 pw. The fees involved are:
Agents fees 9.3% = $604.5
1/4 inspection fees($45) = $180
6mth bond inspection($60) = $120
letting fees (say 2 * $125) = $250
Total = $1154.5
This looks a bit expensive to me or is this generally what is to be expected?.

 

[geoffw]

Grum,

That certainly seems high. I would recommend shopping around.

But you may be in an area where there's not too many PM's- that will place you at a disadvantage. It's also at the lower end of the spectrum (depending on where you are)- that may also put you at a disadvantage.

But inspection fees- for SIX inspections a year? Maybe two are combined. But in the ACT, I think my contract said I was only allowed two per year anyway.

And the fees you're talking about come to 9 weeks per year- 18% management fees all up! That does seem expensive.

Letting fees are normal now- they have to advertise. But inspection fees are not. And that 9.3% seems high from where I sit. But check it out- get quotes form other PMs or agents if you can.

ALWAYS get quotes- for ANY work you do. You can be vaery surprised at the differences.

 

[Sim]

I agree with FP - you should really shop around to see what other property managers are charging in your area.

The rates you quoted do sound a tad expensive - but you really can't compare properties that are not in the same locality. Even in the same city there will be a significant variance in the management rate depending on the type of dwelling and the area it is in. So compare your rate with others in the area.

As for FP's comments about specialist property management companies ... my personal opinion is that it becomes a case of swings and roundabouts to a certain degree.

I personally use a specialty property management company to manage several of my properties - and generally I have been very happy with them. They certainly do have an incentive to perform, since the property management income is a major part of the company income.

However, one thing which I think is quite important that you may miss out on with a specialist company - and that is "walk in" enquiries. If you have a real estate agency shop front in an area - someone looking to rent in that area is farily likely to go a visit all the agencies around there to see what properties they have for rent. With my managers, they do not have a shop front - and even if they did, it's not in the area my properties are - so we rely very heavily on advertising to bring in tenants.

As I said, swings and roundabouts - and since your properties will always be in demand (won't they !!) and will have very happy long term tenants in them, then you won't actually be relying on the walk in enquiries - and it's the day to day management that makes the difference - so the no shop front argument wouldn't really have that much effect.

 

[handyandy]

Hi Grum

I would certainly see this qoute as HIGH. If there are other places around then get some more qoutes, but don't tell them that you are a first time investor.

My experience with management agreements is no inspection costs, no bond inspection cost, no tribunal cost beyond the initial lodgement fee 5-6% management fee and a couple of dollars for postage and handling which I wear. Also GST on top.

I am somewhat confused as to what the '1/4 inspection fees($45) = $180' actually is. I assume that they are trying to charge you for showing a prospective tenant the property????

Boy what are they doing for their 9.3%?? answering the phone!!!!

Also to avoid having more than one letting fee pa try and sign the tenant up to a 1 year lease. This will also cut down on the work you need to do/ get done between tenancies.

hth

 

[nakal]

Another question regarding management fees....I have just purchased an IP which was already rented out, the tenants are still in the property and it is also being managed by the same property manager. Is it normal to pay the letting fee again, this has been paid for by the previous owner and there was no advertising or negotiations to find a new tenant.

 

[handyandy]

Hi Nakal

Definately not!!!!

Under no circumstances are you liable for a letting fee on a newly purchased property with a sitting tenant.

I would be having strong words with the managing agent, as I feel, if you tolerated this then there will be further infringments down the track.

To be fair it may be just a simple mistake and if that is offered as an excuse then let it the excuse stand with a suitable credit off course but be wary for any future 'mistakes'.

What sort of management fees did you negotiate with these people as I find that normally in this situation you don't get the best deal as you didn't shop around.

hth

 

[Macca]

When there is an existing tenant I find it a good idea to negotiate the management fee before committing to buy the property.
It is amazing how negotiable the RE agent can be when the sale hinges on reaching a suitable management deal for the property.

Macca

 

[Lotana]

When buying a tenanted property you don't have to use the same managing agent as the previous owner. In fact, if you've done your due diligence on the current tenant, you can go self-managed and save a few dollars. Also, you don't have to use the same agency for finding tenants and for managing the property. I found that in my area (Sydney Eastern suburbs) the best agencies to find a tenant are those with good high traffic street exposure, but the best managers typically occupy far less expensive offices.

Say cheese

Lotana

 

[Jacque]

Just adding to all the other replies here, Grum.
Yes, I would be shopping around for a better fee. The maximum I am paying at the moment is 8.47% (that's including GST) and I expect VERY GOOD service for that! The only other costs are the letting fees (usually one week's rent plus GST) and postage costs of around $2-$3 a month.

The other thing to remember is that you can self-manage, if you feel confident and wish to try something new
Buy yourself a lease pack from the newsagency (not sure where you buy them in WA actually.....) and grab a copy of one of the many excellent landlord handbooks around (try your local library or big bookshop). It's not that hard and it can be a terrific learning experience.

Let us know your progress.......

 

[Jas]

Another thing to do is check their figures. I recently found that one of my properties had a 9% management fee, while the others where corerct. Because they didn't show the fees for each individual property, I couldn't figure out for ages what the issue was. They are now all the right rate, but it took a bit.

Jas

 

[ruk]

I have been a property manager - and offered the following:-

a. full management
1st weeks rent as letting fee + gst
8.5% management + gst
$4/month postage + pettys + gst
no inspection fees ( in Qld only allowed every 3 months )
no advertising charges

b. Letting Agent only
1st weeks rent as letting fee + gst

the agent does the checking of the tenant, tenancy agreement and entry condition report, you have to do the exit report, bond lodgement and bond refund.

then as the owner you give your tenant a deposit book or your account number ( for direct credits ) - make your own arrangements for inspections and the tenant to call you to arrange repairs and thats how to save lotsa.

the agent shouldn't mind doing that for you, as they will get your business again to find another tenant.

if you have trouble with the tenant, the agent would have had the same trouble anyway.

it's easy after you've done it once.

not all agents are bad.

 

[Reub]

Grum,

On the issue of whether to DIY or professionally PM, a lot of people become too familiar with their tenants if they are DIY, which can create the obvious issues when business decisions need to be made (ie you know they're battlers, but you haven't put the rent up in years). It is also important to keep that buffer between yourself and the tenant (ie a professional pm) after a business decision is made that does not favour the tenant. (again rent increase or eviction for any number of reasons).

On the isse of fees of managers, I have generally found that 7-8%, even 9% commission as mgt fee is fair, considering the no hassle aspect, most RE agents do not make much from pm and the fees are part of your IP deductions anyway.

It also goes without saying that a portfolio around Australia with the same pm can make life a lot easier.

Regards,

Reub

 

[geoffw]

It also goes without saying that a portfolio around Australia with the same pm can make life a lot easier.

I'm not quite so sure on this. Yes, it can make it easier if you have just one account covering a lot of properties, but there may be other costs (and I'm assuming that you mean a single national chain- so that you *may* be able to get a single account).

But I don't mind having different PMs.

If your PM sold you the place, you can get a discount in the rates. Though you have to be happy with the job that's being done.

I have a local agent who manages a small block. It's a family business- 100+ years of local experience. He knows the area, the rents I can expect, and the prices. I will be using his rental appraisal to upgrade the rent on my DHA property (well, it was my first IP).

If one local branch does not perform, I have freedom to move on-I'm not tied in to any deal with agents in one chain.

 

[Reub]

noted Geoff, good point

 

[dwyerfam]

I currently self manage (and have not used a PM as yet). I was thinking if this idea could be possible in order to reduce some of the PM's fees.

Could the the PM just collect the rent from the tenants (chase them for arrears etc and tell them about the rent increases, re-signe the lease when they stay on etc) and I will just be look after all the other aspects of PM (repairs, three mths inspections, deal with RTA forms etc).

Maybe an 'special itemized' agreement could be written up? (I do not know what is in a PM's agreement as I have not used as yet)

Reub, you made valid points re DIY managing and I read somewhere that you have to have the nerve to say "NO" in their face when it comes to making a hard decision, when or if the tenant comes up with some sort of problem/question about the rental property.

Danny D.

 

[JoannaK]

Originally posted by dwyerfam
I currently self manage (and have not used a PM as yet). I was thinking if this idea could be possible in order to reduce some of the PM's fees.

Could the the PM just collect the rent from the tenants (chase them for arrears etc and tell them about the rent increases, re-signe the lease when they stay on etc) and I will just be look after all the other aspects of PM (repairs, three mths inspections, deal with RTA forms etc).

Maybe an 'special itemized' agreement could be written up? (I do not know what is in a PM's agreement as I have not used as yet)

Danny D.

I really don't think that is such a great idea. A good property manager's job is to know your property intimately. Just having them collect the rent is not doing anyone any justice.

You will find that the tenant will start manipulating a situation like this also, telling the agent one thing, then you another.

When I was a PM i went to extraordinary lengths to keep the relationship between landlord and tenant virtually non existant. It was my job to keep my finger on the pulse and know exactly what was going on with every single property. The landlord met the tenant 2 or 3 times a year only when we conducted the inspections. If the landlord wanted to do his own repairs, I said that was fine, but do not tell the tenants that you're the landlord, and I would organise the time and day of the repairs.

It really does keep things less complicated.

 

[bbruham]

G'day all,

I have a property manager as I believe it is more professional.
The less contact you have with your tenants the better!
Every complaint etc, goes through the P.M. (When you raise the rent).
I pay fees of 5%.

Bruce G.

Winners make it happen,
losers let it happen.