Re-let fee for same tenants staying on another year?

[wylie]

I think most of the replies refer to residential management, so don't get hot under the collar. If I had a CIP I would be happy to pay to have it managed, as I know diddly squat about it.

I know residential very well and have self-managed for over 30 years. I cannot justify paying to have our places managed because I find it a breeze. Others do not find it easy, or don't want to deal with tenants and I would think the majority do pay for management.

I just find it rich in the case where a tenant simply signs a new lease that has been printed off from the old one with two dates changed and some landlords apparently are charged a week's rent for this.

I also realise that like many things in life, many tenancies will run smoothly but will be made up for by the small number that take up a lot of time when problems arise.

For the past year, we have given our IPs to a manager to find us a tenant. They take one week's rent plus GST and I am very happy to pay that. I used not to want to pay it, but we can afford it now (couldn't afford it in the past) and I do like not having to screen potential tenants myself.

Our IPs are all local, so organising tradesmen is easy, but I would not like to be doing it for 150 properties.

I also have found our own tenants for the past 30 years and whilst we went very much on "gut instinct" which rarely let us down, I now think that the screening the agent does is worth paying for as it means I don't have to open the house, take applications and be the one to say "yes" or "no".

Maybe I am getting soft .

 

[Compropmanager]

wylie I know first hand that when the IP is your's and you are managing it yourself it is a lot easier let's face you call the shots and have no one to answer to bar yourself.

however to be honest I shall share one thing with you. I have for the past few years felt that managing a property isn't simply calling the l/l and asking for approval as an agent (acting on your behalf) they should call the shot and if they stuff it up well they must fix it.

In my role most of the investors get a phone call from me saying "look Mr/s Landlord we are going to do X, Y and Z" the cheap ones always jump up and down and ask why am I doing these things but to be honest it is in their best interest.

I'll dumb it down to it's bare bones You make money = I make money. You improve your equity as I suggest we need to modernise the building = You buy more property and I get to manage them. your agent = your partner in wealth (if they do their damn job). If you agent is in the right mindset they should understand this and always be looking for ways to improve value/rent/appeal of your IP whether it is R or C.

 

[Lil Skater]

PMs are being paid very well, for the amount of work they do.

You're kidding me right? Being a PM is almost as abusive (if not more) as being a bloody telemarketer! Many PMs are lucky to break the $60k mark. Plus getting death threats to your face isn't pleasant - Trust me it has already happened to me and I wasn't even their property manager. Being over the phone they don't know who you are, where you work or what you look like, in person you wouldn't believe how terrifying it is.



Back to topic though. I think it's fair to charge a re-letting fee to an existing tenant, but not a full fee of 1 or 2 weeks.

Now what some of you perceive as a phone call or two actually starts at least two months before the end of the lease. Why?

You have to call the landlord and see what they want to do, send out registered mail to the tenant, wait for them to abuse you over the rent increase and threaten that they're going to move out, then when they eventually see that they would have to spend more for a similar place they finally send back a piece of paper saying that they want the lease. Then we have to tap away on the computer and input all the new details (and if these are wrong, you're screwed) type the leases, send them to the tenant, hassle the tenant to send them back, send them to the landlord when we eventually get them back from the tenant, chase the landlord for the leases and then once they're received send a copy to the tenant, then, it's finally legal.

Yeah, not much work, huh?

Now we don't charge much for a re-let - something like $30 or $40 (I can't remember), but surely that's not much money to ensure your insurance is satisfied, you've got a secure tenant who can't just up and leave (and heck, if they do, so what? They're up for the fees and charges you'd normally incur), plus if you're worried about not getting your increase after 6 months you can put this into the lease.



DISCLAIMER - Even if I wasn't in the industry, I still think it's only fair to pay someone for their service, plus to me a couple of bucks is well worth the security and peace of mind.

 

[Compropmanager]

So glad I'm not the only one.

 

[kathryn d]

You're kidding me right? Being a PM is almost as abusive (if not more) as being a bloody telemarketer! Many PMs are lucky to break the $60k mark. Plus getting death threats to your face isn't pleasant - Trust me it has already happened to me and I wasn't even their property manager. Being over the phone they don't know who you are, where you work or what you look like, in person you wouldn't believe how terrifying it is.



Back to topic though. I think it's fair to charge a re-letting fee to an existing tenant, but not a full fee of 1 or 2 weeks.

Now what some of you perceive as a phone call or two actually starts at least two months before the end of the lease. Why?

You have to call the landlord and see what they want to do, send out registered mail to the tenant, wait for them to abuse you over the rent increase and threaten that they're going to move out, then when they eventually see that they would have to spend more for a similar place they finally send back a piece of paper saying that they want the lease. Then we have to tap away on the computer and input all the new details (and if these are wrong, you're screwed) type the leases, send them to the tenant, hassle the tenant to send them back, send them to the landlord when we eventually get them back from the tenant, chase the landlord for the leases and then once they're received send a copy to the tenant, then, it's finally legal.

Yeah, not much work, huh?

Now we don't charge much for a re-let - something like $30 or $40 (I can't remember), but surely that's not much money to ensure your insurance is satisfied, you've got a secure tenant who can't just up and leave (and heck, if they do, so what? They're up for the fees and charges you'd normally incur), plus if you're worried about not getting your increase after 6 months you can put this into the lease.



DISCLAIMER - Even if I wasn't in the industry, I still think it's only fair to pay someone for their service, plus to me a couple of bucks is well worth the security and peace of mind.

Lil Skater,
I should apologise a little bit. I should have said the PM's office is paid well..as I don't know what you are paid.

Yes, I know exactly how much work it takes. We go thru 50-75 tenants a year. Up until 4 months ago, I used to be the one securing tenants, checking references,cleaning units after tenants have "cleaned", worked beside my husband while we repaired the damage caused by tenants.
Going to court, taking abusive phone calls from tenants and/or their family members etc..and also working a 40 hr job for my employed income.
We were lucky Rob was always able to have our rentals be his full time job.

Now, we delegate everything our supers do on our behalf.
One couple look after 12 units and are a retired.
The other couple look after 27 units + 2 units of their own, plus have 3 children under 10 yrs old, and both have full time jobs...plus they fix, repair and clean all units, show properties and sign leases.
When there is something beyond their experience, we bring a tradie.


So, yes, I know exactly how much work all this takes.

 

[skater]

Ah Lil, Kathryn is right. The AGENCY gets paid good money to manage the property. Whether or not they pass that onto the PM is another matter. In many instances the Management Department seems to prop up all the admin for other areas.

You pay to have your properties managed, and that management fee should cover the relet fees as well. I mean, it is part of managing your property, right? You and I both know that some LL's have negotiated quite good deals on the management, but there will be plenty of others who are on the standard fee (whatever that is in each office).

Most rentals will be no trouble what-so-ever, and these are the money makers. Hopefully the ones that you really don't need to do much with except collect and pass on the rent, do the inspection(s) and negotiate/re-negotiate leases. The others, well unfortunately for the poor PM, these are the time consuming ones. These are the ones who are more likely to have the tenants that the PM does not want to deal with too, but unfortunately, these are the ones that you have the most dealings with.

 

[wylie]

I do know what work is involved in a relet, because I have been doing it for years too, and Lil knows my son is working the same type of job as her. I know he works his buns off. And I know Lil works her buns off too .

What I am trying to say (perhaps not very clearly), is that a re-let is a LOT less work than finding a brand new tenant, holding opens, accepting applications, vetting those applications, doing exit condition reports for the outgoing tenants and entry condition reports for the new ones (and aren't they lovely fun?).

I was very happy to pay $750 plus $75 for the last time this was done for me as opposed to me doing it for nothing. But I would not be happy to pay another $825 for a re-let where the workload is much less, the tenants are staying on, a new lease is going to be signed, and a few other things, but nothing like the work involved in finding new tenants.

I hope that you understand what I am saying Compropmanager. I am not bagging managers and I believe the work they did to find us a tenant for the cost to us of $825 was handsome pay for a few hours' work, but I was happy to pay it. But $825 for re-let = rip off. I know many don't pay it. If I was handing management over I would not agree to pay it but would be happy to pay a portion for the actual work involved.

Because we manager ourselves, we do it ourselves anyway.

I would not want to be a property manager. I do manager our own, but I would hate to be the meat in the sandwich for someone else's IP. Trying to please two people, one who wants more money and the other who wants to pay less money cannot be easy.

PS. I asked my son this morning and his management company do not charge a relet fee.

 

[ldriver]

no, we haven't been charged a re-let fee- we've had the same tenant for 5 years.

funnily enough, what always annoys me is the monthly statement fee of $2 as I'm fairly sure it could be covered with the 7.7% that the agency receives. Oh well..

 

[SimonSays]

Having worked in the Property Management Industry for 15 years I thought I might share some facts about PM's.

In Qld 60-70 % of agents charge a relet fee for RIP. This % is increasing as business costs spiral out of control.

The average relet fee charged in Qld is between $55 - half a weeks rent. Any agent who charges you a full weeks rent as relet fee is ripping you off. The task of reletting is not as intense as letting because you are dealing with a existing client.

The general role of a PM can be summed up in one word - Pareto's Principal - Pareto's Principal talks about the 80/20 rule. PM's will spend 80% of there time dealing with 20% of the problems in there rent roll. Yes, most clients are easy, straight forward and hassel free, but that 20% of the problems would be questionable on what is earned from managing them. But we manage them because we take the good and the bad and balance out to get averages.

While we may complain about fees charged by agents, most are just keeping above the line. In Qld, 7/10 agents are in financial trouble right now and there Rent Rolls are all that is keeping the doors open. The only reason a agent will charge you for statements, reletting, advertising etc is because they are trying to cover there costs. Do you know that in the last 4 years, the cost to a agency to advertise your IP on popular rental websites has increased by 600%!! We may not be happy about all these charges, but consider the alternative if the agency can not do the job for us, we have to manage it ourselves.

Consider this as well, your agent is the first to be told about our responsibilities with IP and the law, and who has to administer that and make sure we are ok? The PM. In Qld we have just been dumped with new Pool Laws, last year we had the new ACT, and in NSW the new legislation act will start in Jan 2011 and we all will turn to our agents for compliance. Across Australia the ABS told us that rents have increased (all be it small amts) but when was the last time the agent increased there base management fee? Most agents I deal with in NSW and Qld have not changed there base management fee for 25 years! And while we may say but as the rent goes up, so does the fees, but let me tell you the costs of running the business have outstripped these gains in rent. Consider this - A $10 increase in rent for 12 mths gives you $520 more income for the year, of which the agent has got $36.40 (based on 7% m/fees). Do you get out of bed for an extra $36.40 a year?

I see it all from both sides - investment and management - and its not going to get easier

 

[wylie]

Consider this as well, your agent is the first to be told about our responsibilities with IP and the law, and who has to administer that and make sure we are ok? The PM. In Qld we have just been dumped with new Pool Laws, last year we had the new ACT, and in NSW the new legislation act will start in Jan 2011 and we all will turn to our agents for compliance.

I have read a little about this in the paper last weekend. I'm curious to know about pool fence laws? Surely the landlord has to step in and get his pool certified and would not be dumping this responsibility on the PM?

My understanding is that a house cannot be rented without having a certificate, and a house cannot be sold without it either. Wouldn't a PM send the landlord a letter advising they need to organise the certificate.

I would be very surprised if the PM is expected to arrange the issuing of a certificate with a private certifier, but I am curious to know for sure.

 

[Peterw]

Wylie, the things that LL's ask of their PM's goes from one extreme to the other. On one end, the LL's are very hands on, and want to do a lot them selves, just not be in contact with the tenant. At the other end, there are LL's that want you to do every thing, and that can be full renovations. May I also add, in terms of this thread, PM's must spend quite an amount of time each year, attending "education" sessions. From breakfasts to full conferences. To remain completely up to date with continually changing times, does also take up quite a bit of time.

 

[wylie]

Thanks Peter for that. I am a bit surprised that a landlord would ask their PM to get compliance certificates, but even more surprised that they would ask them to organise renovations.

How cheeky. If I was a PM I would want to charge way more than a normal management fee to take on such tasks.

In fact, I don't think I would take them on. I'd rather the landlord take their business away than clog up the property manager's time on such things.

 

[skater]

but when was the last time the agent increased there base management fee?

You don't need to change the base fee. It is percentage based which gives you an automatic increase in income.

Consider this - A $10 increase in rent for 12 mths gives you $520 more income for the year, of which the agent has got $36.40 (based on 7% m/fees). Do you get out of bed for an extra $36.40 a year?

That is $36.40 for EACH property under management. In the last couple of years most of mine have gone up in excess of $100pw, based on your 7% of fees that is $364 per property, now lets multiply that by 100 properties (most agencies would have many multiples of this, but let's be conservative) and you get $36400 extra.

Heck yes, I'll get out of bed for an extra 36k.

Now, if it is a larger agency with, say 400 on the rent roll, that sum moves up to $145600. Of course, this does not go to the PM, but the Principal of the Agency.

Why, oh why, should it always be the Management Department that has to fund the Sales Department? If the Agency is having trouble staying afloat, then maybe it is because they are overstaffed in the Sales Department.

 

[skater]

even more surprised that they would ask them to organise renovations.

How cheeky. If I was a PM I would want to charge way more than a normal management fee to take on such tasks.

Well, I have never asked my PM(s) to do renovations for me. I think that would be beyond what is included in the day to day management of the property.

 

[Peterw]

Sorry, did not mean to give the impression, that to do a renovation was included in the management fee. Just trying to let you know, that every one is so very different in their expectations and requirements. Just like some owners self manage, and others dont want to.

 

[wylie]

So if a landlord asks the PM to organise a renovation, how do you work out a fair fee? Or do you decline the job.

I suppose it all depends on what you mean by "renovation"?

 

[kathryn d]

We never ask our supers to do renovations either.
Only maintenance and repairs.

If the PM's office is only staying afloat because of the rent roll...maybe they should get rid of the Real estate side of it.

 

[jaycee]

Lil Skater,
I should apologise a little bit. I should have said the PM's office is paid well..as I don't know what you are paid.

Yes, I know exactly how much work it takes. We go thru 50-75 tenants a year. Up until 4 months ago, I used to be the one securing tenants, checking references,cleaning units after tenants have "cleaned", worked beside my husband while we repaired the damage caused by tenants.
Going to court, taking abusive phone calls from tenants and/or their family members etc..and also working a 40 hr job for my employed income.
We were lucky Rob was always able to have our rentals be his full time job.

Now, we delegate everything our supers do on our behalf.
One couple look after 12 units and are a retired.
The other couple look after 27 units + 2 units of their own, plus have 3 children under 10 yrs old, and both have full time jobs...plus they fix, repair and clean all units, show properties and sign leases.
When there is something beyond their experience, we bring a tradie.


So, yes, I know exactly how much work all this takes.

I didnt think $60k pa was a "low" wage ?!!!!!!!

Whether propoerty managher roels pay well or not isn;t the quesiotn though is it ? I havd to laugh (well, actually at the time I think I got p1ssed off) when I rang my first PM and asked her if she had snet antyhing ot the tenant abou ta new lwease as ittheir lease was up in a month or so - no not yet... I asked when they coudl do it, and she replied " no worries it will get done, it's no big deal, I don;t know what you're worried about" Got round to it in due course, then charged me for it ! No proactive anythign on her part,km bnot even a pplanned managmeent approachm, she idd it purely becuyase I requsted her to otherwise it woudl not even have occured to her. But I stil lp[auid the money that the company charges for her to proactively thikn about ths in adviacne, work out the marke trate, contact me the owoner andask what I thikn, then contact the tenant - she did none of those things, I had to tell her what do and how much the new rent should be (as she had not given it any though, how would she know these anssers ?).


Unfortunately people have a tendency to feel hurt and possibly even complain when they feel ripped off (for lack of a better term).

 

[skater]

I had to tell her what do and how much the new rent should be (as she had not given it any though, how would she know these anssers ?).

I think you've hit the nail on the head Jaycee! While there are proactive PM's out there, they are few and far between.

FWIW, My best two PM's hold the majority of my IPs. They charge a realistic fee (less for me 'cause I've got multiples) and don't charge for anything extra, not even tribunal visits. I've never had an issue with either of these, however they both are at rather large Agencies that are successful in both Sales and Management, so the Management side is not propping up the Sales side. They are both proactive, however I still regularly keep tabs on the rent and will ask for increases if necessary. Often they are thinking about the increases at the same time I am and it's pot luck who makes the phone call to each other.

I have had other PMs who have charged more and given less service. Needless to say, I moved on a long time ago.

 

[Peterw]

Wylie, we tend to work out s reasonable fee at the time of the request, and based upon what the LL wants. Skater, some interesting comments, and probably the way it is, in most places. The 80/20 rule appears again.