The answer to the fee problem

[redwing]

No not from a Landlords Perspective...from an Agents

The answer to the fee problem

A number of players in every marketplace seem to use discounting as a main point of difference, forcing down management fees, creating a discounting culture and forcing pressure on other agencies to bring down their management fees as well.

If discounting is reducing revenue and margins, and other expenses like salaries, marketing, insurance and other overheads keep rising, a crisis will, (and has) resulted!

And it is simply unsustainable!

One of the key issues I see is the mindset that most of our revenue reliance needs to be on the management fee being the main ?breadwinner?, with not much emphasis on other fees.

The statement of ?but what?s the management fee for?? is common place in the industry, particularly on the east coast in Victoria and Queensland and to a lesser extent in NSW. However, South Australia, Northern Territory and Western Australia seem to all enjoy having several ancillary fees over and above what is charged as a typical fee structure on the east coast.

Therefore, I feel that if we are to become and remain profitable, emphasis must be placed on adding extra ancillary fees, because continuing to hold onto the management fees as a majority breadwinner with not much else, will eventually put you out of business!

You might say, "But adding extra fees, won?t our clients choose to go elsewhere?"

My answer is always the same and that is, you need to understand the ?Law of the Main Game? in that landlords, a majority of the time, place emphasis on mainly the management fee and to a lesser extent the letting fee, but place little to no real focus or emphasis on anything else.

Therefore if you are generally keeping your management fee and letting fee at the market rate, then adding other extra fees can be done quite easily

Cont.....

 

[Salvatore1]

Sorry, dont agree. I have been a PropertyManager/Director for 10yrs + and I have often had to compete with discounters. My biggest asset has been my experience and customer service which i stress with prospective new landlords. My nearest competator offers 2% less than me but my business keeps on growing. Dont lower your standards and stick to your guns. Look after your existing data base and the others will fall in place.

 

[russellpeter]

discounting fees without knowing the numbers to run a successful business is very dangerous.

and i have found than most agencies don't know the numbers and then they take on a management at $250pw at 5% = $650pw management fees a great way to loose money.

 

[Scott No Mates]

Small income rentals need a higher % in management fees - why? If the agent only gets $7.50 per week ($375 pa) from russelpeter's example above, how much effort is the agent going to put into the management? One phone call blows that income.

 

[Peter_Tersteeg]

I'm sure this agent has never flown with a budget airline who uses exactly the same business model of providing the primary service at a discount and adding costs for baggage, food, entertainment, etc.

Other examples of this business model would include banks, builders, supermarkets, convenience stores, petrol stations...

 

[russellpeter]

agree peter but the agencies that are discounting are not adding any extra fees.

I'm sure this agent has never flown with a budget airline who uses exactly the same business model of providing the primary service at a discount and adding costs for baggage, food, entertainment, etc.

Other examples of this business model would include banks, builders, supermarkets, convenience stores, petrol stations...

 

[Scott No Mates]

When you start with the 'extra fees' is the owner ahead?

Monthly petties - $7.50-$10
Quarterly/6 monthly inspections $100+
Annual Statement - $50
Lease preparation $25-$50
Letting fee 1-2 weeks
Advertising $$

These can quite easily outstrip the cost of a normal agency charge out

 

[chilliblue]

When you start with the 'extra fees' is the owner ahead?

Monthly petties - $7.50-$10
Quarterly/6 monthly inspections $100+
Annual Statement - $50
Lease preparation $25-$50
Letting fee 1-2 weeks
Advertising $$

These can quite easily outstrip the cost of a normal agency charge out

I have several recently that have:

Tradesmen callout fees: 10% of invoiced works
Follow up of tenant arrears: $10 per correspondence
Advertising lodge fee(no the actual cost just placing the ad): $25

 

[sharpcq]

I don't agree.

I've found most Investors would rather pay a higher management fee and get rid of additional fees.