Why are WA pms so expensive?

[Gertie]

hi

I am currently in the process of renting out my IP in Beckenham. I have been around a few PMs and the fees are so high. They are also very similar and it seems to me that they are price fixing? I have also found them in the past to be generally useless. Can anyone recommend an good PM in the area? I have self-managed before, and would do it again if necessary.

Gert

 

[Rixter]

Gert,

What is your definition of expensive? What prices have you been quoted ?

I have a few IP in Perth and quite happy with their charges.

But I suppose it all depends on if one is receiving value for money spent.

 

[obiwan]

hi

I am currently in the process of renting out my IP in Beckenham. I have been around a few PMs and the fees are so high. They are also very similar and it seems to me that they are price fixing? I have also found them in the past to be generally useless. Can anyone recommend an good PM in the area? I have self-managed before, and would do it again if necessary.

Gert

Hi Gert,

I have just recently gone through a similar situation as yourself. And did a bit research on REA in the suburb that my property is in.

Their fees were all the pretty much the same. (Yes a lot higher than other states, I don't know why that is?) But there estimate of what I could get for rent was a lot less than I actually got!

I ended up going with a friend of the families. Which I was very hesitant at first as she wasn't in the local area. (which I thought would be important??) She told me I could get $30 p/w higher than what I was originally told by local agents.

Any way within the first week of advertising there were 10 people that looked at the property and 8 applications submitted and I had a new tennant by the end of the first week. She is quite happy to manage properties in any area.

I can totally recommend her as she is absolutely fantastic. She recently did her first inspection since the new tennant had moved in and sent photo's etc of how the place was looking (not that I really cared) but the little things can make all the difference. (I am living in NSW)

If you would like her details just PM and I can send them (and if anyone else would like them?) her prices are comparitable to other REA if not cheaper.

 

[Dazz]

I think that excellent question should be directed to your friendly local licensed Real Estate Agent principal, or any fine upstanding REIWA member will do.

REIWA are always happy to answer your questions, especially when it involves questioning the revenue streams of it's fully paid up financial members. The response you shall receive will satisfy you fully. They are always there for you as a consumer, it says so in their glossy brochures.

Heaven forbid, price fixing/collusion between REIWA members....that would be unethical and totally against their self regulated charter.

 

[kph]

Its an excellent question!!
I have asked a few of them about their fees ( they are generally between 8% and 9.5% plus gst and seem to congregate around 8.5% plus gst) and asked why they are less in the eastern states, and they get quite defensive about it !!
One told me it was because their operating costs were so high with maintenance issues..... what the ..???????

It was a rule of thumb that the fees generted from the rent roll genarally paid for the office overheads including the rent, receptionist and PM.
So all the sales commission was effectively cream ( profit)

Its not collusion, its more the point that landlords don't bother to negotiate a lower rate. The more this happens, the more these agents will get used to the idea of accepting a lower rate. Alternatively, you can elect to not use them.
It can't be a matter of competition as there are more agents and agencies per number of dwellings in WA than there are in NSW !!

The recommended rate is set by reiwa ( or is it reba?) but all fees are neotiable in WA.
I generally get them down to 7% or 7.5% otherwise I'll look elsewhere. Even self manage if I have to.

kp

 

[Rixter]

Its an excellent question!!
I have asked a few of them about their fees ( they are generally between 8% and 9.5% plus gst and seem to congregate around 8.5% plus gst) and asked why they are less in the eastern states, and they get quite defensive about it !!
One told me it was because their operating costs were so high with maintenance issues..... what the ..???????

It was a rule of thumb that the fees generted from the rent roll genarally paid for the office overheads including the rent, receptionist and PM.
So all the sales commission was effectively cream ( profit)

Its not collusion, its more the point that landlords don't bother to negotiate a lower rate. The more this happens, the more these agents will get used to the idea of accepting a lower rate. Alternatively, you can elect to not use them.
It can't be a matter of competition as there are more agents and agencies per number of dwellings in WA than there are in NSW !!

The recommended rate is set by reiwa ( or is it reba?) but all fees are neotiable in WA.
I generally get them down to 7% or 7.5% otherwise I'll look elsewhere. Even self manage if I have to.

kp

Yep my Perth PM rates vary from 6.5% up to 7%.

 

[jscott]

Hi Rixter, you have done well in your negotiations to get those rates. Can I ask how many properties you have with that agency as I would assume you get more of a discount for multiple properties.
Another thing is that the % they ask for is just the beginning. Then there's fees for the routine inspections, petties (whatever they are), etc. etc.

 

[Rixter]

Yep I have a few with one PM (7%) & one with another PM (6.5%).

Inspections ($45) ,Letting fee (1 week rent), Postage/Petties ($5/m) are extra.

 

[kph]

You've done well Rix,
Someone should start a petition and bombard reiwa with emails and a 'please explain'...... pretty hard to justify the current rates imho.
I'm cetainly not prepared to pay them !!

kp

 

[Rixter]

IMHO I think the RE PM's are taking advantage of the level of newbie first time investors entering the market and who dont know any better.

 

[jscott]

yeah your probably right Rixter. I self manage because of the exhorbitant fees I've been offered even with trying to negotiate. If they would just charge a flat 7% or 8% I'd probably go for it.
I used to pay a flat 6.5% in melbourne and they were great.

 

[Ausprop]

we run a small rent roll so no doubt this response is biased but... I would suggest that anyone that discounts their rate significantly probably has a lot of properties under management per property manager - it is a matter of mathematics as good property managers are expensive - so are their cars and phone bills. To pay the wages, phone calls, office stationery, rent etc etc you need x amount of properties at y% rate. If y decreases, x increases.

it's a bit like settlement agents - you could probably convince one to transact for you for $300 and it would probably be fine, but if their is a problem or extra effort required they will leave you holding the hot potato

 

[Rixter]

yeah your probably right Rixter. I self manage because of the exhorbitant fees I've been offered even with trying to negotiate. If they would just charge a flat 7% or 8% I'd probably go for it.
I used to pay a flat 6.5% in melbourne and they were great.

Jscott, What sort of % fee range are you talking, how long ago & what area/s ?

 

[Rixter]

we run a small rent roll so no doubt this response is biased but... I would suggest that anyone that discounts their rate significantly probably has a lot of properties under management per property manager - it is a matter of mathematics as good property managers are expensive - so are their cars and phone bills. To pay the wages, phone calls, office stationery, rent etc etc you need x amount of properties at y% rate. If y decreases, x increases.

I agree with you Ausprop. When an investor is doing their home work on finding a good property manager they should always ask how many properties they manage to make sure they have enough time to look after yours so as its not lost in the workload pool.

Up to 100 properties for each PM I feel should be a comfortable load. One also needs to look for a PM who runs their management business independently to a realestate sales business - not just tacked on as a sideline to the main sales business to cover operating costs as you have already rightfully pointed out Austprop.

 

[<KS>]

Well I pay 10% flat (no BS about GST) and I got a VERY nice high rent return, with the property signed up in 3 days!

BUT

I dont pay ANY inspections fees (Including the PCR) , Letting Fees, Bond Inspections Fees, Postage or Petties, Bill Payment Fees or whatever else dodgy managers make up.

I did the maths:

My Scenario @ 10% Flat:
===================
Rent = $300/week = $30 PM fee x 52 = $1560 TOTAL

Alternate @ 7% + GST + Fees (cheapest I have found):
=======
Rent = $300/week (IF they assess it correctly) = $23.10 x 52 = $1201.20
+ $180 - PCR + 3 inspections/year
+ $300 - Letting Fee
+ $60 - Postage
+ $50 - Miscellaneous (bond inspections etc)

= $1791.20 TOTAL

The moral of this story is do your h/work AND your maths. Read the fine print carefully. Many contracts only state that you pay GST in tiny writing on 1 of 10 pages of the contract. Many sneak in other open provisions which allows them to make up REALLY dodgy fees.

Dont sign ANYTHING that is not specific.

I worked it out that I have to find a PM at 5.5% in order to get the same above deal. But despite the saving I decided the real perk was knowing exactly what I was up for each month and being able to budget for it!

<KS>

 

[redwing]

Who do you use KS and how many IP's do you have with them if you dont mind me asking??

Redwing

 

[Gertie]

That sounds a good deal - can I ask who you are with?

I have just signed up with an PM but find the fees hard to swallow. I also had an interesting experience - the agent had made a mistake on the internet ad so I rang up to let them know. They thought I was a prospective tenant and were very short with me - when they realised I was the owner they suddenly became very polite. I have found this with all property managers. I have decided to survey my tenants regularly just to get their perception of the PMs!

Gert

 

[<KS>]

@REDWING - KS = Kaizer Sosey....ever seen the usual suspects with Kevin Spacey? If not then go get it NOW!

I have just the 1 property with them, its a deal they offer anyone - its just that most people see the double digits and dismiss it as expensive without doing their homework.

@Gertie - The company is Elders Kwinana/Como. The lady I use is a friend of mine called Donna, she has already helped me professionally in ways most PM's would not consider - like the other day she nipped out to hand a contractor the spare keys whilst I was stranded on a gold course Big of her considering it was on Good Friday.

I have a couple of smaller properties that I self manage, but I decided that due to its value and size I would get this one managed for me. If Donna keeps doing a good job I will flick over my other properties and keep doing so as I aquire them.

<KS>

aka

Bryn Williams

 

[depreciator]

Yes, as KS demonstrated you can't just look at the management percentage without taking into account all the other costs.
It's a bit like loan rates. Often a lender who offers, say, half a percent less than a competitor will get that half a percent back somewhere in fees.
Just on the PMs. Let's say you have a place rented at $350pw. Squeezing the PM for a 1% drop equates to $3.50pw. Is it really worth getting a PM off side for $3.50? And if $3.50 is that critical, you'd better hope you don't have a hot water heater pack it in.
Of course, having a number of properties with one PM would be reason to expect a reduction in the management percentage.
I've always been unfailingly nice to PMs - unless they stuff up, of course. I moved a property in 04 from a PM who was charging 7% to one charging 9% because I thought she'd do a better job. And she did.
I figure being a landlord who is pleasant to deal with makes them more inclined to do their best for me. Maybe I'm imagining things. Or maybe I've just been lucky to date.
Scott