As I write this, about 2 hours ago a new client of ours told me he was getting $280 PW paid monthly and with the tenant we placed today he is now getting $350 PW, paid weekly. We had been talking to this owner for about 6 months and I had forgotten he had told me $280 was his current weekly income. We had simply prepared the marketing for a new tenants and done research around what we felt was achievable in the current market based on other properties we manage in the area. It’s fair to say this investor thinks our fees are cheap. Over the next 5 years we will earn around an extra $18,000, he wasn’t expecting. The thing is we hear this all the time.
When a new client comes to us, most usually want to know what our fees are & if we can do better. Which is fair enough because that’s how our society is conditioned & investors want to maximise their investment return. After all they have invested in a property to build wealth and its ability to return is a big part of that. Our fees are not the most expensive, but they are also not the cheapest, so I suppose they are about average. For us we think our fees are very fair.
Investors really should be asking what are our results, what type of return do we feel we would be able to give them over the next 5 years. How will we protect their investment and help their investment grow.
Another simple example is a client who came to us about 6 months ago had her $565 PW investment sitting empty for 6 weeks. Once she engaged our services we tenanted it in 14 days but she had already lost a staggering $4,520 in lost rental income by using the wrong property management agency, in the first place. To rub salt in the wound. She had to pay a termination fee of $565 when she left.
We focus on placing quality tenants as fast as we can, maintaining our clients investment properties and doing market rental increases to ensure our clients are getting their maximum return.
I’ve lost count the number of properties we’ve taken over that have been under rented between $20 to $100 a week.
So what are our fees ?
Property management fee – 8% of rental income
This is our fee to manage the property. We collect the rent, pay bills, disburse the income to you. Ensure all legislation is met. Deal with maintenance, perform routine inspections etc. It’s surprisingly more work than people realise
Monthly technology fee – $5
This small fee helps to the growing costs we need to invest in technology these days
Letting fee – 1 week’s rent
This covers our time to prepare the marketing, handle tenant enquiries, show the property, process tenant applications, which is very very time consuming, draw up the lease, have its signed lodge the bond, prepare the entry condition notice etc.
Lease renewal – 1/2 week’s rent
This is not just having a new lease signed. We need to check the current market value, get instructions from the owner, negotiate with the tenant, draw up the new lease, send it to the tenant, chance the tenant, chase the tenants, oh and did I mention chase the tenant, get it back from them, then update our system and file it. All up this takes us around three hours.
Advertising Fee ( varies )
Realestate.com.au charge us around $150 for every property we put onto their site as a rental. At the time of writing we are offering our clients are free marketing pack, which includes, photography, floor plan and the realestate.com.au ad free of charge
But the good news is that’s it. Unlike some agencies we do not charge end of financial year statement fees, or QCat fees, or termination fees.
Keep in mind our fees are tax deductible, but we also pay our clients weekly so they can access their earnings fast. Too
Last week we took over a management that was rented for $575 PW. We’ve now increased it to $650 PW. But the previous tenants had not cared for the gardens or the house. The owner was shocked when she saw it. . Yes they have bond and most of that will be needed to get the property back to how it should be but property managers doing proper routine inspections should of picked this up long ago, so it didn’t happen.
(all costs are plus GST)
How do property management fees compare ?
On the Sunshine Coast fees vary from as ow as 5.5% inc GST to as much as 11% inc GST. Our fee of 8.8% inc GST is about average. Can we do it for less ? Not really. Our clients have one property manager that looks after their property but behind that manager is a team of other people that do lots of other things to ensure our clients investments are protected & returns are being maximised.
What are the advantages of engaging a discount property management agency ?
I figure investors want to maximise their returns. So it makes sense they can do that by engaging a property manager with discount fees. But this can soon become very expensive if rent is not increased, or the property is not looked after or if the property sits vacant, the savings a property investors thinks they are making is soon swallowed up with all the other costs.
On a rental property where the rent is $550 PW a discount agent charging 5.5% would be charging around $30 a week in fees, compared to our 8.8% which is around $48, which is less than $20 more. That extra $20 is like an insurance policy to ensure to ensure the property does not sit vacant, that the condition of the property is looked after & that the rent is continued increased to keep up with the market.
Another example of a property we’ve now managed for some time. We took over when the rent was $420 PW. Its now $550 PW and its cash flow positive. We were able to achieve this for the owners by ensuring the property was being maintained and the rent was increased consistently over a few years. It’s now due for another small increase, which we are reviewing as the tenants are particular good and being cash flow positive the owners are super happy with the return now. We may leave it of $550 PW and do an increase in 12 months time, of around $25 per week.
Discount agencies, may not have the resources, or foresight to ensure increases like this happen & its certainly my experience with managements we take over its doesn’t seem to happen either.
Why we don’t charge for QCat fees when most agencies do ?
Qcat is basically small claims court, where a hearing is set and we attend in front of a panel and put forward our case usually against the tenant. We go to Qcat if we have not been able to mediate the situation with the tenant through the RTA. You can read more about QCat here if you feel the need.
Most agencies charge the owners of this. But we don’t. Firstly if we did charge you it would be unaffordable. While the Time to attend court is usually around 4 hours, we spend hours prior preparing & we charged you it will be a $2,000 bill. But also we feel if we have to attend QCat it’s possible our clients will be stressed about this and possibly we may have played some part in it ending up here. Lastly we very rarely need QCat. So when we do need to attend its very infrequent.
If you are talking to an agency with QCat fees, I would ask them what the total cost would possibly come to and how often they need to attend, as it may be an indication of how they perform as an agency.
No matter which property management agency you end up engaging. Their various fees will be tax deductible, so you will be saving their too. You can read a little more on the government site here.