Property Management Fees: How to know what's fair

Published 09 September 2020 by Team :Different

How much does a property manager cost? What is included in the property management fee? And where exactly does my money go? 

Maybe you’ve just started thinking about hiring a property manager for your expanding portfolio. Or, you might already have a property manager and simply want to know if what you’re paying is reasonable. We know how hard it is to find transparent information on property management fees and discern the best service amongst the hundreds of options available. 

In this article, we’ll investigate the mysteries surrounding property management fees and help you gain an understanding of where your money is going. By the time you reach the end of this article,  you’ll have some newfound knowledge of property management fees and services that will help you make better informed decisions.

The traditional property management pricing strategy

Usually, property managers charge for services as a commission of your weekly rent plus GST. However, it’s hard to get a sense of how much you can expect to pay, or what the average cost of property management is. This is especially the case if you’re searching for a property manager for the first time, as there are various factors that may influence the amount you’re charged

The location of your property is one of these factors. Whilst Sydney property management fees average 5.5% and property management fees in Melbourne average 6%, you’ll find that the fees in Perth easily hit the 8-10% range. Even within the same state, you’ll notice that the management fees for homes in popular locations in metropolitan areas are lower than those in regional areas. 

Another factor is the fact that property management fees are negotiable. Owners with more properties under management can often negotiate a lower fee, while single owners can also negotiate what’s included in the base rate in order to minimise any ‘additions’ which will cost more down the line.

At the end of the day, this means that you’re likely to be paying your property manager a different rate than your neighbour down the road for the same services. 

These reasons alone make it really difficult to find accurate, up-to-date information on the average pricing when you want to compare property management fees and shop around for the best deal without providing your personal information. 

What is included in a property management fee?

What exactly does your property management fee pay for? Many traditional property managers charge fees based on a %-of-rent for basic ongoing property management services and a separate fee for other services. It’s important that you carefully review your property management contract prior to signing to understand the structure of the property management fee and ensure that there are no hidden extras that will cost you more down the road. 

It’s hard to say what typical property management fees look like as every property management agency has their own terms on what is and isn’t included. So, it is important you review the property management contract carefully to know what you’re paying regularly, and what extras you might be expected to fork out down the line when you’re comparing rental property management fees.

These are the services that are typically included in your ongoing property management fee (% of weekly rent): 

  • Collecting rent, following up on arrears 
  • Organising and managing payment of bills, council rates, strata levies, and other ongoing costs
  • Organising maintenance and repairs for the property
  • Keeping you updated on legislation and laws that might affect you 

We recommend looking out for these services as they are sometimes charged at an extra fee:

  • Leasing fee - Usually 1-2 weeks’ rent. This includes receiving and assessing applications, negotiating lease terms and finalising the contract.
  • Advertising/marketing fees - This can average around $300. As part of this fee, your property manager should arrange for professional photos of the property, write the advertisement listings and advertise the property for prospective tenants.
  • Inspection fees - Some property managers will charge you an extra fee for regular inspections. The purpose of this is to check your home is well-kept by the tenant and to identify any potential maintenance issues.
  • Tribunal preparation fee - If you get to this point when evicting a tenant, many property managers will charge extra to prepare the documents you need for the Tribunal. The cost of this ranges far and wide - while it can often cost upwards of  $100/hour, it’s also often charged as a flat fee.
  • Annual statement fee - Around $55. This is the administrative fee for preparing statements for the end of financial year.
  • Lease renewal fee - Usually 1 week's rent. This involves preparing lease contract renewals and advice on rent pricing.
  • Admin fee - Around $11.50/month. This covers miscellaneous administrative fees such as postage, photocopying documents, preparing reports, spare key creation, storage, etc.

These are all the typical duties a property manager is expected to do, and the reason why you would hire a property manager in the first place. 

However, each property manager will have their own pricing model on the services they provide with their property management fees and what is included.

Sometimes you might be paying very little for your ongoing property management fee, but factor in the extra costs of leasing and regular inspection fees among others, and you’ll be looking at paying hundreds more each year. On the other hand, you might be paying more for an all-inclusive property management fee - but if you find yourself needing to go to the tribunal, for instance, you won’t need to fork out an extra $100 for every hour it takes.

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Property management fees in action

How do you calculate property management fees? 

Say you own a 1 bedroom apartment in Sydney CBD and are renting it out at $550 per week. Below is an example of what you would be expected to pay per year when employing the services of a traditional property manager:

Because of the variance in prices, there is a lot of confusion surrounding how much you really should be paying for a property manager. But for a property manager, the work required to manage a property is pretty much the same regardless of the property’s weekly rent. Is it right that the prices vary this much? And is it really fair for you and your neighbour to be charged different prices for your property manager to be doing the same amount of work?  

:Different’s philosophy: Flat-fee property management service

At :Different, our goal is to rebuild property management from the ground up. We believe charging a percentage based on rental income is fundamentally wrong. We know that the true financial and time cost of managing a $500/week property and $1000/week property is relatively equal and therefore we don’t believe it is fair to charge our owners differently for our service. 

"We don’t think the traditional way of charging percentage fees of rent is fair to owners, because the work required to manage a property doesn’t vary with the weekly rent.”

Mina Radhakrishnan, Co-founder 

We’re a team of local property experts backed up by intelligent tech - and this is why we’re able to charge such an affordable rate and not pass the cost off onto the consumer. Our technology works 24×7, doesn’t need to take a vacation and doesn’t demand a paycheque. It also doesn’t forget to follow up on what needs to be done. 

“You don’t rebuild property management with software alone – you need the right people who can work with us to create a world where we let people do what people do best, and let technology do the rest.”

Having built a proprietary property management platform that automates a lot of the work that traditional agents need to do manually, we can afford to hire experienced property experts who, thanks to our tech, now have the time to do the jobs that they do best and focus solely on providing the best service. Our team of property experts is dedicated to delivering the same, consistent, excellent service to all our owners - regardless of the location, price or value of their property

A :Different kind of flat fee property management

Everything you would expect from a full-service property manager is included in our $100 property management fee structure (see full breakdown here). Our flat $100 fee is made to be transparent and simple, with no hidden extras.

Our friends at savings.com.au have used data from Domain to calculate exactly how much in rental property management fees you could be saving with :Different. Check out the article here to find out more about their take on using :Different to maximise your investment property returns.

The :Difference in property management fees across each capital city

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Our leasing fees explained

If you need to find new tenants we charge a leasing fee. Finding a new tenant requires a lot of resources and work outside of the day to day management of a property. Our flat $500 leasing fee covers all the work the team does to find you new tenants: from getting your ad online, to running open homes and reviewing and vetting tenant applications. To ensure we have professional photos & premium placements of your property ad in both Realestate.com.au and Domain, we also charge a flat marketing & advertising fee ($400 in QLD and $500 in NSW & VIC) to cover these costs.

When you don’t have any tenants in your property, you do not pay the $100/month. Leasing is an essential part of our business as it’s a moment in the owner’s investment journey that can be very stressful. We have built a best-in-class leasing process to ensure we can put high-quality (and most importantly) long-term tenants in each of our owner’s properties. We understand this is a service that no owner should skimp on so we ensure all efforts are undertaken to deliver the best result possible at the fastest rate. 

:Different’s property management fees in action

Remember our example earlier of how much a one bedroom apartment in Sydney CBD would cost you in property management fees with a traditional property manager? Let’s see how much you will be able to save with :Different:

We know that having to constantly switch property managers or shop around for the best deals is an extremely time-consuming and headache-inducing affair. With :Different, you have no need to worry about hidden costs, or unexpected expenses. We also have no lock-in contracts, so you are free to leave whenever you want (our clients usually don’t!). On average, our customers save $1200/year with us. If you are already engaging a property manager, find out how much you can save by using our savings calculator

So, how much should you be paying for property management fees? At the end of the day, every property and property owner is different and has different needs. Whilst the world of rental property management fees can be difficult to navigate, we highly recommend taking the extra time to review your property management contract and ensure you know exactly what you are paying for before signing on with a new property manager

These smaller costs can add up when you are balancing out the ROI of your investment property. If you are interested in learning more about our flat fee property management structure and how it could work for you and your property, get in touch with us today, we’d love to chat! 

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:Different's unique business model means that you can save on cost but not service. Chat with us to find out more.

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Disclaimer

The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you.