The wide range of property management fees you’ll find in different markets around Australia might come as a bit of a surprise when you start investing.
It would be fair to assume that they should be quite similar; after all they’re all providing the same service, right?
At Adviseable we still regularly hear the comment, “Why is there such a difference in property management fees if they’re all doing the same thing”?
Let’s have a look at this concern in more detail, because it’s not as straight forward as it seems.
It’s important to understand the value behind property management fees and how they fit in with your investment strategy.
Firstly, most serious property investors diversify into different markets and have more than one property. This takes the property management role to a whole new level. For most people self-managing investment properties just wouldn’t be a viable option.
In terms of the variance in the percentage of rent charged by Property Managers, which will encompass most of the total fees, we need to make sure we’re comparing apples with apples.
For example, if you are charged property management fees of 5% in Sydney, there is no need to be outraged by a fee of 8% in Brisbane.
Sydney property renting at $550 per week 5% fee Total cost per week $35
Brisbane property renting at $400 per week 8% fee Total cost per week $32
The weekly rents above indicate the median rental figures for houses in each city. In this example, despite the 3% difference in management fee, a property manager in Brisbane still earns less than a property manager in Sydney, for the same amount of work.
And let’s be sure that we’re comparing the same scope and quality of services, if you are considering negotiating lower property management fees.
The decision of who is going to protect your investment shouldn’t be based on who charges the lowest fees.
In fact, a willingness to cut property management fees (and undercut the competition) could mean that the agency will try to make up for it by overloading the manager(s) with as many properties as they can (or can’t) handle.
Of course it’s also important to make sure that you are getting the same range of services offered within the fee quoted when comparing property management professionals.
A lower management percentage could be wiped out by a gamut of additional sundry expenses.
We’ve even seen management agreements that charge for each property inspection. This could make you wonder what the management fees really cover.
It can be justifiable to negotiate on sundry expenses if you feel they’re a bit steep.
Some of the expenses you may find questionable include:
- Postage or admin fees (especially when email is used)
- Leasing fee (1 – 2 weeks is reasonable)
- Lease renewal fee to the same tenant (Half a week is common)
Tip: Be careful that the termination period of the property management agreement isn’t excessive (over 30 days).
Property management is a service based segment of the housing industry, and like most things in life, you get what you pay for.
The peace of mind that comes with having a property manager you can trust to protect your investment should be your first priority, rather than haggling for the lowest fee.
The best recommendations for good property managers come from happy clients. If you need some help with this, we may know someone that you can trust, as we’re buying properties for our clients Australia wide every week, and have fantastic connections in many markets.