Are the fees for property management reasonable?
Getting what appears to be a better and more affordable offer from a competing property manager is a frequent cause of that query.
Assessing the value of the service you're receiving from property management is a crucial component of being a knowledgeable investor property owner. You want property management who will bill you in an open, fair, and honest manner. In the event that isn't the case, you'll probably want a better deal. But can you negotiate the cost of property management?
The correct response is that it is possible for you to negotiate a cheaper price; but, doing so comes with a number of potential drawbacks. The alternative is to change to a pricing system that is simpler and more user-friendly, such as charging a flat charge rather than a cost that is dependent on a percentage of the transaction total.
We'll explain how to evaluate your eligibility for a fee negotiation for property management. We'll go over what to watch out for and how to negotiate property management fees, and we'll also discuss why we believe a fixed, flat cost is the best option.
Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.
Do property management costs vary?
Both to no and yes. On your level of bargaining power, your ability to reduce the cost of property management will depend. How do you determine whether or not your request for a conversation with your property management is appropriate? How do you determine whether or not to negotiate the costs that your property management company charges?
If you could specify what a reasonable price is to you, that would be helpful.
First thing's first: let's get something straight: when we talk about "negotiations" regarding property management expenses, we are not talking about "bargaining"!
When it comes to negotiating your property management fees, getting the greatest bargain is not always the goal. This information may come as a surprise to you. You would rather have a cost for property management that is transparent, disclosed up front, and affordable in relation to the level of attention you require.
You should not necessarily look for the property management cost that is the lowest; rather, you should look for something that is clear, fair, and transparent.
There is often a close correlation between the price you pay and the quality of the product or service that you receive. Make sure that this is the case for both you and the management company that oversees your property. This is the most crucial factor.
Review your existing charge schedule critically
Consider the possibility that your property manager would charge you management fees based on a percentage of the total amount in addition to additional fees for things like inspections and tribunals. If this is the case, you should talk to them about it and ask them why they bill you individually for those additional services and what possible benefits there are for you.
They should not have any difficulty providing a response to this enquiry. In the event that this is not the case and a competitor is offering the same service for free, you have a persuasive basis for requesting that the expense in question be decreased or eliminated altogether or for switching property managers.
In the end, it would be to your advantage to choose a real estate manager after first selecting the priorities that are most important to you. Recognize the standards pertaining to the service quality and funding for your investment properties. Compare the prices that various property managers are offering and choose one that you feel is reasonable for you.
To reduce fees, you can leverage your portfolio
Keep in mind that property managers who base their fees on a percentage will frequently make you a special offer in order to entice you to bring your entire portfolio to them if your investment property portfolio consists of a large number of properties. This is something else that you need to keep in mind because it's important.
Take into consideration the possibility that you own two investment properties but the proportion of property management costs that you pay is the same as if you owned only one. In that instance, you can use this to negotiate a decrease in the amount you're required to pay.
This merely adds another layer of complexity because, when your portfolio is large, it can be more difficult to determine whether or not you are paying a reasonable amount in property management fees. This can make it more difficult to determine whether or not you are paying a reasonable amount in property management fees.
Should you haggle over the cost of property management?
You should be aware that there are potential downsides to negotiating a decrease in the property management fees. If you do so, you will almost certainly experience a decrease in the level of service provided to you, unless you and the management of your property specifically agree that this is not the case.
Be aware of these dangers as you consider negotiating the rates for the administration of your property. If you are skilled in the art of negotiating, you may make an offer to the other party.
How are property management fees negotiated?
You might not be comfortable negotiating a change to your property management charge schedule. It's frequently simpler to deal with in writing.
It would be to your advantage to make it abundantly clear to property managers that financial considerations are a primary factor in your decision-making process. They have to be aware that it is one of the variables you take into account when selecting your property management and that you want them to make a favourable impression on you as a result of the selection process.
Cost and value for the money was cited as the primary source of dissatisfaction by 42 percent of the 3,000 owners of investment homes. Because of this, your property management should not be surprised if you are looking for a fee that is both reasonable and transparent.
Alternative: a set, flat fee for property management
Working with costs that are based on a percentage can be chaotic, confusing, and challenging. Additionally, you may not feel confidence in your ability to negotiate property management rates. Because of this, we recommend that owners of investment properties search for property managers who offer a pricing that is consistent across the board and includes everything in it.
Flat fees are a huge step towards greater transparency and simplification. There is no longer a requirement for you to carry out an exhaustive search of the numerous add-ons and concealed extras.
This eliminates the possibility of conversation, which isn't always a bad thing in every circumstance. It merely suggests that the property manager is forthright about the fees that will be incurred while making use of their service model to manage an investment property.
In addition, it makes more sense to charge fixed rates for property management services rather than costs that are based as a proportion of the rent that is collected.
If you discover a property manager that is willing to provide you with the same level of honesty and transparency, you won't ever feel the need to fight over the costs that they charge for managing your property!
How to Know What's Fair
What is the price of a property manager? What is covered by the charge for property management? And where does my money actually go?
Perhaps you've only recently begun considering employing a property manager for your growing portfolio. Or perhaps you already have a property management and are wondering if the fee you're paying is fair. We are aware of how challenging it is to identify clear information on property management costs and choose the finest service from the many accessible possibilities.
We'll look into the mysteries surrounding property management fees in this post and show you where your money is going. You will know more about property management costs and services by the time you finish reading this article, which will enable you to make more intelligent choices.
The traditional property management pricing strategy
The typical fee for property management is a commision of your weekly rent + GST. However, it might be challenging to estimate how much you should budget or the typical cost of property management. This is particularly true if you're looking for a property management for the first time because a variety of factors could affect the price you pay.
One of these criteria is the location of your property. The average property management cost in Sydney is 5.5 percent, while the average fee in Melbourne is 6 percent. However, you'll discover that Perth property management rates quickly reach the 8 to 10 percent area. You'll find that even within the same state, properties in desirable metropolitan regions have lower management costs than those in rural areas.
The fact that property management fees are variable is another aspect. Owners who are managing numerous homes frequently have the ability to negotiate a reduced price. Additionally, single owners can decide what is included in the base charge to reduce any "additions" that will end up costing more in the future.
When you want to compare property management costs and shop around for the best price without giving up your personal information, it can be challenging to locate accurate, current information on the average pricing. These are the only reasons for this.
What is included in a property management fee?
What precisely is covered by your property management fee? For ongoing, necessary property management services, many traditional property managers bill tenants on a percentage of the rent, with additional costs for extra services.
You must thoroughly read your property management contract before signing it to ensure there are no hidden fees that will end up costing you more in the long run and to comprehend the price schedule.
Given that each property management company has its own policies regarding what is and isn't included, it is difficult to say what typical property management fees would look like. Therefore, while comparing rental property management rates, you must carefully read the property management contract to understand what you're consistently paying and what additional costs you might later be required to pay.
The following services are ordinarily covered by your ongoing property management fee (calculated as a percentage of your weekly rent):
- Collecting rent and pursuing unpaid debts
- Coordinating and overseeing the settlement of invoices, council fees, strata levies, and other ongoing expenses
- Arranging for the property's upkeep and repairs
- Keeping you informed about legislation and policies that may have an impact on you
As some of these services may incur an additional fee, we advise keeping an eye out for them:
- Leasing fee - Usually a week or two's rent. Receiving and evaluating applicants, negotiating lease conditions, and concluding the contract are all included in this.
- Advertising/marketing fees - On average, this can cost $300. Your property manager should arrange for expert photography of the property as part of this cost, create the listing descriptions, and publicise the property for potential tenants.
- Inspection fees - For routine property inspections, some property managers will charge you an additional fee. This is done to make sure the tenant is maintaining your house properly and to look for any prospective maintenance issues.
- Tribunal preparation fee - Many property managers will charge extra to produce the documentation you need for the Tribunal if you reach this stage in the eviction process of a tenant. The price for this varies greatly; while it frequently costs more than $100/hour, it's also frequently sold as a flat fee.
- Annual statement fee - Roughly $55. This is the administrative cost associated with creating the financial year-end statements.
- Lease renewal fee - In most cases, one week's rent. Creating new lease agreements and providing guidance on rent price are involved.
- Admin fee - Roughly $11.50 each month. This covers various administrative expenses including postage, document photocopying, report preparation, the development of spare essentials, storage, etc.
These are all the basic responsibilities a property manager is required to perform, which is the main reason you would hire one in the first place.
Each property manager, however, will have a different pricing structure for their services, including what is included in their property management fees.
Even while your monthly property management charge may occasionally be extremely little, when you add the additional costs of leasing and routine inspections, among others, you could be looking at paying hundreds more annually. On the other hand, you might pay more for an all-inclusive property management fee, but you won't have to pay an additional $100 per hour if you need to visit the Tribunal, for example.
How do you calculate property management fees?
There is a lot of uncertainty over how much you should actually be paying for a property management due to the wide range in costs. But regardless of the property's weekly fee, the effort involved in managing a property is essentially the same for a property manager.
Is it true that there is such a wide range in prices? And is it right that even though your property manager performed the same amount of work for you and your neighbour, you were paid different prices?
Property investor tips for the new financial year
The start of a new fiscal year is the ideal opportunity to review our financial situation, just as we do when we reflect on the previous year and make personal goals for the one ahead.
You should have a clear knowledge of where you are financially after speaking with accountants and filing tax forms. It's time to assess your plans, make any necessary adjustments, and establish goals. Investigate the following to position yourself for success:
Are you using the best accountant?
A good accountant can mean the difference between achieving landmark goals and stressfully flying blind due to excellent counsel. In the world of accounting, trust is paramount, but you should also be on the lookout for crucial characteristics and behaviours from your account that will motivate you to succeed.
From the beginning, your accountant should be creating a budget to support you in achieving your objectives. Throughout the year, you should regularly check-in to see if you're on track or if you need to reevaluate your situation. You should also make sure that your paperwork is being collected properly. Your accountant should be proactive and strategic rather than waiting for deadlines.
When evaluating your accountant, there are a few questions you should ask yourself:
- Do you enjoy working with your accountant?
- How does the price stack up?
- Does your accountant support your goal-setting and achievement?
- Is using your accountant for the end-of-financial-year process more user-friendly?
- Are you able to reach your accountant right away?
- Do you find yourself rushing to acquire the data you will need to give your accountant at the end of the year?
Are you getting the best value from your property manager?
Having all of your investment properties under one roof makes sense whether you have one, two, or many. The goal of your property manager should be to simplify your life.
- What are you paying should be the first thing you enquire about.
Many property management companies or real estate firms demand a percentage of your monthly rent. Since this strategy favours agents with higher-value properties, it may lead to the neglect of properties with lower rental income.
Property managers split their time equally among their portfolios under a set pricing model, which guarantees that every property is equal.
What services do you receive for that price, is the second query.
Have you taken a look at what your property management charge includes? Hundreds of contracts have been evaluated by us, and we discovered that many of them merely include a lease takeover and regular inspections in the monthly cost. Property owners are frequently required to pay extra fees for practically everything!
Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.
Summary
Are property management fees negotiable? Your ability to negotiate the cost of property management will depend. Not always the cheapest property management cost is what you want. Instead, you want something clear, fair, and transparent for both you and your property manager. We'll explain how to evaluate your eligibility for a fee negotiation.
If your investment property portfolio comprises of many properties, you might be able to leverage this to negotiate a reduction in fees. It's important to keep in mind that property managers who charge percentage-based fees will frequently make you a special offer to entice you to bring your complete portfolio to them. Working with percentage-based fees can be chaotic, perplexing, and difficult. We advise property owners to look for managers who provide a flat, all-inclusive price. Flat rates make more sense than property management fees that are calculated as a percentage of the rent you bring in.
The average property management cost in Sydney is 5.5 per cent, while the average fee in Melbourne is 6 per cent. Perth property management rates quickly reach the 8 to 10 per cent area. Owners who are managing numerous homes frequently have the ability to negotiate a reduced price. Each property manager will have a different pricing structure for their services. When you add the additional costs of leasing and inspections, among others, you could be looking at paying hundreds more annually.
There is a lot of uncertainty over how much you should actually be paying for a property manager. The start of a new fiscal year is an ideal time to review your financial situation. Investigate the following to position yourself for success. A good accountant can mean the difference between achieving landmark goals and stressfully flying blind due to excellent counsel. Many property management companies or real estate firms demand a percentage of your monthly rent.
Since this strategy favours agents with higher-value properties, it may lead to the neglect of properties with lower rental income. Property managers split their time equally among their portfolios under a set pricing model.