Hi All,
I would like some input on property management fees. It seems to me that by the time that you add everything in to the equation, i.e. Letting Fees, Management Fees, Inspections etc. that you are paying between 20 – 25 % of your rental income to the property manager, not to mention rates, water and maintenance.
If you have a property that you purchase at $60000 and rent at $120 per week, which fits the 11 sec rule, there doesn’t seem to be much left. It seems to me that you almost need to get a 14 to 15% return for it to be a cash flow positive investment.
What do people think of managing your own properties? Obviously you can’t with properties not in your area, but what about those that are??OR AM I TALKIN TO THE WRONG PROPERTY MANAGERS??
HELP!!
G’day Stevod…
Your property management fees should look something like this…
On a rental of $120 pw x 52 = $6,240 Gross
1 weeks letting fee……..$120
Advertising…………….$ 50
Bank/admin fees…………$ 60
7% Mgt fee (51 weeks) $430Total………………….$660 pa = 10.5% year1
If Tenant stay on…then no extra letting fee or Adverts. 7% of $6,552( 5% increase) ie $126 pw
= $458 + $60 Admin….
While tenant remains…Annual cost to you $518pa
and that equates to 7.9% of Gross rent received.If it’s as you say, with add ons…inspection fees etc and you are paying 20-25% get another Agent. Are you sure your figures are accurate?
You can’t blame the Agent for the rates/maint.
Cheers
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]A good property manager saves you money!
I researched the REA in my area and chose the most expensive as my property managers @ 8.5%. Why? Because they distinguished themselves from the other REA in their quality service including by guaranteeing 3 inspections a year.
Ideally you would manage it yourself, but my properties are interstate.
Get a good tenant and you won’t have to pay letting fees until they leave.
Ben
Every contract I have signed with a PM lately includes a half weeks rent as the ‘re-letting’ fee. ie when the tenant signs another lease.
Is it me, or is it just in Canberra that this appears to be the norm now?
Cheers
MelOur onsite manager in SEQld charges half a week’s rent letting fee when the tenant renews for a further 6 months. I rang Dept Fair Trading Qld, was told it is legal. Seems a bit mean. Our Nth Qld manager does not charge. Our manager here (NSW) does not either.
Steveod
A good property manager does a lot more than collect rents and therefore should pay their way.By maximising your rental, keeping vacancies to a minimum, handling arrears and advising on refurbishments or repairs that will maximise your rent a good property manager is worth their weight in gold.
The difficulty is finding a good one. I have been investing in property for 30 years now and I have seen some good PM’s and lots of terrible ones. If you don’t think you are getting value for money look elsewhere.
In the balance of this long post I am going to going to offer some suggestions on how to find a good PM but before I do I must first make a disclosure. Pam my wife is the best property manager in Melbourne because she is an investor and understands what is needed and also becuas eshe cares.
OK I am biased, so here is my list of what to look for:-
To chose a good property manager you need to ask the right questions. Here are some to consider:-
1.Does the agency have a dedicated rental department and how many staff will be looking after your property?
Many agencies see property management as a “poor sister” to the more glamorous sales department and some even leave the management of client’s assets to the front desk staff and receptionists. Ensure that your agent has a dedicated property management department. It would be preferable that this department is staffed by a number of experts so that there is continuity of management in the event of one property manager being ill or leaving.2.Is a director / owner of the agency involved in the day to day management of the property management department?
Most agencies have a sales department and a rental department. Generally speaking the business owner has a sales background and not a rental background and looks after the sales department and leaves the management of their rental department to a property manager.This is because the sales department has a higher turnover and high income and the rental department has a lower income and is more intensive and difficult to manage.
3.How many years has the property manager looking after your property been working in real estate?
Note that I said property manager and not the agency! Don’t go to an agency just because they have a brand name…. it doesn’t mean their service is going to be any better.Many people start their career in real estate as receptionists and then move up to the property management department and some of the top performers move into sales. Yet some individuals chose property management as a career – this is the type of person that should be looking after your property and they should preferably have had 4 years industry experience.
4.How many years has the property manager been with the agency?
You should look for stability in your property mamanger. You want someone who will learn your property inside and out. You want to pick up the phone and talk to that person today, and in six months time you want to be able to talk to that same person. Due to the stresses involved in property management the staff turnover tends to be quite high. This is another reason why you should look for an estate agent who has chosen property management as a career.5.Does the property manager give you a written proposal?
Some property managers just go out and look at your property and say “OK we’ll put it on our books”
Look for someone who has put in the time and effort to present a professional image to you and give you a written proposal. If they make the effort to present their services professionally to you it is likely they will look after your property professionally also.6. Does the Property Manager just hands out keys or do they attend property inspections with prospective tenants.
If they just hand out he keys and let the tenant inspect the property on their own, move on to another agency. I’ve seen to many things go wrong with this approach, including one extreme case where a prospective tenant made a copy of the key and returned the key to the agent, got back his driver’s licence or whatever he gave for security and then used the copy key that he made to move in and squat in the premises without paying rent! It took weeks to get him out.
Also walking around the property with prospective tenant’s means that the agent has a chance to promote the property as well as an opportunity get to know the tenant a little better. It is amazing what will come up in general chat that would never be written on an application form!7. How many properties the manager looks after?
If a property manager looks after too many properties they won’t have time to devote the attention your property deserves. Many busy agencies have up to 200 properties per property manager and in general this is far too many to give your property individual attention. At some boutique agencies each property manager looks after about 100 properties. While these agencies may charge a little more for their property management services landlords find this extra expense translates to a trouble free investment that often produces a higher return.Michael Yardney
Metropole Properties
http://www.metropole.com.auHi Michael, An excellent post. My previous PM was excellent, but went on to bigger and better things (sales) same office. The new PM wasn’t performing up to scratch so a quick telephone call to the last one changed this. I followed this up with a call to the new PM and everything has been going excellently. What area of Melbourne does your wife cover?
C2
“Is it true the more you owe the more you grow until the bank steps in?”
Every contract I have signed with a PM lately includes a half weeks rent as the ‘re-letting’ fee. ie when the tenant signs another lease.Is it me, or is it just in Canberra that this appears to be the norm now?
Cheers
MelHey Mel,
I notice you are from Canberra. Do you have an accountant here that you can recommend at all. I haven’t done my taxes as yet and know I am goign to owe some money so want to minimise it as much as possible. Any advice would be greatly appreciated.
Thanks,
LuckyoneI am yet to do my tax return for this year [
]. I have been recommended from a number of sources, including this forum that Tony Commisso is very good. Others also recommend Dale Gatherum-Goss if you are willing to travel to Melbourne.Cheers
MelPS. Are you going on Saturday? There might be some others there who can give advice on people they have used.
G’day….
A good Accountant in Canberra is Anthony Curtis at Weston Creek…Coolamon Court…in phone book.
“Tony Curtis”…just like the actor!
Tell him Bill sent you…
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Hi Mel and LuckyOne,
I’m not certain about placing my accountants name out into the ether here. Don’t get me wrong, he’s been terrific with business, investment and wage issues. He even sorted out a $4,500 refund for my lady friend, after her previous accountant calculated about $250 !!
He is up to date with ruling changes. If you buy me a scotch on Saturday Lucky, I’d be happy to introduce you to him. (My only ulterior motive is the scotch by the way .. no spotters fee OK?) Hope you can make it.
Kind regards, Phil
Hi Michael, An excellent post. My previous PM was excellent, but went on to bigger and better things (sales) same office. The new PM wasn’t performing up to scratch so a quick telephone call to the last one changed this. I followed this up with a call to the new PM and everything has been going excellently. What area of Melbourne does your wife cover?C2
C2 Pam is a director of Metropole Property Management. When we set it up we decided to adopt a business model that was becoming prevalent overseas and just starting in Australia. Rather than a street front office we have a centrally located corporate office that covers most of metroplitan Melbourne. Currently this requires 3 property managers each specialising in a geographic region.
I am not sure of the etiquette on this forum, but if you want to know more you can see her website at the address below. If it is incorrect to post websites, I am sure the moderator will remove this part of the post.
http://www.metropole.com.au/mpm.htmMichael Yardney
Metropole Properties
http://www.metropole.com.auThanks everyone. This has helped alot. Getting back to the original reason for this post, one of the PM’s I contacted charges 9% letting fee of rent every time they renew the lease. EVEN IF IT’S THE SAME TENANT!!
I.E. Lease renewal for 6 months works out to the following. 26 weeks times $200 rent times 9% equals $468.00!!
Needless to say, I have since found better deals than that around.
Regards,
Steve.
Thanks everyone. This has helped alot. Getting back to the original reason for this post, one of the PM’s I contacted charges 9% letting fee of rent every time they renew the lease. EVEN IF IT’S THE SAME TENANT!!I.E. Lease renewal for 6 months works out to the following. 26 weeks times $200 rent times 9% equals $468.00!!
Needless to say, I have since found better deals than that around.
Regards,
Steve.
While the letting fee for new tenants tends to be a percentage and in Melbourne it tends to be 4% of the annual rental, most agents in Melbourne charge a FLAT FEE for lease renewals usually $100 or so.
Remember….
All PM fees are negotiable.Michael Yardney
Metropole PropertiesThanks everyone for your advice on accountants. I certainly need a good one to reduce my tax bill. E-tax gave me a bill of about $950 but I’m sure a decent accountant can lower that amount.
What’s happening this Saturday? I’m afraid I haven’t read anything on this forum about a meeting in Canberra. Can’t go anyway, unfortunately I’ll be in Sydney visiting the folks. Hope it works out well for everyone though.
Hi guys,
You wouldn’t happen to know of any good property managers in Canberra would you, who could look after a property in Gungahlin? I’m after someone who’ll take intimate care of the property as I intend on living in it one day. I’ve talked to a couple of real estate agents about their property management services, and they all charge 10%! Is this an appropriate fee in Canberra?
Thank you!
Hi,
In reference to property managers for Gungahlin I can’t recommend you a good one, but I can tell you to avoid Independent out there. I have never been a landlord of a property through them, but I have been the tenant for about 3 years (up until the middle of last year). They would have to have one of the highest turnovers of property managers I have ever experienced in my life. Literally everytime we rang up about something (which was about every 2-3 months) there would be a different property manager managing the property we were in and we would have to explain everything about the property to them again.Other than that, if you are really worried about the fees you can always look in the back page of the Saturday property guide and there are a few there who claim to charge 7.7% mgmt fee.
For our investment property we managed to negotiate down from 10% to 9% through LJ Hooker telling them that it was in their interests to give us a good rate as we will be buying many more properties in the future which if they treat us well would all be managed by them.
Make sure also that you look out for hidden fees. On top of the 9% mgmt fee there is also a signing of the lease fee (1 week’s rent), re-signing of the lease fee for existing tenants (1/2 weeks fee), inventory report ($50 each time), sundries ($7.50 per month, meant to cover postage however they e-mail the statements to me so I don’t understand this cost) + we had to pay for all the advertising. I think we could have got a better deal, but this was one of the few agencies we could find where the property manager had been there for more than about 6 months which was an important criteria for us.
Anyway, good luck!
Thanks luckyone, much appreciated! The Independant PG does seem to be a behemoth when it comes to these sorts of things, I was talking to three different RE agents at the same time once, from the same branch!
I’ll try and negotiate down some of these fees… I’ll hopefully be buying many more in future! Still, crikeys, seeing other places charge between 5 and 8% seems almost unfair
With regard to LJ Hooker, have they at least been very fastidious when it comes to making sure your property has been well maintained? That might justify the price.
Secondly, can you believe how much house prices in Gungahlin have shot up in the last 6 months alone?? My house increased in value by $80k! I’d hate to see how much land in the new Wells Station development would be going for.
Does anyone else have experience with property managers in Canberra?
Sincerely,
MalYeah, the Gungahlin house prices have certainly jumped up recently. We actually bought in Amaroo six months ago not expecting much of an increase in the price (we thought it had really peaked there) and the place has already been valued at $50,000 more than what we paid without really doing anything (besides the obvious for a new place of adding carpets and tiles, not many curtains as yet and no landscaping). Pretty good I think.
Wish I had known about cashflow positive investing back then though, I don’t think I would have bought in Amaroo then. Anyway, we’re probably going to cash in early next year and then buy a couple of IP’s and rent once again.
By the way, yes LJ Hooker are very particular about the rental property. After the first month they did an inspection and noted that the place was very clean (they implied that it was cleaner than how we left it) but that the tenants need a base for the bed in the 2nd bedroom (I don’t think that this is really something that can be enforced, but I suppose it shows how particular they are). As a general question, does anyone know if it is a requirement to have a base on a bed in a rental property (with the bed being the renters property, not ours).
Hey MalPatti
Head to Olims at 2pm this Saturday. there will be a few of us there who could probably share some stories about good and bad agents. Don’t want to risk any reprisals about what gets written on the forum!![
]Cheers
Mel
]. I have been recommended from a number of sources, including this forum that Tony Commisso is very good. Others also recommend Dale Gatherum-Goss if you are willing to travel to Melbourne.
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