Excessive PM Costs???

Hi Tim,

Property Management costs vary from town to town, manager to manager in NZ. I think 7.5%-10% is about statndard. Some charge a flat fee of x% of the rental which includes everything from maintenace, inspections, etc… Others may charge you the x% extra on any maintenance, bills, etc.

Has the manager given you a reason for the increase? Also, the manager would be contracted to manage the property for you. Their fees and charges would be in the contract you signed. I’d re-read the contract and see if it says anything about fee increases, a discount period maybe?

There are two things you can do:

a) Negotiate with the current manager for a better fee

otherwise

b) They lose your business, and you can find yourself another manager. Having said that, if the manager is good and does their job right, it may be a better idea to stick with them and put up with the extra costs.

Regards,
Ozi

Hi Tim,
Your situation sound similar to mine some time ago.

I bought a Property Investment (PI) off an existing investor who had multiple properties through the Property Manager (PM). As I only bought one PI of this investor the PM tried to raise his management fees, with good reason. I was successful in retaining the low PM fees (7.5%) only because that same Real Estate agent was also the selling agent and I threatened to move to another PM agency.

To answer your original question, yes PM’s fees generally about 10% in NZ, stepper than Oz. However, do try negotiate lower figures, I always do and if I fail I try again. My success rate is 75% of PI’s are on a lower that 10% PM fees through haggling.

Good Luck

Cheers
GeoffB

Hi Guys

Although I think it is great to get a discount, I count my property manager as perhaps THE most important person on my team after purchase to ensure the property performs as expected. Therefore, I don’t try to discount the fee, until I have three or more properties, where you could argue that they have less admin.

I wouldn’t like to give my property manager any reason not to treat me as an absolutely #1 priority client. I am not sure that saving a few bucks a week wouldn’t have a potential negative effect on the service you might get – a possible ‘psychological effect’ on your rental manager, who, once screwed down in price, might feel that you don’t value their service, – and then not give you the best service.
Perhaps is not worth it in the scheme of things.

I run a business and occasionally people try to negotiate my fee down. The result is that I feel less inclined to help them, not more inclined.

However…if your tenants are on a lease, or your properties are absolutely top notch, or your rental manager is screaming out for rentals, then perhaps it is different and you do have grounds to negotiate. I mean, of course, negotiating is all part of the game. However, I would prefer to get larger discounts on larger purchases, which fund the smaller expenses. An extra $1000 negotiated off a 100k house is only 1 percent – but you will never see the vendor again. but negotiations with your property manager, who are making sure you get paid every month, (cause then they do too) – if those negotiations go wrong, they will bite you on the bum every month potentially! Your relationship with your rental manager is absolutely KEY. surely this is the one area not to scrimp on, and ‘buy quality’??

Re 10 percent surcharge, hey, $20 fee to organise a $200 new hot water cylinder is fine by me. What, you want to save $20 bucks, ring around, get a quote, by the time you’ve made a few phone calls, getting a quote, sending an email, arranging access for the tradesperson, making sure it happened, not knowing if it happened properly because you are overseas, transferring money to pay the bill, getting the bill, printing it out, filing it in your expenses file – how much time and money have you spent?

isn’t it SUCH a good deal to have someone do this for you for $20 bucks?

I’m sticking up for the rental managers, working at the coal face, they get the grittiest job of all which is screening and managing tenants, and ensuring you get paid. look after them, I say!

cheers-
Mini

Hi Barb,
Valid comments, as always.

Property Managers still can give you quality service at 7.5% to 8.5% instead of 10%-11%. I manage to been treated as a quality client by the PM’s through dialogue, i.e. Keep a in contact with PM and a relationship of trust (so far it’s working…).

In large towns like Invercargill where PM’s could have 200+ properties on their books, the PM is not going to treat you any differently to there other 199 properties, however in small towns where everyone knows everyone else then your philosophy of quality is spot on.

Unfortunately, I don’t have the luxury of multiple property investments PM discounts as I diversify my properties by investing in different areas. In NZ I save $600.00+ per year by reducing my PM fees by 1-2%, that’s equivalent to a hot water service per year.

P.S.
Sorry I didn’t catch-up with you at the Carlton Crest last Thursday, was a very long day for me…

Cheers,
GeoffB

Property Managers who are part of a Real Estate Coy charge from 6% for more than 3 properties to 8.5% for a single property. Some charge 10% which includes 3 monthly inspections and no charge for Tribunal Time. All of these charges plus GSt so whatever the rate is for Managemt is the rate charged for R&M as well.
A member of a Real Estate coy can charge a tenant a weeks rent plus gst as a letting fee. This is illegal for Managers who are not in the Real Estate industry( until the law changes within the next 12 months) so they may also charge landlord a ‘find a tenant fee’
Other charges can be Property Inspection fees from $0 to $20 to $35 upwards.
In Some areas the PM’s deserve 10% as the properties attract the types of tenants that need a lot of time. In monitoring or replacing tenants etc.
How do I know? I have worked as a PM in REal Estate coys and now work as a private PM.
If a landlords priority is ‘make the money’ then I won’t deal with them. Yhis is a customer based business and the customers are the tenants and the landlords. TO make it work well need good landlorda and good properties to attract good tenants. I know that for some ‘the figures’ are all that matters but that may be false economy if you get high turnaround of tenants.
As in any business there are good, bad & ugly.
For some it is just get them into the place and get the letting fee ( againa & Again) Others know that getting a good tenants saves time, costs and retains a good relationsip with the landlord who just may have another few properties which need to be manadged. A PM who is more than 30 min drive from you Investment may not always be the best option as they won’t alway be available to show tenants a property and so the place can be empty for longer than you want. Downtime costs more than management fees. So perhaps look for a company closer to the Investment. If a PM handles more than 50 -60 proeprties without help ( like pa or accounts person) then they won’e be doing a good job. Anyone manageing 200 properties how do they handle the inspeftions ( unless they pay someone else to do it) 200 every 3 months = 1000 inspections per year which equals 83 inspeftions per month = 4 per working day each month. Do they have time for anything else?
For a Pm to raise their fees there should be a review clause in the original agreement and if there is not agreement then you don’t have to give them a month’s notice just get the bond assigned to another PM.
I agree that PM can make or break your investment.

No problem!
The last reply was 2 years after the previous one!!! This thread was started in 05!!!!!