The do's and don'ts of property management fees

Worthy property management services are about maximising your investment, while minimising your risk, meaning an excellent property manager is invaluable.

But have you ever wondered why there can be a such a difference in what property managers will charge to manage your investment property? What are typical property management fees? Should you go with the cheapest option or look for the premium price? And what exactly do you get for your money – what do your property management fees cover?

In this video, we provide some do’s and don’ts of property management fees on what to look for when shopping around for the management of your investment and how it is important to know how much your fees will be, what you will be getting, and where your money will be going.

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What does a good property manager do?

Not all agencies who offer property management services offer the same level of service. Having a professional property manager will help to maximise your investment, as well as reduce your stress. The duties and responsibilities a good property manager generally include:

• Assessing an accurate rental value of your investment property
• Advertising to potential renters and screening prospective tenants
• Accurate lease preparation, including condition reports and bond collection
• Inspecting the property regularly and providing updates regarding its condition
• Collect rent and ensure it is always paid on time
• Organise tradespeople to complete repairs and maintenance required at the property
• Organise and manage the payment of any invoices incurred with the property
• Liaise with the tenants and strata companies if necessary to deal with any issues that may arise
• Manage difficult tenants, including managing the eviction process if necessary
• Providing updates on legislation changes that may have an impact
• Conduct the outgoing inspection upon a tenant vacating, and release of bond

How much does a property manager cost?

As a general rule, you can expect to pay a management fee of anywhere from 6% to 8% of your weekly rent, plus GST. Services offered for this fee will vary.

When comparing property management fees and services, ensure you understand exactly what is included in each fee quoted. Some companies will offer an all-inclusive fee, meaning they bundle the above costs into a monthly charge. There is always the risk of this flat fee being increased to keep pace with inflation, and there can no incentive for the agent to ensure regular rent increases occur to keep pace with the market.

How do you calculate property management fees?

The best way to work out how to calculate your property management fee is to use a practical example. Assuming you own a property that is rented for $750 per week, you could expect to pay the following:

7.7% management fee (includes GST) of $750 rent per week is $57.75 management fee per week x 52 weeks = $3,003 per annum in management fees.

Are there additional costs?

Typically, real estate companies will charge extra for costs that come up from time to time. Extra fees may be charged for the following services:

• Leasing fee – usually 1- or 2-weeks rent, and includes processing tenancy applications, negotiating lease terms, and finalising the lease agreement.
• Advertising/marketing fees – charged when advertising the property for lease.
• Inspection fees – some property managers will charge additional fees to conduct routine inspections.
• Tribunal fees – an additional fee may be charged for preparation to attend a tribunal hearing, and attend on your behalf.
• Annual statement fee – an administration fee charged for preparing an end of financial year statement.
• Lease renewal fee – a fee charged to cover the costs of preparing lease renewals and advice on rent increases.
• Monthly administration fee – a fee that covers miscellaneous costs such as preparing reports, and document storage.
• Insurance claim fee – charged to oversee an insurance claim.
• Maintenance project fee – may arise if the property requires substantial work.

Every property management agency will have their own terms on what is and isn’t included in their standard management fee. We recommend you review the Managing Agency Agreement carefully, and obtain the full details of their commission and additional fees to know what you are paying for regularly, and what you may be required to pay for in the future, and ensure it is right for you.

Is cheaper better?

Paying a low property management fee sounds appealing. Generally, the lower the commission fee, the fewer services that likely to be included. Always read the fine print on what is being offered and factor in any additional costs that may be incurred when leasing, such as if regular routine inspections will be completed or tribunal attendance be actioned and at what charge (among other things). You may end up paying more than you budgeted for and you may receive a lower quality service than you deserve for one of your biggest investments. It should be noted that any management fees paid can be claimed at tax time as a tax deduction – speak with your accountant for more information.

If you're ready to discover how you can rent out your property with confidence, download our free Step By Step Checklist to Renting Your Property with Confidence.

YES, DOWNLOAD MY CHECKLIST

Selecting a property manager is an investment in your future. When choosing a property management agency, choose one that offers you a comprehensive and personalised service. Prepare a list of questions to ask your property manager to ensure you receive all relevant information regarding the services on offer. Contact us for a free rental appraisal or visit our rental services page for more information about how we can help with your investment portfolio.

We hope these tips have been helpful. If you feel you could benefit from our experience with property management, we’d love to hear from you. Simply reach out.  We hope that has helped you today. If you have any questions, we’d love to talk to you. Our number is 0426 264 771 or 0455 147 755. We look forward to talking to you soon.