Rental management fees – how much is fair?
Landlords are wondering, rental management fees – how much is fair? Since 1989, I have been hearing the ongoing conversation about what to pay for management fees of investment properties.
Across metro Melbourne we are seeing firms offering cost free periods and/or low fees like 4% excluding GST. The Buyer Solutions team questions what services are provided at these low rates. Our fees range between 6.6% and 8.8% on which we rarely compromise because the boutique service we provide is well worth it. As a small, experienced, diligent, thorough and responsive Property Management department we could not provide our service level for any lower cost.
In response to an investor asking what fees are appropriate for Property Management in Melbourne on a Facebook forum, here are some response comments which we found to be intelligent and on point.
“I wouldn’t base your decision on fees alone. The difference between 4% and 6% might only be $5, and there is a reason why a business will charge your 4% instead of 6%, they are desperate for clients, unlikely to manage your property the way a more expensive agent might, and ultimately costing you a lot more than $5 if mismanaged.”
“You should ask questions like how many properties are assigned per manager, what staff turnover is like, their complaints management protocols, maintenance protocols and how they vet prospective tenants. Those are the important questions to ask when shopping around. Cheapest is never best and agencies that value their work don’t drop their fees too low. Also ask to speak to some current clients.”
“Choosing an agent based on fees alone is not a smart move. The industry norm is 7% to 8% plus GST. There are agents that do it cheaper but you get what you pay for. Why would you trust your most expensive investment to amateurs? Shop around but look at portfolio sizes, how long team members have been at the company, is a Director really involved in the Property Management business or just sales?”
Analysing the cost benefit of paying lower fees for an investor client of Buyer Solutions recently, we worked out that they could save $195 per year on 5.5% offered by another agent. After tax, this would drop down to around $100. Is the risk of poor service worth this small incremental cost? We don’t believe so. As one property owner above correctly commented, when things go wrong with investment properties it can be very costly. Good Property Management is pro-active and legally compliant at all times, minimising the risk of cost for Landlords.
If you own an investment property or plan to buy one in Melbourne, we would be happy to send you’re the Buyer Solutions rental information pack so you can compare service offerings.
Should you wish to move management of your investment property into our care, we make this transition easy and pain free.
+61 39816 8555