Everything you want to know about property management fees and letting fees.
- How much are property management fees and what do you get for it?
- How much are letting fees and when do you pay?
- How much is advertising costs and who gets this fee?
- Do you need professional photos taken?
- Do you need to pay an account service fee?
- Are the fees negotiable?
- When do you actually pay property management fees?
- Can you change property managers if the agent is not performing ?
High fees don’t guarantee great service. Low fees will almost certainly be matched with low service. Most people are happy to pay a fair fee for a good service, but how do you know what the property management services will be like? Reviews on Google are a great place to start. You are also rarely locked in to an agent so if you are not happy you can easily change.
Real estate agent’s property management and leasing fees vary between states, suburbs, towns, and different types of property. Larger cities like Melbourne, tend to have lower fees. Managment fees for shorter stay or older properties (more repairs and maintenance issues) are usually higher.
Some agents provide an all-encompassing fixed dollar or percentage fee. Other agents break it down with a separate fee for each service or function. While a single fee sounds simple you may be paying for things you don’t need.
The separated fees ensure you are only paying for what you get. For example, if a tenant remains in a property for many years there is no leasing work so you shouldn’t be paying for it.
Quality advice from experienced property managers is free (included in the fees) but it is the most valuable parts of property management services. It can save you thousands of dollars and lots of head aches.
Let’ breakdown the 4 main property management and leasing costs or fees.
1. Property management fees.
The Property Management fee is the percent fee paid each month and is the main cost associated with managing a property. This is what the property management fee covers.
- Collecting and paying the rent.
- Following up late or unpaid rent.
- Attending to all maintenance issues including keys.
- 6 monthly property inspections.
- Servicing the renters and owner’s needs.
- Dealing with lease transfers and renewals.
- Reviewing the market rent and issuing increases.
- Facilitating safety checks for gas, electrical and smoke detectors.
- Working with the owners corporation on building issues.
- Assisting on landlord insurance.
- Liaising with the owners corporation on broader building issues.
The fee for these services is charged as a percentage of the rent paid (so obviously while your property is vacant there are no fees charged).
In Melbourne, property management fees are – 5% to 7% (+ gst) of the rent
2. Letting fees.
Finding and keeping great renters is one of the most important functions for apartment owners (and property managers). The process starts when your apartment is first prepared for lease, right through to the renters induction to your apartment.
Successfully completing all these steps is somewhat of an art form and is summarised as follows.
- Making the presentation pop. (incl doing any repairs or refurbishment)
- Setting the right rent.
- Creating an attractive online presence with great photos and social media.
- Messaging all matching and active renters on our database.
- Having lots of times available for people to book an inspection.
- Meeting and “interviewing” renters at open for inspections.
- Following up preferred renters and encouraging an application.
- Processing all applications with reference and financial checks.
- Obtaining the owners approval for the preferred renter.
- Recording the apartment condition at the lease commencement.
- Documenting and executing the lease.
- Receipting the bond and first month’s rent.
- Logging out the keys and completing the renter induction to the apartment.
The specific letting fee for this service is a multiple of the rent per week. For example, if the letting fee is 1.5 weeks rent, and the rent is $500 per week, the fee will be 1.5 x $500 = $750.
In Melbourne, leasing fees range from an amount equivalent to 1 week to 2 weeks rent (+ gst).
(Occasionally a higher leasing fee can be changed for a lease only service)
3. Advertising and sundry costs.
These are costs for engaging services mostly outside of the real estate agency.
They cost depends on the quality and level of exposure of the marketing. For example, social and internet advertising can be free if it is low level and very general. Targeted, quality and high-profile marketing requires exposure on the real estate portals and paid social media.
- Professional photography – $100 to $200
- Floorplan – $100 to $150 (if required)
- Internet advertising – $150 to $400
- many other real estate portals
- Social media / Google ads – $25 to $150
- Video walk-throughs – free to $200
During the journey of property managment there can sometimes be other costs such as
- Processing and payment of accounts such as rates, OC fees and maintenance bills.
- Cutting keys and ordering electronic fobs.
- Tribunal (eg. VCAT) applications, preparation and appearance fees.
- Landlord insurance claims.
- Gas, electrical safety checks and smoke detector servicing.
- Lease renewal fee (documenting a new lease for an existing renter).
- Preparing an ingoing condition report.
4. Do you need professional photos taken?
When tenants are looking for a new property they first search on their phone. They rarely read anything. They just look at
- Size and amenties
If you get past that they might then read about it and book a time to inspect.
If the photos are dark or unattractive in any way your property does not make the cut.
5. Do you need to pay an account service fee?
As an investment owner you want a full property management service. This should include paying all your bills which for an apartment owner will include.
- Owners corporation levys or also known as strata fees. (usually payable quaterly)
- Coucil rates
- Water rates (Wood Property will split this so the consumption charge goes to the renter)
- Saftey check charges (includes gas, electrical and smoke detector checks)
- Landlord insurance (optional)
- Maintenance or repair costs.
- Key cutting and electronic fobs.
The account service fee is for all these bills to be directed to Wood Property and for them to check and pay them out of the rent proceeds.
Each month your statement will then provide a physical copy of any bills that were paid.
6. Are the fees negotiable?
Yes. Fees are negoitable. It is a competive world.
It is important to understand what service you require and what fee you are prepared to pay for it. If you are changing property managers because the current one is no good, a new but cheap agent may also be sub standard.
7. When do you actually pay property management fees?
The fees (and bills) are paid out of the rent from your tenant so you don’t acually need to pay the fees to the property manager.
Rent is paid into the property managers regulated trust account. Once it has cleared ( about 3-5 days depending on weekends) and all the bills to be paid are entered the money can be disbursed. The rent is paid to the owner less the agents fees and any other bills that are paid to the supplier.
8. Can you change property managers if they are no good?
Yes… You can change property managers almost at any time.