Management Fees as a Percentage

Like many products or services, Management fees as a percentage can be a poor indicator of actual cost.

The first question many property investors ask is "what is your management fee?" The second question, “how much rent can you achieve?”

The most important aspect to consider when trying to achieve the ‘best deal’ is to understand the long term effects rather that the short term costs. You should also look out for hidden costs that will often be the difference in percentages from one organisation to another.

Below are a few factors that effect the return on investment and the true cost of management:

Vacancy Rates
If a property manager quotes you a low fee and a high rent it can cost you more than you think long term. A vacant property is the most costly mistake of all, just 4 weeks vacancy can equate to an additional 1% in management cost! Be sure that the rent appraisal is substantiated by asking for a list of recently rented properties as a comparison.

Hidden Costs
When you add up all of the ‘extras’ like postage & sundries, lease renewal fees, advertising expenses etc, this can add another 3-4% More if it is advertised long term. When you ask a dangerous question like “what is your management fee” Be prepared to dig deep and ask for a TOTAL cost to manage per annum and you may get a very different answer!

Value for Money
How often is the property inspected? How thorough is the report? Are maintenance items dealt with promptly to eliminate long term damage? Are rents monitored regularly, is your agent experienced in all areas of legislation requirements, how often is the rent reviewed and increased? Do you receive value added advice from your property manager in relation to risk management and maximising returns?

My advice is to be prepared to ask a the right questions and choose a property manager that you trust has the skills and the experience needed to effectively manage your valuable asset.

For a checklist of questions to ask a potential property manager, contact our office for a FREE copy, it could save you thousands.