How much should you pay for a property manager? How will you know if you’re paying a reasonable amount for the services you’re getting?
Different property managers have different charging policies. If you compare one to another, you’ll notice how some property managers charge high for an all-inclusive package, while some offer low commission rates with higher additional charges. There’s no straightforward answer to which is better, but there is a way to evaluate them to get the best bang for your buck.
Managing a rental property can be expensive, so it’s important to compare the costs of different management fees and services. This article compares these two things to help you make better-informed decisions when choosing which property management company to work with.
How Does a Property Manager Charge?
There are two fee structures all property managers in Australia use:
- Percentage-Based Property Management Fees: Property managers charge a percentage of your gross weekly rent. The average cost varies between states, ranging from 5% to 12%.
- Flat-Fee Property Management Service: While less common, they can also charge a monthly fee. The average rate ranges from $80 to $250, largely depending on which state you’re in.
For both of these fee structures, the property manager should include the following costs:
- Management Fee:This fee covers the day-to-day responsibilities for managing tenancy. The property manager will collect and receipt rent and invoice funds, handle repairs and maintenance work, pay the outgoing costs such as the council and water rates, manage correspondence with tenants, and issuing breach or termination notices if required.
- Letting Fee: This fee is for covering the cost of finding new tenants. Often, this amounts to one or two weeks of rent. The property manager will hold viewings, interview prospects, complete the necessary paperwork and reference checks, and will collect and lodge the bond before the tenants officially start renting.
- Marketing Fee: This fee is for marketing your rental to source for new tenants. It can include listing the home online, advertising to tenant databases or advertising materials.
- Inspection Fee: It is important for a Property Manager with a trained eye to inspect the property up to 4 times per year to check for leaks, proactive maintenance to avoid bigger costs, and to hold tenants accountable for any upkeep or damage rectifications. These reports are not detailed like an ingoing or outgoing report but should provide photographic evidence of the ongoing condition of the property and any maintenance recommendations.
- Lease Renewal Fee: If your existing tenants stay beyond the original agreement and need a new fixed-term lease signed, this fee allows the property manager to do that for you.
- Ingoing Property Condition Report/Exit report: It is a requirement in most states to provide tenants with a property condition report on a prescribed form within 7 days at the start of their tenancy, and a final inspection report within 14 days of the end of their tenancy. These reports should be incredibly detailed with photographic evidence to both protect the owner and tenant from risk and liability. These reports can cost between $200-$600 depending on the size of property.
- Tribunal Fee: If an issue arises with the tenants and someone needs to take them to court, this fee covers the cost of representing you at the tribunal.
- Annual Statement Fee: This fee provides you with your yearly statement that shows all financials for that year. Some property managers will offer monthly reporting as well. Some property managers will offer monthly reporting or online management reporting as well.
These fees all depend on the level of service you require. For example, if your new property managers are coming on board in the middle of a lease, they shouldn’t charge a letting fee for finding new tenants.
In the same thought, if you see that a property manager is offering you a price that’s way too good to be true, they might exclude some of these tasks and charge it to “additional costs.” You’ll end up paying more than you bargained for to get the holistic service you expected. For example, they may charge extra for routine inspections, property repairs, or providing annual statements.
How Can I Compare Costs Between Property Managers?
It’s difficult to give a straightforward cost comparison of the different property management fees, as every agency has its own terms and inclusions. What you really need to do is review the contract carefully, so you know what you’re paying for and what services you won’t get.
In my opinion, the bare minimum property management fee should cover the following:
- Collecting rent and following up on arrears (debts and missing payments)
- Managing ongoing bills such as council rates and strata levies
- Keeping up with repairs and property maintenance
- Updating you on relevant legislation and laws
Then, my advice is to check if these common add-ons are part of the contract or not.If they aren’t charging for these services, will they actually do it?
- Management Fee: Cost ranges per state and charged either as percentage of total rent collected or on gross rental collections (including invoices paid by tenants). The later can be much more costly especially if it’s a higher all-inclusive rate, so definitely check how the agency charges.
- Leasing Fee: Typically equivalent to 1-3 weeks rent
- Marketing Fees: Around $300 for advertising your rental
- Inspection Fees: This fee can vary between $40-$90 per inspection, and frequency should be 2-4 times per year.
- Tribunal Fee: Either a flat rate or around $100/hour for processing an eviction and representing you in court
- Annual Statement Fee: Additional $50-70 for preparing statements
- Lease Renewal Fee: This fee can vary between a flat fee to an equivalent of 1-2 weeks rent. for preparing lease contract renewals
- Property Condition Reports: Between $200-$600. These can be very time consuming for unexperienced inspectors, so it is recommended to ensure costs are set based on size of property, not on a per hour basis.
- Admin Fee: Roughly $6-15/month for postage, photocopying, as well as travel, bank charges, printing, postage, telephone, internet, etc..
Regardless of what services you’re looking for in a property manager, you need to go through the proposal with a fine-toothed comb, so you won’t be surprised if anything is missing, overpriced, or inapplicable. Doing so makes it easy for you to compare property management prices and find your ideal agency.
How Much Can I Expect to Pay for a Property Manager?
While charging policies vary per property manager, it also greatly varies per state. Here is a chart that shows you the cost comparisons of each state in Australia:
|Other Fees||Additional Information|
|5% to 12%||Letting fee is 1-2 weeks rent in Sydney and 4 weeks rent in rural NSW||Lower fees are available in high-density areas; higher fees, particularly in rural areas|
|7% to 12%
(Brisbane is 9%)
|Often separates rent collection and management fee; letting fee is 1-2 weeks rent||Average property management fees available in the suburbs; both flat and percentage-based structures are common|
|5% to 10%
(Melbourne’s inner suburbs is 6%)
|Letting fee is 1-4 weeks rent in Melbourne and across Victoria||Melbourne is a competitive area with relatively low property management fees; those that offer less than 5% are “bare-bones” managers with minimal services|
|9% to 15%
(Adelaide metro areas are at 9% to 11%)
|Letting fee is 2 weeks rent across South Australia||Said average fees usually only includes general management and can charge extra for inspections and repairs|
|8.5% to 11%
(higher in regional or rural areas across WA)
|Letting fee is 2-3 weeks rent across Western Australia||Property Condition Reports may add a thousand dollars to your annual fee; make sure to ask for the full list of possible fees|
|6% to 8%
(higher in regional ACT)
|Letting fee is 1-2 weeks rent across Australian Capital Territory||Lower fees are available in Canberra metro areas; higher fees, particularly in rural ACT|
|5% to 10%||Letting fee is 1-4 weeks rent across Tasmania||Lower fees available when closer to Hobart and other key cities; higher fees, particularly in rural areas of Tasmania|
Don’t Sign Until You’ve Double Checked Everything!
Price isn’t everything when it comes to choosing a property manager. But based on my experience, I’d rather choose one that is fully equipped (and paid!) to completely manage my rental properties instead of finding out half way through a tenancy that an overworked, unexperienced Property Manager has not been keeping a close eye on the details that end up costing a whole lot more to fix. After all, property managers are supposed to make your life easier.
Our team at Benchmark is more than willing to help you with property management. Get in touch with our expert property managers today for more information using this link.