While some property investors choose to go it alone, many use a real estate agent or property manager. If you choose to go this route, you need a clear idea of the property management fees you'll have to pay.
What does a good property manager do?
While there could be dozens of real estate agencies that offer property management services in your local area, not all of them will offer the same level of service. The duties and responsibilities that a good property manager will handle generally include:
- Determining the accurate rental value of your property
- Advertising to renters and screening prospective tenants
- Inspecting the property regularly and updating you as to its condition
- Ensuring that rent is always paid on time
- Organising trades to perform repairs and maintenance duties on the property
- Liaising with the tenants to deal with any complaints or issues that may arise
- Dealing with difficult tenants, including guiding you through the eviction process if necessary
Our guide to choosing the right property manager offers more detail on what to look for in a property manager.
How much does a property manager cost?
The fees real estate agencies charge for property management services vary depending on where you live and the agency you choose. As a general rule, you can expect to pay a commission of between 7% and 10% of your weekly rent plus GST, but the agencies we spoke to for this article quoted commissions as low as 4% in some areas and as high as 15% in others.
However, the services included in this commission vary between agencies. With some agencies, this fee covers 2 property inspections per year, weekly rent collection and maintenance (excluding insurance claims). With others, you’ll need to pay extra for some of those services.
It’s worth pointing out that the lower the commission fee percentage charged by your agent, the fewer services likely to be included as part of your package. Before selecting a property manager, find out exactly what services you are paying for and what will cost an additional fee.
Depending on the agency, you may need to pay additional fees to cover things like:
- Letting and lease renewal. The letting fee is usually based on the property’s weekly rent, often around 1 or 2 weeks' worth of rent but sometimes more. Lease renewal negotiation is sometimes included in this fee, but can sometimes also be charged as a separate fee of $25 to $100.
- Admin fee. This typically ranges from $5 to $10 per month.
- Tenancy database checks. Usually $12 per person.
- File preparation and tribunal attendances. Fees range from around $100 to $200 when there are disputes between tenants and landlords.
- End of financial year statement. $25 to $50.
- Lease transfer fee. This charge ranges from $0 to $500.
- Insurance claims (for example, if you have a landlord’s insurance policy and your tenants left without paying the last month’s rent). $0–$150.
Ask any prospective property manager for a full rundown of their commission and what it covers before you decide whether they’re right for you.
Pros and cons of using a property manager
Pros:
- Choosing a property manager allows you to take a step back and free up more time for yourself, which can remove a lot of stress from the process and allows you to rely on their experience and expertise.
- Property management fees are tax-deductible.
- You can rely on their expertise and range of contacts and suppliers when an emergency strikes.
Cons:
- The main downside is that property managers don’t offer their services for free and their charges are an ongoing expense you will need to budget for.
- You're not as hands-on and may have less insights into the day-to-day status of your investment, so some things could slip through the cracks.
Are there any cheaper property management options?
It's always worth asking your property manager if they'll negotiate on fees. They might be willing to offer a discount on the percentage they charge, or waive the monthly statement fees. You never know if you don't ask!
It's also possible to find some property management companies like :Different, which charges flat-fee rates, rather than a percentage.
We asked :Different Co-Founder Mina Radhakrishnan to explain how this service works.
"We provide clients with information in real-time through an owner app. That increases their involvement, while drastically reducing the need for phone calls and emails by as much as 70%," Mina said.
"We also provide our clients access to our property experts. They respond to maintenance requests, undertake routine inspections, ensure compliance, and manage leasing, among other things."
By automating and systemising the process of managing your investment property, :Different is able to reduce their overheads and charge less for these services. Currently, they charge a flat rate of $33 per week, regardless of how much you rent your property for.
"We get asked a lot about how we can thrive at that rate and the key differentiator is in our use of technology. We leverage our own tech to reduce lag time and human effort, which drives down expenses," Mina said.
"These savings don't come at the expense of personalised service. We pair each client with a dedicated property partner. That way, help and support are guaranteed when managing issues or conflicts involved in managing your property."
Hiring a property manager vs DIY
Julie Harrington has been a property investor for about 2 decades. Based on Sydney’s North Shore, she bought her family’s home in regional NSW from her father after her mother passed away, and decided to rent the property out following her father’s passing.
Going on a recommendation from a family friend, Julie chose a local real estate agency to manage the property for 8 years.
“When the last lot of tenants moved out I was left with a filthy property,” Julie explains. “Carpets uncleaned, a whole wall of tiles off the laundry wall, filthy hand prints all over every door and cupboard, mould-covered walls and curtains in a house that was never known to be mouldy – so the tenants must have had it shut up and heated like a furnace.
“I had to replace all the curtains, they stole my garden furniture and left me rubbish everywhere and an overgrown, weed-filled garden to sort out on a 1,075sqm block.
“It also came to my attention that if the tenants wanted something fixed, they called the plumber or whoever themselves and got the bill sent to the agent for me to pay. I was rarely advised of any repairs being done and knew nothing about it until I got my monthly statement from which they had deducted costs. This was despite asking the property manager on many occasions to advise me of repairs being done to the house beforehand.”
Julie was left thousands of dollars out of pocket and with a house that was “unrentable” until repairs were completed. “They had managed the property for 8 years and I really did not know what I was paying them for. Rent collecting was about all they did,” Julie says.
Going down the DIY management path
After such a negative experience, Julie made the decision to manage the property herself, and found her own tenant on Gumtree.
“You can get a Lease Pack from the newsagent’s for $15 or so, do the property condition report which you and the tenant agree to, lodge the bond with the bond board and that’s about it. As a condition on the lease I have the rent paid into my account by direct deposit to avoid late payments and chasing money. I do three-monthly inspections on the property and he emails me if there is anything he wants me to know.”
So far so good for this DIY property manager, who admits that if she ever employed an agent to manage a property again she would be interviewing them to find out exactly what they offer for their commission.
However, Julie also says that employing an agent is useful if you do not live anywhere near your investment property.
“You do need eyes on the ground and local knowledge for tradesmen,” she says.
“My advice would be to choose an agent who provides you with quarterly inspection reports and who has a property management team who are qualified and trained. Make them earn their commission. I enquired with another national name local agency and was told that they did do this. Their commission was higher than I was paying but I think it is worth it if you get your property looked after correctly.”
Traps to be wary of when choosing a property manager
The most important thing to remember when finding a property manager is that you choose an agency that offers value for money. You want an agency with plenty of experience when it comes to managing similar properties, but you also don’t want to choose an agency that manages too many properties and can’t offer personalised service and attention. Comparing a number of property managers and interviewing the top candidates will help you make the right decision.
Another issue to keep an eye out for is that some property management agencies charge a flat fee for their services. There’s always the risk of this flat fee being raised in the future to keep pace with inflation, while there’s also no incentive for the agent to ensure that the weekly rent charged on the property keeps pace with the rest of the market.
Last but not least, make sure you know exactly what you will get for your money before you choose a property manager.
Property investor? Compare landlord insurance policies and protect your investment
The fees real estate agencies charge for property management services vary depending on where you live and the agency you choose. As a general rule, you can expect to pay a commission of between 7% and 10% of your weekly rent plus GST, but the agencies we spoke to for this article quoted commissions as low as 4% in some areas and as high as 15% in others.
Hi, how much should an agent charge for letting fees and management fees in Dubbo please?
Hi Patricia,
Letting agent fees vary depending on the agency. It is usually based on the property’s weekly rent. Generally, it could be between 4% and 15% of the weekly rent plus GST. But it’s worth comparing from several local agents to get the most accurate picture.
Regards,
Richard
How much notice does a landlord have to give to inspect the premises?
Hi Patricia,
It’s worth checking specific rules in your state. But generally, unless entry is because of an emergency, landlords should give at least 7 but no more than 14 days written notice to enter the premises for routine inspections.
I hope this helps!
Regards,
Richard