This week I was speaking with a fellow with regard to managing a property for him and he mentioned to me that our fees were higher than a competing agency. It’s funny when you talk about fees, because it is rare that people sit down and really think about the cost to them in real terms, rather than the percentage figure. In this particular instance, the difference between us was $2.86 per week. You can’t even buy a decent cup of coffee with the amount that you are hoping to save. I did go online to see what I might be able to buy at Woolworths for this amount and I could buy a 205g packet of mac n cheese, or a single can of mother energy drink… realistically this amount of money doesn’t get you a lot over the course of a single week. The second thing to consider when you are asking me to drop my fees by as little as 1.1% so that I will match another agency, is that your income on the property is 100%. For example if your rent is $260 (which is the price that I am using in the above illustration) then your income is $260 or 100%. You pay me a percentage of this amount to manage the property on your behalf. When you ask me to manage, my income is the management fee. So in this case our fee was $22.88 per week. For me and my office this is my total income. Therefore, $22.86 = 100% for me. When you ask me to reduce my fee, then you gain 1.1% or $2.86, for me I lose 12.5% of my total income. This is not a comparative ask. The situation for this prospective client was that another agency had left him out of pocket with their management, and that this had cost him thousands of dollars, as he also did not have the correct insurance in place. For just $2.86 extra per week, he could employ our agency to look after his property properly. The other thing to remember when you are thinking about your fees, is that all the fees that we charge are tax deductible. So for the extra few dollars that you might pay, remember that you can claim this all back from the tax man at the end of the year as well – which makes it even more important to make sure that you have the right agency on the job and not be only thinking about what your cost is. The next thing that you need to keep in mind when you are thinking about fees is that some agencies charge extra for items. A good example of this would be where an agency might charge you a percentage of your repairs that are arranged by their office, as a fee. Another one is where the agency charges you for their end of year statement for your tax accountant. I can tell you that in our office, these prices are all included in our management fee, so if you are saving 1.1% by using them on a cheaper commission rate, but being charged for items that should be included in your management, as they are just part of our job, then I am pretty sure that you are not saving in the long term anyway. If you were charged $50 for your end of year statement and you had 3 repairs through the year of $300 each, then your fees to the agency would be increased by $140, which is pretty close to the saving that you made of $2.86 per week by choosing a lower management fee. We do have to earn our fee of course, I am not for one minute suggesting that you should ignore your fees all together, but it is important that when you are thinking about the fee that you are paying, you know exactly what it is that you are paying for. Some good questions to ask agencies could be ‘What has been your vacancy rate over the past 6 months?’ or ‘What is your current vacancy rate?’. You could also ask ‘When was the last time that you went to tribunal?’ or ‘How many times has your office been to the tribunal in the past 12 months?’. How about ‘What is your current arrears rate?’ or ‘What has your arrears rate been over the past 6 months?’. An agency that knows what they are doing, will have answers to these questions at hand. They will know the current market, they will know how the market is performing and how is has performed over the past few months. They will be able to give you an idea of current trends and what is affecting their market. Here is a list of some of the things that you can expect from our agency for our management fee: Ultimately what I am saying is that you need to see the value in the fees that you are paying. Our service needs to be of greater value to you than the fee is a cost to you. On top of all of this we have a very stable team of managers with over 20 years combined experience in the industry. If you wanted to have a chat with me about this particular issue, or you would like to discuss your current management and how easy it is to move to a new agent where our motto is ‘Property Management, Done Properly’ you can give me a call at the office on 63525125 or email me at tina.case@professionals.com.au
