Bundling multiple IPs with 1 PM?

This one's been on my mind for a while ever since one of my PMs mentioned that he'll knock the management fee from 5.5% down to 5% inclusive of GST if I moved my other IPs under his management.

I have a local agent for each IP at the moment, with management fees ranging from 4-7% (NSW).
4 in Sydney and 1 up in the Central Coast.

I'm curious to know for those who have 2 or more IPs in any city, do you have 1 local PM per property or give multiple IPs to manage under a central agent? What were the factors in your choice, either way? Are there factors I've missed that are worth calling out?

My pros and cons list is below. There's alot of factors which are hard to put a dollar sign against, which can easily offset the ~$500 per IP annual saving on paper. eg, property being vacant for 1 extra week.

Pros:
- $500 (reletting scenario) and $700 (lease renewal) cost saving per IP per year given his rate discount offer.
- single point of contact for all requests, consistent ownership statements and EOFY reports
- the preferred agent is a solid performer

Cons:
- The preferred agent is a small shop, if he's unable to work because of holiday or illness there's not many people to take over what he does.
- Loss of local market knowledge in other areas from both a PM and selling angle.
- Potential loss of walk-in prospective tenants (during reletting) and buyers (during selling) interested in the area.
- PMs manage multiple units within the same complex and hence build up a relationship with the building manager and strata. Heavier weight behind enquiries or requests that affect all?

Let me know your thoughts on this, or your personal success or warning about this bundling idea.

 

We got 11 town houses in 2 different complexes managed by the same agent in Brisbane.

Much easier than spreading out over multiple agents.
Better management rate.
Only 1/2 week rent letting fee.
Single point of communication.
Simply more bargaining power.
I've had a few issues but had them resolved.
We've probably been reimbursed about 5k in the past couple of years from the agency due to non collection of some utility bills.
Don't think they'll be making that mistake again, and it's the leverage which helps get things resolved in your favor in cases like this.

If problems ever get bad, I'll just move them all to another agency rather then spread over multiple managers, don't have time for that.

 

Thanks @Ace in the Hole. Good point about having that option to move everything to another agent if the current one drops the ball.
Half week letting fee sounds epic... Will note as something to push for while factoring in that fees in NSW may have differing benchmarks to Brisbane.

If you don't mind, by how many % did your management fee go down when you bundled your IPs with that agent?

 

Can't remember how much the bulk rate reduced as it was set up years ago.
Probably in the vicinity of 1% based on multiple proposals when we shopped around.
The 1/2 weeks rent letting fee helps a lot at times.

I think we're paying about 6% + gst for full service in Brisbane, which is more than what we pay in Sydney.

 

Only have 2 ips managed by the same agent. It's easier in term of communications and admin. There's discount for bundling of course however it's usually better to be with competent PM with slightly higher fee than cheaper but just ok one. You'll also have more negotiating power as they know if they screw up they might lost multiple properties.

 

Mine are all with the same agent, but they all are within their service area.

Are the properties near each other?

 

^^^This...or I may as well manage myself

 

They're within 10-15km of each other, or 30-40 minute drive. One's out of town which I'll likely keep as is given having a regional agent in that area is better.

Currently some agents are as close as being down the road from the IP or at most 1 postcode out. The boots-on-the-ground insight is the main reason I've kept the current setup.

 

I bundle where properties are in the same suburb - keep it local while getting scale & negotiation benefits.

 

Walk-ins? Maybe 15 years ago, nowadays they're tyre kickers. You don't need to have a shopfront - Domain or RE.com.au is the place to be.

 

To me, the important thing is not what % the PM fees are but how much money ends up in my bank account.

The amount of money I get is more dependent on minimising vacancy rates and maximising the weekly rent tenants sign up for.

For example, on an IP whose market rental is $500 per week, a PM fee difference of say 1% (eg 8% vs 7%) is $260 per year.

That is, 4 days less vacancy in a year or $5 extra rent per week for 12 months. Any good PM should get you both.

Hence, I would rather pay a good PM say 8% than a mediocre PM 7%, no matter whether they manage one IP or multiple IPs for me.

 

Thanks everyone for your input. Having a good agent who knows how to negotiate for a good rent and get tenants in quickly makes solid sense. Got a bit to think over.

 

Pros:
- $500 (reletting scenario) and $700 (lease renewal) cost saving per IP per year given his rate discount offer.
- single point of contact for all requests, consistent ownership statements and EOFY reports - Definitely a pro, particularly having properties appear under the one portal. On the flip side, my properties that are managed by @D.T. also appear under our agency's portal as they are linked via email address. This also means that provided your PM uses the same software, they can all be linked even via a different agent.
- the preferred agent is a solid performer

Cons:
- The preferred agent is a small shop, if he's unable to work because of holiday or illness there's not many people to take over what he does. That is a con and honestly one which we considered at great length and make a big effort to staff. We close over Christmas for a few things, but PM never stops and we ensure we are still carrying out the job that we are employed to do by the landlord. In all honesty though, this isn't necessarily attributable to the size of the business as I know many quite large PM agencies who just close up completely over Christmas.
- Loss of local market knowledge in other areas from both a PM and selling angle. A PM should be using a data driven approach predominantly given the vast resources available on the net and it depends on their set up. If they have managers operating in a specified area but can manage your property far and wide using a systemised approach, I don't believe this is a negative. Until someone who is self-managing experiences the true extent of what a PM offers in a bad times, it's hard to truly value. Like an airline pilot, sometimes it's less about the day-to-day tasks (although these are many and varied) than it is about expertise in crisis management.
- Potential loss of walk-in prospective tenants (during reletting) and buyers (during selling) interested in the area. As Scott already mentioned, this is really a non-event these days. Approximately 98.7% of all letting is done via the internet.
- PMs manage multiple units within the same complex and hence build up a relationship with the building manager and strata. Heavier weight behind enquiries or requests that affect all? Enquiries comes down to marketing and price point. Applications come down to the flexibility of the agency and their leasing policy and getting "eyes on" your property. An agent who has a solid marketing approach and does private inspections at all times of the day will let your property faster than an agent who only does Saturday opens (an old methodology that definitely does not yield the best results).

Let me know your thoughts on this, or your personal success or warning about this bundling idea.
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I'll transition back to black here!

The consideration of the multi-property discount is subjective. For example, if you have an IP in Redcliffe, one in Logan, one in Toowoomba and one on the Gold Coast how many agencies will manage all of those for you, period? A lot won't because of the distances involved. This means that for an agency who will, it's almost a premium service that not many will offer and in actual fact, no discount should apply! If the agency is based in one location, the driving is much more, the letting process is much harder and most simply won't do it, even for no discount.

Having said that, we have deliberately set up our agency to cater for geographically spread properties owned by the same investor because it's something I value and have myself. We have PMs based in different locations to cater for it and although you will have the same PM assigned, it's an inefficiency we accept as part of our product offering. However our multi-property discount generally pertains to close proximity investments for reasons listed above. Properties in the same complex is very easy as yes, there are efficiencies derived from proximity and a discount is reasonable. My point is that it's somewhat subjective and shouldn't apply unilaterally, just because there are multiple properties.

 

Thanks @Andrew Hancock for that detailed reply. Most of mine are within driving distance so moving some of them is an option and they'll still be relatively local. I mention walk ins as that's what I did (after finding them on Google maps and booking some time to meet the PMs to pick their brains, compare against similiar sit down sessions with other local agents). Outdated for sure in this mobile-first world.

 

I don't understand why you've decided to use lots of different PM's. Wouldn't it be much easier to give a new purchase to your existing PM to manage because you've already chosen them to be a great and effective PM? All mine are with the same PM who I pay 4.4% and they're fantastic which is why I chose them in the first place. How is it beneficial to you by having loads of different PM's to communicate with?

 

You make an extremely good point about only having to maintain 1 relationship, this is very beneficial. Just be careful that at 4.4 that agency doesn't go under.

 

Totally only use local agent for each property .
I have learned this the hard way over the years.
Even if it costs a bit more as it will soon eat into yr profits if they have dramas

 

Not necessary so.

Depends what you mean by "loads".

If I had 10 IPs, then I would be happy with 3 or 4 PMs.

If I had 50 IPs, then I would be happy with 10 to 15 PMs.

If I had 100 IPs, then I would have one PM, on my payroll.

One of the main reasons I like to have multiple PMs is that you can compare one against the other on an ongoing basis - their quantity and quality of services provided, their customer service, the use of technology, ...

If one PM falls behind another, we have a chat. If they don't improve, we go elsewhere.

 

How does local change level of dramas?

 

Me too.
Has a lot to do with their knowledge base ie trades, etc. It just makes sense and am coming from my own personal experience.

If you are investing Australia wide as many on PC do clearly you will have PMs everywhere.

In US I now use 2 PMs because they cater for different precincts (Beltline and South) and local knowledge is imperative, otherwise I would be shooting myself in the foot.