Discount for multiple properties with one PM

Hi all,

I am interested to hear whether others would expect/have negotiated a discount with their property manager for placing multiple properties with the same manager (putting aside the pros and cons of having all you propertied with one PM, which has been discussed in other threads)? If so what discount was secured and for how many properties? I imagine either a reduced % fee, reduced letting fee or other discount would be appropriate.

I currently have two properties with the one PM and am about to engage a PM for the third IP, with a fourth to follow shortly (and more in the future). All IPs are in the Perth inner metro area, with some being next door (agent covers entire city). For me the discount is not so much about the cost savings for them, which I imagine would be minimal (aside from some efficiencies for having one owner contact point) and more of a 'loyalty discount' and incentive to keep my growing portfolio with them.

Thoughts?

 

Plenty would because they want the business. They shouldn't though - there's not really any efficiencies gained, still have to do all the leasing, routine inspections, phone calls, emails, negotiating issues with tenants etc.

Also reduces the value of their agency.

 

I don't disagree, though in any business there is (by necessity) a certain profit margin built into the 'standard pricing'. Similarly, there is a certain cost to attaining new business and keeping current business (be it advertising, client relations etc). The question then is: what reduction to the standard pricing (ie hit to the profit margin) is sustainable in order to maintain or grow business?

Given you run a property management company, it is safe to say you know more about this than me @D.T. (!). Nonetheless, I don't think I would go as far as saying that it is always a bad idea for PM firms to reduce fees for larger portfolios.

Anyway, this is sort of getting away from the original question, though it does relate to whether it is reasonable to expect a discount.

 

I gave 3 of my Sydney properties to the one agency. Normal fee is 6.6% and I'm getting 4.4% for the grouped business. The others arent geographically realistic so they have their own local agents. No downsides as my agent is pretty switched on.

I had a post here maybe 2 years ago detailing my enquiries and asking other users here before going ahead.

 

As a loyalty reward and the business given to them (ie they didn't have to advertise/convert sales etc) I would expect up to 0.5% off

 

Haha yeah that was actually the thread I was referring to @Zoolander .

Wow, 2.2% discount is massive. I was expecting more like the 0.5% mentioned by @Westminster below, and maybe letting fee down to one week. Good job.

 

Some efficiency is gained and I doubt it reduces the value of their agency. One agent grew to six agencies and I was with him throughout that time, won awards too. Also for agencies being heavily reliant only on sales, in tough times property management income can help with cash flow or even survival.
I have given one agent to manage our block of 6 units, one place, and I do like that they do offer % discount and exclusion of some fees!
However that is not the most important aspect to me, but rather how they manage, their advertising, collection and late payment process, cashflow, reporting, maintenance and repairs. I communicate with them my expectations as I like to be an active not a passive owner.
I also reduce everything that doesn't suit me (contract timeframe, fees, %, etc...) not really a template as different states and agents have different contracts or expectations.
I don't wish to reveal too much but I have now less agents, let's say few even within a state, as I don't wish to give one agent all the business, the same concept as loans with the banks, that way they stay on top and you can negotiate better, as they may gain future business or lose theirs, right? However, that really depends on the number of IPs...

 

So, for those interested:

I have heard back from my current PM, who has advised they do typically reward clients for signing up multiple properties, with tiered discounts for clients with 3-4 properties, 5-7 properties andnso on. In my case (three properties) they are happy to offer a 0.5% discount, plus waive the $44 annual financial summary and $6.60/mth admin fee, for all properties. For me this represents a savings of around $650pa for the three properties. Not huge, but better than nothing for a company I am happy with.

Moral of the story: “don’t ask, don’t get”!

 

+1, well done, sometimes it is all that it takes, just to ask!

 

Monthly admin fee? You mean more than the commission off the rent?

And $44 for a end of year printout???

FWIW, I have just received all of my end of year statements, and they all cost me the price I would expect to pay for an automated email.

Don’t get rolled by greedy pm’s!!

 

Expensive? Yes. Greedy? Maybe, maybe-not. I knew when I signed them up the first time they were far from the cheapest in town (in fact, I think they are close to the most expensive)! I've always been of the opinion that: most PM's are relatively 'expensive'. A lot of them are expensive AND pretty average. I'm happy to pay a bit more for 'more expensive BUT excellent'.

 

Yes the agents are likely to give you a reduced fee. Unsure for residential but for commercial around 0.5%.
There are efficiencies for the property manager, for one, less landlords means less people to contact, and property management is a lot about time management.
Also if they know you as a landlord and like working with you then your 'business' may be worth more to them than buying the rent roll of another agency with very difficult landlords.
Finally, I know it sounds lame but it is actually true=if you have one landlord then that is just one email to detail repair requests, rent arrears updates etc., one port of call is much easier.

Imagine a property manager's portfolio being of just one landlord's properties. All one would have to do is know that landlord really well, and it could run so smooth and easy-e.g. know when to call about repairs and which repairs not to, know when to call about rent arrears, organising insurances all due for renewal at the same time

 

Also there is only one relationship to build/maintain compared to multiple relationships.

As in one owner with four properties is much easier to build a stronger relationship than trying to build a relationship with four owners having one property each.

Even if there was a KPI to call the LL once every six months as a touch base - the difference for the above situation would be 2 calls vs 8 calls or an additional 6 calls to make in a year - less cost to business means there is also a potential of saving for landlord.

Along with other benefits for the agency if two properties have an issue each it is only one call for the LL compared to two.

Note - we got 1% off along with other fees removed for bringing 3 properties as a group.

 

This is all well and good when the agency is on the pulse, but if not, your problems could be multiplied by the amount you have with them. Consequently the discount will pale into insignificance.
......putting all your eggs in the one basket comes to mind.

 

Somewhat agree with Taj, although it depends on what they are managing, for rural or special properties with high management commission sometimes the problems are still less than commission saving. E.g. with a rooming house the commission is reflective of all tenants rather than just one and they typically have high commissions so sometimes saving can be worth it.

 

If the PM is good then not really an issue but yes if they are bad/change then you go looking again...

Also if you have multiple properties but some are clustered in an area a good PM can manage but you are divsersified with other areas as wellyour eggs aren’t in the one basket.

I wouldn’t recommend someone buys property in the same area just to save on PM fees - it is really such a small saving it really shouldn’t influence your decision on where to purchase.

 

You have to consider this is in Perth

PM costs are exorbitant compared to some other states, can sometimes work out to be 15 % or so + GST when all is considered

@theperthurbanist

We have negotiated discounts on multiple properties with one agent previously also, though we've found having an agent not local to the area where an IP is located can make leasing difficult when in a down part of the cycle

 

@JetstreamVic

PERTH'S PROPERTY MANAGEMENT FEES

 

O.M.G.
~$4k odd in PM fees per year, for a $400/wk rental.
That is pricey.

 

Don't forget charging a percentage of disbursements like water rates. Wow.