Lease renewal fee

You are right, each state, each contract needs to be looked upon its own merits. My 17 year old contracts vary greatly say from QLD to the recent one 4 year old, for Coogee NSW, hence everything is negotiable. It took me two weeks to go through 6 property manages to understand the total % fee (I even had created spreadsheet) as each had more fees built in outside the percentage interest charge. I decide to pay the leasing fee with negotiation for that IP, whereas 6 others that I recently changed in QLD I crossed most fees out. It really depends how good and what you have when you negotiate but more property managers keep adding all sorts of fees, sort of like the banks into their products!

 

seems to be the norm in hobart. all other 3 agencies i spoke with quoted $100, but the PM i am going to change to immediately offered to reduce rates to 7% and drop all lease renewal fees. i had not even told her why i was calling around.

 

Agree and at times you are constantly chasing tenants to return forms/leases

 

Yes this is a game we always play here, maybe Sydney is different. Tenant 1 said something, Tenant 2 duck for cover, after many calls SMS emails you finally got both to agree on a date and amount, print and give them the new Lease, and wait many days for it to come back if you're lucky. If not, more calls SMS emails....Patience is a virtue...

 

In Brisbane, There are so many fee structures out there and most investors are quick to ask the percentage charged per month, usually opting to go with the agency that has the lowest, not paying attention to the added monthly and annually fees. They do not look at the cost or value of the whole year. It is about educating new and old investors that most agencies charge for a lot more than rent collection. This is a struggle for me daily when speaking to prospective Landlords. My advice is do your research based on the brand, agency, property mangers employed and overall cost of services provided...if the % is high its usually because all the small fees are inclusive and actually works out better for you annually.

 

totally agree. this fee prompted me to add it all up, and it turns out i pay nearly $1200 more a year across 2 properties for my current PM that doesn't charge the highest percentage, but far more than the other companies in all the extra fees.

 

I do not think any of us or the general public need "educating", how about getting with the program and offering a flat fee structure, saves us adding all the BS charges up

 

Hypothetically, why would we want you to be comparing apples with apples? It's the same as any industry (try getting a straight answer to build a house...!), we all structure in the way we feel suits our situation best. Sometimes it's all a big sales pitch, other times it's for operational reasons or just the way things are done.

I only have a management and letting fee because my experience has told me people want simple. It's not really fair when you come to think of it, because some properties are a lot more work than others, but most clients agree with @wylie and @dabbler and don't want all the other extra fees. I would also rather spend my time adding value instead of sitting at the desk calculating and keeping track of hundreds of insignificant charges.

On another point, I strongly believe that if you are shopping agents primarily on cost, you haven't found a good agent. The vast majority of agents charge very similar fees, but deliver extraordinarily different levels of service.

 

I think that investors simply do not see the value in Australian property management to pay more and property managers don't provide the value proposition to enable them to charge more. It's a two way street and a fixed fee model simply will not solve it under the current market for PM in what is essentially a race to the bottom with fees.

As investors, we love to complain about property management yet none of us are willing to pay more than 5,6,7,8% (or a relatively small fixed fee) to employ a degree qualified, 6 figure salaried PM employed by agencies such as those that exist in the US. It's the easiest cost to cut out yet the main ongoing service that upholds the value of your investment.

Investing is a tough business and we all want to make money. At the end of the day it's where we believe the best value proposition lies that determines where we spend our money and therefore, what the fees will be in the industry ongoing.

 

I would never pay a lease renewal fee for an existing tenant. That is complete rubbish.

A new tenant fair enough but to pay this for an existing tenant just to sign new paperwork? I would have this fee removed from you agreement or find a new agent.

 

Don't buy IPs in Adelaide, Canberra or Perth then

 

or hobart

 

Slightly off topic but fee related...I'm just printing out all my tax documents and noticed on one of my statements i was charged $160 for the PM doing 4 home opens! Ontop of the $88 advertising fee and they would have collected two weeks rent for leasing had i not fired them (for other reasons). Cant say I've ever been charged per home open, what a joke!

 

maybe that is what they charge if they do not end up receiving the 2 weeks leasing fee?

 

I'm not sure, must be! If they had only had just done their job i wouldn't have had to fire them...

 

There is a difference between cost and value, some get it others don't.

Some will look for the lowest % fee but most of the time the 'extras' come at an additional cost. So a flag if the standard rate you are seeing from PM is 7% and someone charges 5% (picking random numbers) the 5% would raise a red flag to me to look at the hidden extras that will end up costing more or the PM is crap or maybe they are good but don't want money (sure).

Like @Tom Rivera time is money in business and the simpler the PM makes it the easier it is for them not to get bogged down into charging fees. For me at work when someone says I will give you 3k instead of 3.1k which I have quoted if they were going to sign and pay today then yes I will get that $100 approved because it really isn't worth my effort of following up for the next 2-3 weeks trying to get that extra $100. Same as calculating $10 or $20 for something as a PM it really chews up time which could be used to actually manage the properties or heck enjoy some sunshine!

For me the PM fee I pay is nothing in the grand scheme of it and it means I don't have to be on top of the laws and deal with tenants on a more regular basis. Bad PM will chew up more of your time and end up costing you more (time = money) and I like not having to worry so much about the property as much as there is a professional who is looking after it. When you find a good one you generally don't worry what they charge unless they start to increase prices by a lot compared to others.

Our PM knows we treat our property like a business and I want her and the agency to win (get PM fee have an easy to deal with tenant/LL) and I want the tenant to win (place to live, well maintained/fix any issues) and I win (get rent/growth/tenant that maintains and looks after the property). If one of the three aren't winning something is wrong and it will soon break.

 

The other agents are not managing the property. You will always get the answer you want to hear if you ask enough people but the only thing that matters is the contract you signed.

 

Owning 2 IPs and also doing hundreds of tax returns I see lease renewal fees a lot. Some are minor ie $80 and others insanely sky high like they are a city law firm ($1400!!). A few I have seen are based on X number of weeks rent which seems extraordinary. Some PMs are padding their fee income by charging all sorts of fees incl sundries, open home inspects, repair quotes, annual tax statement fees, letting fees, inspection fees etc etc. I would think a fee for effort make sense but it needs to reflect actual costs and time and not be a way to pad client revenue. Iguess in the world of PM some places lease fast and are a no brainer and others a long winded and slow - Perhaps a standard fee makes sense and others scale it ?

Ensure your PM agreement is competitive and review any proposed changes. If it seems unreasonable discuss and consider their competitors.

$400 is fairly typical I would think.

 

I don't know any property investors in WA that pay a $400 lease renewal fee, or any that pay anywhere near that magnitude. Lets call a spade a spade, this is an unjustified rip off and any agency trying that on should not be trusted.

Fwiw, the agent managing my properties charge a flat 10% fee (inclusive of GST) for the whole property management package (ie no letting fees, no lease renewal fess, no inspection fees, no petties etc) and they do a reasonable job, no better or worse than the average PMs I've used over the past 20 or so years.

The thing is that the agency still makes money, in fact they are expanding across Perth. So there is no need for this $400 fee rip off.