PM is asking for increase in commission

A year ago the PM found me new tenants and we negotiated market level rent. Just before signing they tried to demand an increase in commission and were not that friendly about it. I was assertive and spoke to the licensee telling him that it was unprofessional to do it just before signing and that they should have done it weeks prior. They said it would be ok to do it in a year.

The service this year has been appalling. Sometimes the PM takes 2 weeks to reply. I emailed the licensee about a comparable house sale and he didn't reply at all. It was only when I contacted his partner that I got a reply.

Its a small town and only one other agency with whom I haven't heard great things about.

My intuition tells me that I should just pay the extra commission and see what happens. Whats your opinion? When the email comes through I will take 2 weeks to reply of course...

Also, I have spent 15k on improvements- new air con, repairs to decks, renovation of garage. Its kind of a new living space for the kids in that garage and it all had to be done for safety issues. I was thinking of putting up the rent by $15 a week which would represent a 3% increase. The tenants didnt ask for any of the improvements and thus I feel a bit bad putting the rent up. The house is now in excellent condition located in the best part of town close to shops. Also, this town has a chronic shortage of rental houses and demand is higher than supply. Thus, I think that they will put up with the increase. My tenants are not high income earners and thus I feel bad but I have to look after my own best interests.

I think 3% based on the above situation is equitable. What do you think? As a landlord we have to consider small increases like this to cover CPI core inflation and rising costs of rates and tradesman etc. Do you agree?

 

If service has been appalling, price is irrelevant. Go elsewhere. Getting the right partners to your investing endeavour (see thread by the Property Twins) is vital to your success. Investment savvy PMs are part of that team.

Its the same as interest rates on our loans; no one really cares what they are because a few points either way is less important than the strategy / correct fit.

 

If the PM is getting a % of rent, then the rent increase should be enough to cover a small increase in commission.

 

He's already said that his options are limited to just two agencies in the rural town. The one he isn't using he's already heard bad things about. doesn't leave much hope.

@davidst Are the tenants any good? you seem to be proactive with maintenance and what not, why not try self managing? don't put the price up on the tenant which will make them happy and just pocket the commission you were previously paying to the agent?

 

I can guarantee it - in a small town they probably know each other well and don't work that hard to capture one another's business. I can also guarantee that the service won't be much better/cheaper.

 

Thems the pros and cons of investing in small towns I guess

 

@davidst , Study up and have a crack at self manage.
Find a suitable retiree neighbor to the property who'll keep an eye on it for you better than any agent would for $50pm (+ buy em something for xmas). They won't want any crap next door to them etc.

When starting out my 1st IP was in a town with only one agency, which was crap, did it myself from 6hrs away, wouldn't do it again, found a local to look after it for me.

 

thats a really dumb dumb suggestion, getting a neighbour to watch over it!

 

Why? if you get on with neighbors wouldn't you get them to watch over your place while not there, on holidays etc, water your plants, feed the cat/dog etc? this is just an extension of that.

Worked/s for me, not just any neighbor, a mature couple that takes pride/care of their own place, wants similar around them.

 

What about a performance based fee increase? E.g if they agree to always response to your emails within 48hrs, the property is not in arrears more than say 4% and at least 2 inspections are done every year and emailed to you then you agree to the increase, if not then the management fee goes lower. just an idea.

 

You havent told us how much the fee is ?
Is it comparable with everyone elses ?

Its obvious they dont like you, they dont care if they lose your business or not.

 

Or they just don't need the extra cash-flow because there's a strong demand for their services in that small town? Really, outside of self-managing it doesn't sound like there's much else the original poster can do.

 

Why not move to the town, open up a new property management agency and rake in the cash for supplying a better service then the other two?

 

Sounds familiar