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Question Regarding Letting Fee (Lease Renew 50%)

Discussion in 'Property Management' started by fullylucky, 8th Oct, 2016.

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  1. fullylucky

    fullylucky Well-Known Member

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    Hi I have a question regarding how letting fee is calculated for lease renewal (50%)

    Info:

    Rent Price = $360 pw
    Comm = 7.5%

    See diagram below:

    [​IMG]
    So is this correct calculation? half the rental price, for the first section you get all of it (100% of the 50%.)

    for the second half you still get the 7.5% of half of that.

    I always thought instead of getting the commission for that week you get 50%.

    This would mean it's slightly more than 50% because it's 50% + half of the commission %.

    Can someone please clarify?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    You're thinking about it wrong. The comm and the renew fee are unrelated to each other.

    Every time rent comes in, x% is calculated.

    Every time a lease starts x weeks are charged.

    I haven't had a spare moment to trial the software you created yet. I will soon and let you know what other bits need review.
     
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  3. fullylucky

    fullylucky Well-Known Member

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    Ok thanks so in the above case, you get 7.5% for comm which is $27.

    Then on top of that you also get 50% x 360 = $180.

    So in total you get $207?
     
  4. fullylucky

    fullylucky Well-Known Member

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    Thanks for your time for trialing the software. I will extend your account by a few years so it doesn't expire. : )
     
  5. JacM

    JacM VIC Buyer's Agent Business Member

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    You'd pay management fees (plus gst) on the whole rent collected. In addition you would pay the letting fee (plus gst). I believe this would give the following figures:

    Management = 360 * 0.075 *1.1 = 29.70

    Letting = 360 * 0.5 * 1.1 = 198
     
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  6. fullylucky

    fullylucky Well-Known Member

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    Thanks, so two people (DT and JacM) agree letting is on top as an extra charge. (GST is always 10% so to increase something by 10% you times 1.1.)

    Does any PM think it's the way I have it in the original first post?

    If it's the first time you renew a lease and the rent is $360 wouldn't you be double charging them for the same rent. Shouldn't you take the higher of the two. Commission or Letting charge but not both?

    I always thought it's:
    For the first week you are taking all of the property owner's rent, so you don't charge them commission but the second week onwards you charge just the commission.

    But you guys are saying letting and commission are separate so for the first week you get the commission but you also get to charge 1 weeks worth of rent?
     
    Last edited: 8th Oct, 2016
  7. mikey7

    mikey7 Well-Known Member

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    Thats how i get charged..
    Letting fee of 1 week plus normal PM fee.
    Weeks rent = $360
    PM fee (8.8% inc gst) = $31.68
    Total i paid = $391.68

    Edit: Im talking new tenant not renewal of existing tenant.
     
    Last edited: 9th Oct, 2016
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  8. fullylucky

    fullylucky Well-Known Member

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    Hi Mikey

    Thanks, appreciate it.
     
  9. TMNT

    TMNT Well-Known Member

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    I dont get that diagram remotely.....
    seems like complicating a very simple formula
     
  10. Scott No Mates

    Scott No Mates Well-Known Member

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    The colours are all wrong - I'm colour blind.
     
  11. fullylucky

    fullylucky Well-Known Member

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    I'll redo it a better diagram.

    I always thought it's method 2, but after speaking to an industry professional PM. He said there has been a long debt on this topic and in the end it should be method 3 that is correct.

    However after making this thread everyone so far is suggesting method 1.



    [​IMG]
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    • Initial letting = commission + management fee
    • Subsequent letting ie renewal = commission + management fee
    There is no double dipping.

    Have a read of the PSBAA 2010 and the regulations with respect to the requirements for automated/computerised systems. Simple things like creating an audit trail for all transactions are required.
     
  13. fullylucky

    fullylucky Well-Known Member

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    No one mentioned anything about hiding audit trail. Just trying to nail down letting fee calculation. Getting conflicting methods...
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    The above are the only methods.

    I know that you're trying to work on some software but you need to be aware of each state's requirements - it's better to review what is required by law before progressing too far and having to rewrite the software.
     
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  15. Big Will

    Big Will Well-Known Member

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    Or do the program for one state and nail it all down correctly then have different inputs for the different states.

    This will help your cashflow as writing a program to be 100% for all Australia will take much more time than 100% for State 1 and then whilst getting money in from State 1 (along with feedback) you can develop state 2.
     
  16. fullylucky

    fullylucky Well-Known Member

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    The program we are writing is targeted at a national level (to be used in Australia only) so for all states and territories in Australia. But we imagine most customers would come from QLD NSW and VIC (the major cities).

    We are still looking for more testers that are willing to test our platform and give feedback.

    At this stage it's ready for beta testing.