PM Fee's, WA

I would like to say, it’s all a big bad rip off in WA and some property managers should come in and undercut everyone and offer amazing service (kind of like what Sanj is alluding to) but guess what? If that was the cases it would have happened already and they would have 90%+ market share.


Kent, thats a bit negative mate. You shouldnt assume that if it hasnt already been done its not worth having a crack at, have a look at this link.


http://www.watoday.com.au/technolog...-lies-in-a-cheese-toastie-20110602-1fi3i.html

Chomp

Thanks

Thanks everyone for the replies.

I've calculated the annual as around 10% which sounds ballpark WA with the feedback here. Based on prior experience I'm focused on quality and the recommendation I have gives me comfort on that as well as this feedback that this isn't out of step with WA.

Cheers,

Ralph

Ralph,

Not that it's the be all and end all, howeer, you knwo the management fee is going to be 8.5% of your total rent right ?

Have you actually added the amounts in addition to the management fee ?

Surely 2 weeks rent, plus $300 for advertising, plus $180 for initial condition report plus $196 for intereim & a final inspection + $116 for statements, all adds up to more than 1.5% of your rent ?

For me, using similar numbers, it got nearer to 18% of my rent.

Ralph said:

Appreciate any views on reasonable PM fee's for within 3k's of Perth CBD.

Looking at a mob who are :

Setup
$300 mktg /advertisement for first time letting (inc. professional photography)
$180 initial condition report
2 weeks rent + GST

Ongoing
8.8% on gross collections (i.e. not just rent but any bond deductions, water payments etc.)
$5.50 pmth for statements
$66 per inspection
$50 annual account summary
$99 lease renewal
$130 final bond inspection

Works out at an annual cost of ca 9-10% of gross rental.

They come recommended.

Appreciate any views of others re rates.

Cheers,

Ralph

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As per Jaycee

Wouldn't the total fees be around 17.5 - 18% ?

I based it quickly on a $360,000 property renting at $350 p/wk, as there were no other figures as an example

$300 mktg /advertisement for first time letting
$180 initial condition report
2 weeks rent + GST
8.8% on gross collections
$5.50 pmth (x12) for statements
$66 per inspection (x4 if every 1/4)
$50 annual account summary

= TOTAL Property Management Costs


Thats assuming its 8.8% inclusive of GST for gross collections as stated

customer service charter?

Kent Cliffe said:

Ask them for a written customer service charter and a marketing plan. If this is not written up, good luck on holding them accountable to getting back to you when something goes wrong with the property or marketing it well.

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I've been reading through this post and the only thing that i was not sure about is what exactly you mean by a customer service charter. Perhaps we call it something else, perhaps we dont have one!

Well 8.8% is high. Queensland is regulated to a maximum commission of 5% + GST. Fees are unregulated and up for negotiation.

rachelroe said:

I've been reading through this post and the only thing that i was not sure about is what exactly you mean by a customer service charter. Perhaps we call it something else, perhaps we dont have one!

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I'd take it that your firm does not have one if you are unaware of it.

This is the answer I'd expect most firms to reply with

Oops

Thanks Jaycee, et al, you're right, the figure is around 15-16% annually (assuming ~ 600pw rent, vacancies etc.), not sure how I screwed up the calc!

I guess it still sounds like ball park Perth though...

Kent Cliffe said:

Now the main costs to property management companies are wages. I can guarantee, anyone who is a property manager in Perth back in 09 could easily get a job as a cleaner up at the mine sites earning $70k pa. This puts wage pressure on PM employers and thus increases there bottom line, so they pass this onto consumers.

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I'm not sure if I go along with this, for four reasons.

1. In the early 2000s (before the mining boom really took off) WA PM rates were also high (typically 8.5% + GST + other charges)

2. The $70k mining job would likely involve odd hours, unsociable shifts and seperation from family. So the high pay won't lure everyone.

3. Even if PM wages were above average due to demand from mining this would also be true of other jobs. If people were paid more rents would likely rise to reflect this (assuming population growth which creates demand). Higher rents means the agent gets more, even if the percentage was the 7% more common over east. So the claims that cost pressures to charge a higher rate in the West are probably bogus (especially in a metropolitan market like Perth or the larger non-mining regionals). Tenant turnover is greater in mining areas but rents tend to be higher and there is a greater dependence on letting fees etc (both of which provide the PM more money - possibly justifiable due to more work).

4. The 8.5% base figure is widespread amongst different agents. This is consistent with a finding that formal or informal price fixing exists in the WA RE industry. In contrast eastern states PM rates are both lower and vary more - indicating greater competition. Such cartel-like behaviour is something that the ACCC would do well to investigate - a bit like Visy vs Amcor in the packaging industry.

Spiderman said:

I'm not sure if I go along with this, for four reasons.

1. In the early 2000s (before the mining boom really took off) WA PM rates were also high (typically 8.5% + GST + other charges)

2. The $70k mining job would likely involve odd hours, unsociable shifts and seperation from family. So the high pay won't lure everyone.

3. Even if PM wages were above average due to demand from mining this would also be true of other jobs. If people were paid more rents would likely rise to reflect this (assuming population growth which creates demand). Higher rents means the agent gets more, even if the percentage was the 7% more common over east. So the claims that cost pressures to charge a higher rate in the West are probably bogus (especially in a metropolitan market like Perth or the larger non-mining regionals). Tenant turnover is greater in mining areas but rents tend to be higher and there is a greater dependence on letting fees etc (both of which provide the PM more money - possibly justifiable due to more work).

4. The 8.5% base figure is widespread amongst different agents. This is consistent with a finding that formal or informal price fixing exists in the WA RE industry. In contrast eastern states PM rates are both lower and vary more - indicating greater competition. Such cartel-like behaviour is something that the ACCC would do well to investigate - a bit like Visy vs Amcor in the packaging industry.

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I think it's a bit of a long bow to stretch also...

Why would PM's be so in demand as cleaners, but not every other industry in Perth ?

Also, I purchased mmy first IP in 2004, and the fees were the same as being quoted now.... .they did not seem to go up in 2009

I think cartel is a strong word, I would suggest a better term is monopolistically competitive. See: http://en.wikipedia.org/wiki/Monopolistic_competition

I have many agents I deal with, and the general consensus for both (PM and listing fees) is that the industry has shot itself in the foot by solely competing on price. The amount of times I know good reputable agents loose business because the chop shop down the road, buys the listing (appraises the property high) and discounts the fees is amazing. I put a caveat on this, that I will get a swarm of trolls about this last statement, but this is empirical evidence from being in the field.

Here’s the first PM fees I found in Sydney:
http://www.marstonproperty.com.au/fee-schedule.htm

Assume the same as Ralph ($350pw) Setup is: letting $770 + marketing ~ $300 + $18 ongoing: management fee $1001 + sundry $60 so a management fee PA of about: 12.4%. I would guess (without knowing market) that PM fees all up are averaged between 12% to 14%. In Perth it is averaged around 15% to 16%. It means that Perth is about 10% to 20% more expensive. I would say I lot of other services/products in Perth are 10% to 20% more expensive then over the east coast. It’s a fact of life; the cost of living/business in WA is higher than our lucky East Coast counterparts.

I don’t advocate or condone the higher costs in WA, it’s simply an interesting economic observation. The strange distortions of the two speed economy. I mean we could argue all day about the chicken and the egg. Is higher PM fees because agents are capitalising on the higher fees they can charge collectively or is it the higher costs causing the higher fees. Correlation does not me causation.


Rachelroe – A customer service charter is a written document giving you an outline of what our commitment to the client is. For example; how often they will expect to hear from us, what about, how many quotes to tender out, how long to return an email/phone call and everything to do with correspondence between us and the client or 3rd party. The big thing for our team is to manage the client expectations and be hold to account on the communication we provide for our landlords, tenants and others.

Kent Cliffe said:

Before I worked in the industry I would have agreed with Sanj.

But here is my un-researched, untested and unproven opinion:

Property management is a service and it also has a geographic restriction. For example, if there was a shortage of loan assessors in WA and there were heaps in VIC. The wage and thus the price of loan assessors went up, the simple solution would be to email the loan through to VIC and then back. Quick fix and it would resolve the increasing cost. However, you can’t exactly get a Property Condition Report done in VIC.

Now the main costs to property management companies are wages. I can guarantee, anyone who is a property manager in Perth back in 09 could easily get a job as a cleaner up at the mine sites earning $70k pa. This puts wage pressure on PM employers and thus increases there bottom line, so they pass this onto consumers.
If you want to see an explanation of why wages and thus prices haven’t come down, see also: http://en.wikipedia.org/wiki/Sticky_(economics)

The other costs of a PM agency are leasing, essential services and advertising. These also are intrinsically high in WA to the rest of the state.

Here is an article giving a backing to the high costs of doing business in WA:
http://www.google.com.au/url?sa=t&s...49HyDQ&usg=AFQjCNGLVyixkIkQF6UsW2wrBN2Kveahrw

I would like to say, it’s all a big bad rip off in WA and some property managers should come in and undercut everyone and offer amazing service (kind of like what Sanj is alluding to) but guess what? If that was the cases it would have happened already and they would have 90%+ market share.

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Kent, Did you not suggest days ago that the reason for high PM fees, not "everything"/"general cost of living" in WA were due to the mining boom as quoted above ?

jaycee said:

Kent, Did you not suggest days ago that the reason for high PM fees, not "everything"/"general cost of living" in WA were due to the mining boom as quoted above ?

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I may not have articulated myself clearly, but I meant everything in general. I was giving the direct example of how it could affect PM.

Here is an article giving a backing to the high costs of doing business in WA:
http://www.google.com.au/url?sa=t&so...W2wrBN2Kveahrw

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Kent Cliffe said:

Perth Property Management rates are higher then anywhere else in the country for various reasons. These fees I would say are pretty industry average.

Rather the focusing on fees, I would recommend checking the quality of management by asking a few of the following questions (be sure to get there answers in writing/email):

What is the cap of properties for each property manger?
A good agent will have it on paper that they stay under 100 properties per agent. This is important because if they are managing 150 properties, that is 150tenants, 150 owners, plus trades and other services (talking to 350 - 400 people every month successfully is almost impossible to keep up) .

What areas do they manage in?
If they say everywhere or are willing to take any property, this is not good. Another test is ask if they will manage a property in x suburb (far away from your current properties). A good managing agent will have a core area they specialise in and then reject properties outside of it. Therefore, they are able to operate under economies of scale. This means the cost to operate is lower and they can provide you with better service.

Ask them for a written customer service charter and a marketing plan. If this is not written up, good luck on holding them accountable to getting back to you when something goes wrong with the property or marketing it well.

Ask to see a copy of their end of month statements and get your accountant to check that they are adequate or if they could improve it in anyway. I've seen really bad ones that cost extra $$$ in bookkeeping fees.

Another good test is to ask if they take photos for the routine inspections. I have heard of some managing agents who mock these reports up when they get a little busy (it is not always the agency - but sometimes the overworked property manager). Photos guarantee that they have been inside every room. This is especially important if you are far away from the property.

I have a document with quite a few more questions your can ask, msg me you email and I can send them onto you.

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thanks i will print this out good tips here. thanks

Kent Cliffe said:

I have a document with quite a few more questions your can ask, msg me you email and I can send them onto you.

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I wonder what are some other good questions to ask?

So far i have 4 to ask.