How Are Property Management Fees Calculated?
Are you worried about paying too much for a property manager? Once you look at the real value of their professional services you may think twice.
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How Are Property Management Fees Calculated?

How are property management fees calculated_If you’re looking to rent a property there are many costs involved. To save yourself from any nasty surprises it’s best to keep track of them so everything runs smoothly.


At the end of the day, your investment property should be making money for you. You could handle property management by yourself or you could rely on the professional services of a property manager.


In some cases, people refuse to use a property manager because of the fees involved in hiring one.


To weigh up the value of using a property manager it’s worth considering what’s really involved in the complicated processes of managing a rental property. You may be surprised to discover how challenging it can be.


One of the most important factors to consider is just how much time it can take to manage a rental property. When you add up the fees involved with a property manager you find it’s worth the extra investment. 


If you decide to use a property manager then one of your first questions may be what the property management fees actually cover. It’s a fair question and one that a property manager should be able to answer for you quite easily. Here we’ll break it all down for you. We’ll cover how property management fees are structured and why property management can be a worthwhile investment. 


How to compare fees from different property managers


If you have a few options for property managers you’re considering then it’s not always about price. Think about how the fees themselves are structured. This can reveal a lot about how the property manager organises themselves and offers value to you. 


Generally speaking, property management fees are broken down in these three categories:


      • Leasing fee 
      • Ongoing management fees 
      • Other miscellaneous fees and charges


While comparing these property management fees it’s best to confirm which services are included in the fees themselves. These services aren’t always clearly communicated. In some cases, a property manager may bundle all services into one all-inclusive fee. So the initial leasing fee for finding a tenant may be included in the bundle instead of it being charged separately. 


By now you’re probably wondering which fee structure is better. This is good to know. Especially if you have a choice. Ultimately the right fee structure comes down to you. An all-inclusive fee can make it easier for you to budget and calculate the costs of running a rental property. But having a separate management and leasing fee could help you save more. 


Some property managers will charge you a leasing fee even though you may have the same tenant for over three years. Ideally, you should only be paying for a leasing fee on a yearly basis only if you have had new tenants moving in on a yearly basis. So a safer option for you as the rental property owner would be to have property management fees, leasing fees, and ancillary costs charged separately. It provides a lot more transparency to the real expenses you should be paying for. 


So what is a leasing fee?


A leasing fee should cover all aspects of the service involved with finding a new tenant for your rental property. The amount for the fee is calculated based on the rent you’re asking for. An agent may include the marketing costs in your leasing fee. Alternatively, marketing costs may fall under the box of miscellaneous fees and charges. 

Generally speaking, a leasing fee ends up being the same value as one week’s worth of rent for your rental property. Some property managers may charge up to one and half times that amount. The difference in costs comes down to the size of the marketing campaign. A property manager may offer you different marketing packages with their own prices for you to choose from. 


Remember that the marketing for your rental property can include the production of photos, 3D floor plans, signboards and the execution of social media campaigns. So there can be a lot of marketing activities involved in helping your property stand out.

The cost and size of your marketing campaign can also depend on the type of property and the area it’s in. A competitive market may require more investment in marketing. If your property is a one-of-a-kind option in the area then it might stand out on its own enough without the need for much of a marketing campaign. 


With the combination of your leasing and marketing fees paid for, these are the kind of services you can expect to get from them:

Leasing & marketing fees paid for, this is what you should expect:
  • Marketing campaign development
  • Professional photography and ads created
  • Publication of advertising including signage 
  • Responding to queries from interested tenants
  • Booking and hosting inspections for the property
  • Collecting and assessing applications
  • Performing credit and reference checks
  • Negotiating terms of the lease and organising signing
  • Conducting an initial inspection after the tenant has signed
  • Documenting the property’s condition with photography before it’s tenanted

Fees for ongoing property management


Once your property manager has a tenant secured, they will handle the ongoing management of your rental property. For these services, they will charge you a property management fee. This fee is usually calculated as a percentage of the rent collected. This percentage can vary depending on the property manager, the area or the type of property you have. Your fees could range from 4 per cent to 11 per cent. 

Property management fees should cover the following:
  • Collecting the rent
  • Following up on arrears
  • Paying water bills and council rates
  • Conduct regular property assessments
  • Document the property’s condition after each inspection
  • Respond to maintenance requests
  • Organise any repairs that are required
  • Establish communication between you and the tenant
  • Inform you of any changes to legislation that affects your property

Ancillary fees you can expect


Some property managers will charge ancillary fees for extra tasks that fall outside of their usual duties. Sometimes these extra tasks will simply be bundled into ongoing property management fees. Even if you have chosen to go with all-inclusive payments, It’s best to understand what fees you’re paying for.


Your property manager should be able to provide you with a detailed list of all fees before you sign their contract. GST is also payable for all these property management fees. It’s best to check if GST is included in the final quoted price you get on ancillary fees. 


If you’re concerned you’re paying more for your property management it may be due to one of the following fees being added:

Administration fee

This fee covers all the admin tasks such as document storage, postage, and photocopying. It’s common for this fee to be charged monthly.

Renewal fee

It’s common for leases to be renewed after one year. With this renewal comes the time and effort your property manager puts into researching and advising you on potential rises in rent or other terms and conditions that could be revised. 

Advertising fee

There’s a lot of different services involved with advertising your property. Professional photographers, copywriters, and real estate listings all need to be paid for their services which contribute to advertising your property. These charges can all be bundled into an ancillary fee when your property becomes available for rent again.

Maintenance fees

If your rental property is in the sort of condition where it requires constant maintenance then your property manager may have to spend a large amount of time booking tradespeople. There will also be a significant amount of time they will have to spend inspecting all the maintenance work done to ensure everything is up to scratch.

Inspection fee

Periodically your house needs to be inspected in order to ensure it’s being looked after. Some property managers choose to make the cost of these inspections an ancillary fee while others bundle it with ongoing property management fees. 

Fees for tribunal hearings

In some rare cases, there may end up being a dispute between you and the tenant. If this issue carries over to a tribunal then your property manager may have to attend the tribunal on your behalf. They may also have to spend time putting together documents to help support your case.

Insurance claim fee

For any insurance claim for your rental property, there may be a fair amount of paperwork and communication that takes place between your property manager and insurance companies. This insurance claim fee will help cover these duties.

How a property manager can help save money on your rental property


Inevitably, your property manager should be helping you to maximise the revenue you’re making with your rental property. The amount of time and effort they put into managing your property should also help reduce the stress you experience having a rental property. 


Here are just some of the key tasks your property manager should be taking care of for you:


Staying up to date with tenancy laws

Property managers are the best resource for tenants and landlords. They know who has rights, what documentation needs to be kept up-to-date, and when administrative duties need to occur.


Taking care of tenant complaints

Tenants can be tough to deal with. When they complain about the property, it’s hard not to feel emotional. A good property manager will keep a cool head and help solve any problems quickly too.


Chasing after rent

Do you know what to do if your tenant starts falling behind on rent? There’s a right and wrong way to approach this scenario. Your property manager will help take care of what can be a time consuming and distressing encounter. With good screening procedures in place when they first choose tenants you shouldn’t have to worry about any issues related to defaults on rent payments. 


Pricing your property

Setting your rent at the right amount is crucial for keeping your tenants and maximising your income. Set your rent too high and you risk scaring away tenants and having the house vacant which also means no money coming in. A property manager should have enough experience and expertise to advise you on the right price for your property. 


Being proactive with repairs and maintenance

Your property manager should have a holistic view when it comes to repairs and maintenance. If there’s one room that’s suffered water damage then it’s likely the roof should be fixed before any plaster is repaired. If there’s one small electrical fault then this could help identify the fact that the entire switchboard may need replacing. It’s little things like these that could lead to bigger, more expensive problems down the track if they’re not handled correctly now. 


Still have questions about property management fees?


Are you concerned you’re paying too much for your property management services? Here at Property Managers Melb, we offer clear and detailed information on all fees and charges related to our property management services. And of course, we’re always happy to answer any questions you may have in regards to fees and changes. 

Our experienced property managers are happy to assess your rental property and provide you with a
rental appraisal. Speak to an experienced and knowledgeable Property Manager in Melbourne by contacting us today.

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