Melbourne property management fees - what you need to know

Have you made the big financial commitment of buying an investment property in Melbourne? As exciting as it is, now that you’ve made the leap you are going to want to protect your investment and ensure you get a solid ROI.

Managing your investment property can quickly become overwhelming. That’s why many savvy investors are turning to the professional services of a property manager. But, what exactly does a property manager do and how much are property management fees in Melbourne?

The average fee for property management in Melbourne is between 6% and 8% of all rental income, plus GST. However, the amount is generally determined by the local market which means you could be paying anywhere between 5% and 10%, with lower fees found closer to the CBD. As fees are a regular expense it’s a good idea to compare the market.

Find out more about what fees and charges you can expect below.

Property management basics

Melbourne property management

A professional property manager can play a large role in maximising the income of your property and retaining its capital value. Look for an agency or manager that will offer you:

  • Industry and area knowledge
  • Professional and personalised service
  • Value for money
  • Peace of mind

A good managing agent should eliminate the day-to-day stress of handling your investment property for you. They will ensure you have quality tenants, deal with all tenant communication, collect bond and rent payments, and organise maintenance and repairs, lease renewals, inspections and more.

How much are property management fees in Melbourne?

Fees vary across Melbourne for two main reasons: the location of the property, and the number of competing agents within the area.

Generally, inner-city properties attract lower fees because they have a higher value. Affluent inner-city suburbs like Toorak will usually have lower fees than outer suburbs like Warrandyte where the property values are much lower.

Agency commissions range from about 5% in the inner suburbs up to 10% in the outer suburbs, while the industry average sits at around 7%. In most cases, fees and expenses and the terms of your agreement are negotiable.

There are plenty of discount providers around offering less than 5%, but be aware that you could end up paying more in the long run with hidden fees or additional expenses, such as court costs or advertising. The lower the commission fee charged, the fewer services are usually included.

Always clarify these details with the agency before making any final decisions.

Flat rate versus percentage-based property management

How do Melbourne property managers charge for their services? There are two main fee models you will find - percentage-based and flat-fee.

Percentage-of-rent fee model

Traditionally, property managers charge a percentage of the gross weekly rental amount for their service.The range of services included vary from agency to agency so remember to ask for an itemised list of all their fees before you sign, so you know what you will be getting.

What property management fees will I be paying in Melbourne?

Melbourne property management fees

The two most common property management fees that apply are:

  • Management fee (in Melbourne this can be anywhere between 5% all the way up to 10% in outlying areas)
  • Letting fee (typically 1 – 4 week’s rent)

Depending on your agency, other property management fees you may need to pay include:

  • Internet marketing fee ($0 – $200)
  • Lease renewal fee (typically 1 week rent plus GST)
  • Monthly administration fee ($5 to $10 per month)
  • Court or tribunal attendance (billed per hour)
  • Photographers fee ($75 – $150)
  • Tenancy database check ($10 – $12 per person)
  • Property condition report ($100)
  • Routine inspection fee ($10 – $30)
  • Annual statement fee ($25 to $50)
  • Lease transfer fee ($0 to $500)

Flat-fee property management model

In the case of a flat-fee, you will be charged one single fee instead of individual fees for services. This is a fairly new method. It differs in that the price is not determined by the rental amount or the size of the property but by location. Everyone pays the same percentage rate. Some agencies have additional charges to the flat fee or percentage so you must be vigilant and ask for a breakdown of the quote.

Here is a sample of flat-fee property management providers and what they charge:

  • Queensland’s Pure Rentals charges $1,249 + GST per annum.
  • NSW-based ‘Once’ charges an annual flat-fee of $1,100 incl GST per annum
  • NSW-based ‘:Different’ charges a management fee of $100 incl. GST per month and a leasing fee of $1000 incl. GST for new leases.

What does a property manager do and what should you expect?

property management fees in Melbourne

Don’t underestimate how much time and energy it takes to manage your investment property alone. An experienced and capable Melbourne property manager will save you a lot of hassle, and bring you peace of mind.  

A managing agent’s responsibilities include:

  • Sourcing the right tenants
  • Ensuring the tenancy agreement is completed and signed
  • Collecting rent and ensuring you receive it
  • Lodging the rental bond
  • Liaising with tenants and coordinating repairs to the property
  • Conducting regular property inspections
  • Handling disputes with tenants, including attending court and tribunals
  • Paying rates and bills on your behalf
  • What questions should you ask a prospective property manager?

No two property managers are the same. A brilliant manager will be worth their weight in gold. Make sure to interview them thoroughly to see they are up to scratch.

Ask the following questions:

  • How long have you been a property manager?
  • How many properties do you currently manage?
  • Does your business also handle sales?
  • How do you handle requests for repairs from tenants?
  • Do you check and monitor repairs to my property?
  • How do you find and screen tenants?
  • How do you handle a tenant who is late with rent payments?
  • What are your fees and how are they structured?
  • What is included/excluded in your fees?

Signing a management agency agreement

Once you have decided on a property manager, then you will need to sign a written contract with them. This is called a “management agency agreement”. It will set out the terms of service and list of responsibilities of the agent, as well as your obligations.

Write a comprehensive list of all the services you expect to be fulfilled by the contract. Don’t leave anything out!  

Include the following in your agreement:

Once you have signed the contract, your property manager is not at liberty to change or adjust their fees. Any new charges or fees need to be covered by a new agreement.

Switching to a new property manager

It would be foolish to stick with a property manager who isn’t delivering. Fortunately, if it’s not working out for whatever reason, it’s easy to switch to another property manager. Once you find a new company to go with, simply fill out a transfer management form with all your details and they will do the rest for you.

Give your current agent 30 to 60 days notice in writing that you are ending the contract. After that, you can commence services with your new company.