What you need to know about property management fees

Property management

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We often think of two types of property management. We can hire a property manager to find appropriate tenants for us or we can hire them to manage our property after we find tenants. In many cases, we may want them to do both.
 
While these are the basics of property management, property management can and often does go beyond the basics and can be surprisingly complex. What will a property manager charge for handling an emergency repair? What will they charge when a tenant is in arrears? Over time, these and other issues arise and it will be your or your property manager’s responsibility to handle them.
 
In many cases, property managers will charge fees for work that falls outside the scope of their day-to-day activities. In addition to these fees, you will be paying them a standard commission for their work. It goes without saying that you need to understand everything about commissions and fees before you choose a property manager.
 
 

What to expect from a property manager

 
You can negotiate with a property manager and handle some details yourself. If it becomes overwhelming, you can renegotiate and have them handle more of the responsibilities. A full service property manager will take care of your property as conscientiously as you would. Their duties may include some or all of the following:

  • Finding suitable tenants (includes background checks)
  • Ensuring the tenancy agreement is complete and signed
  • Lodgement of the rental bond
  • Managing the day-to-day needs of the property
  • Paying the rent to you, minus the property manager’s monthly fees

 
Management of the day-to-day needs of a property will include:

  • Arranging repairs
  • Collecting rent and keeping rental records
  • Conducting inspections on a regular basis
  • Handling disputes
  • Arranging maintenance and repairs
  • Paying bills (such as electricity and water) on your behalf

 
In most cases, property management should go smoothly. Extraordinary occurrences may be subject to additional fees.
 
 

Standard property management fees

 
You can choose the level of property management you wish to give to a property manager. If you have time and live in the area, you may want to take a hybrid approach and do some of the property management yourself.
 
These are some of the standard property management fees you will face:

  • A letting fee is a fee charged for finding a tenant
  • A lease renewal fee will be charged when it is time to renew a lease
  • An administrative fee is charged monthly. It is usually a percentage of the monthly rent
  • An end of financial year statement is an additional fee
  • A property manager may charge a fee for an inspection report
  • You will have to pay advertising costs when a tenant vacates and your property manager has to find a new tenant

 
The administrative fee is your only monthly fee. The property manager will deduct their fee from your rent. If you have elected them to pay your water and electricity bills, they will also deduct those from the rent received.
 
 

When you may have to pay additional property management fees

Sometimes a property manager will have to go beyond the basics to handle an extraordinary problem:
 
Occasionally, a tenant may be in arrears and a notice to vacate may be needed
A property manager may need to appear before a tribunal on your behalf
Emergency repairs must be carried out quickly
 
Any of these occurrences may be subject to additional fees. If emergency repairs are needed, you may not have time to transfer costs quickly. Many property managers will pay for emergency repairs to a predetermined limit on your behalf with the understanding that you will reimburse them quickly. They may charge a fee for this service or charge a fee if you don’t repay the money within a set period of time.
 
 

Choosing property management services

 
Professional property management services routinely perform the services mentioned above. Before settling on one service, you should interview several. All of them should give you an itemised list of their standard commission and additional fees. In many cases, your commission is negotiable and you may be able to make arrangements for issues such as emergency repairs and other extraordinary occurrences.
 
You do want to choose a property manager who charges a fair rate. Their commission is one part of their fee, but you need to read the fine print, too.

In some cases, a slightly higher commission will include services another property manager will charge an additional fee for. It may be worth paying the higher commission or you may decide to pay a lower commission if you feel the extra fee will rarely be required.
 
Aside from commissions and fees, you want to know your property management company will take care of your property as you would. Some questions you should ask before choosing a property manager include:

  • How long has the property manager of my property been working for you?
  • How many properties are you handling?
  • How do you handle requests for repairs from tenants?
  • Do you inspect repairs after they have been done?
  • How do you handle a tenant who is in arrears?
  • How much experience have you had with tribunals?

 
These questions will help you choose a competent and experienced property management company. You should also expect them to give you a full list of their fees. When you know you have chosen an experienced and ethical property manager who charges a fair rate, you will know you have made the right choice.

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