How much does it cost to manage a property?

Thursday 07 May 2020

The question of how much will it cost to manage my property should be the second question you ask, the first should be who is going to manage my property. If you do it the other way around then clearly you are making a judgement on price not professional ability and I can assure you that will end in disaster. Having said that, it is important that you do a budget and you cannot do one without knowing the costs. So, in this article we will be dealing with how much and we suggest you read our article about choosing the right agents as well.

Let us assume at this point that you have already purchased an investment property, you have decided to put your home up for rent, or you have decided to move your management from your existing agent. We also have an article on how to choose a property for investment.

How much commission should I pay to rent out my property?

Like many questions this is hard to answer with just one word or sentence as there are variables. We are obviously based in Cairns Queensland and different cities and regions have different rates and sometimes structures. The differences are based around things like average rents, density of properties managed, and traveling times to name a few.

Fees can be presented in several ways, but you must look at the overall picture and total cost. You may be presented with a single percentage of collected rent. Make sure you properly understand what is included, do not assume anything. On the other hand, you may get a percentage of rent collected as one fee and then payment of different services on a user basis. In this case make sure you want all the services that are offered and look at the total cost to you.

Cairns being a Regional area of Queensland, you will find that majority of agencies will charge within a range generally between 8% to 10% with or without additional fees for managing your property. If you were to bring in multiple investment properties into the one agency, this range may be lower.

Additional fees on top of your management fee could include: a letting fee (1 weeks rent + GST), lease renewal fee, routine inspection fee, admin fee, EOFY statement fee, Insurance claim/Tribunal appearance fees per hour, Title search fees and possibly a Termination fee when you no longer wish for the agency to manage your property. There will also be advertising/marketing fees which I will go over shortly.

Our suggestion is to work through the costs with your chosen agent and tailor a management fee structure to suit you.

What are the Marketing & Advertising costs?

Modern day technology plays a big role in the property market. I am sure you have already looked at realestate.com.au or Domain.com.au and done some research on similar properties to your own. You would have looked at property photos, written descriptions, and the overall presentation online. This may also intrigue you as to certain agencies you would like to engage as property agents.

The benefits of marketing and advertising are simple. Your property has a lot of competition and should stand out on the property portals. The information provided to possible tenants needs to be complete and the ability to inspect should be easily achieved while online. All this should be done with proper advertising and marketing.

Prices below are based on our agencies contractors who deliver this service to you.

  • Premier Ads ($141 through REA)
  • Large signs placed at the property ($60)
  • Professional Photography (5 for $100, 10 for $150)
  • Social media
  • Other portals such as
    • Our website and national website
    • Gifang.com
    • Realestateview.com.au
    • Homehound.com.au
    • Rentfind.com.au
    • Allhomes.com.au
    • Domain.com.au
    • Homely.com.au
    • Homes.com.au
    • Onthehouse.com.au
    • Realestateworld.com.au
    • Rent.com.au

 

The average weekly rent is about $370 the total recommended advertising is less than one weeks rent. It is a small price to pay to receive a large amount of exposure to seek a potential tenant for your property. Cutting corners will possibly lead your property to sit vacant longer than required.

What should you get for your fees?

Like all investment strategies there are risks in investing in real estate and our job is to know those risks and manage your property to minimise those risks.

It is more than likely you are an expert in your field and either not interested in knowing all the legislation concerning investment property or just do not have the time. At last count there were over twenty pieces of legislation that influence the investment property industry. It is hard enough for us to know it all and keep up with the legislative changes, it would be silly for you to try.

A good management agency will have a formal education and training calendar in place. This should keep the team up to date with legislation and new technology as well as maintaining a high level of enthusiasm.

Cybercrime is a huge risk in our industry, and it is growing. Your property manager keeps data about you and your finances, not to mention a significant amount of money in trust. A good agency will have procedures in place to manage this threat as well as software to secure their system. This should include a firewall and be backed up with proper standalone insurance.

The day to day issues like collecting rent and dealing with maintenance or emergency repairs are obvious things you should be getting from your property manager, but they can be much more. I heard a great saying the other night when working with a friend of mine Uwe Jacobs of the group Property Friends. Uwe was speaking with some of his clients about the responsibility of owning investment property. He said that an owner should delegate responsibility, not abrogate responsibility. Together you and your property manager should work together constantly looking to enhance the capital value of your investment property and its rental return.

It is essential for the owner and the property manager to develop a relationship. A property manager will have a detailed knowledge of the local market. Rental returns, vacancy rates, movement in arrears, are just some things they can keep you informed about. But take advantage of the relationship and speak with the company principal. The principal will probably have a broader knowledge of the local economy and developments that may have influence on the value or return you should expect.

There is a lot your property manager can do for you. Have a good conversation with them and work together to build value in your investment.

Where to go from here?

All the above is a lot to take in, especially if you are a first time Landlord. If you do your research, keep an open mind, and pursue what you think is best for you, you will find an agency who will take care of you and your investment.

If you would like to find out more, do not hesitate to contact our Business Development Manager Katrina Gobbett. She will be happy to discuss any questions you may have and provide you with our agency management fees.

Here at First National Real Estate Cairns Central, we put you first!

CLICK HERE FOR INFORMATION ON OUR MANAGEMENT FEES!

 

David Forrest - Managing Director