Property Management Fees & Commission Explained
What are property management fees?
Property management fees represent the costs of marketing your property and managing tenants while they are in the property. It is also the agent’s commission for getting your property tenanted and is the way a rental property agent makes money.
Property management fees, also known as real estate rental fees, are presented as a percentage of the weekly rental amount for the property. The average property management fees for all states are 7.5%. There is also a letting fee payable when the property gets tenants, which is usually listed as a specific number of weeks rent. The average for this in Australia is 1.4 weeks of the weekly rent amount.
What’s the “average” property management commission rate?
Commission levels vary from state to state and can range between 5% and 15%. What you actually end up paying will depend on your property, the local market and the types of services you select. It’s also important to note that you’ll also pay GST on property management fees, so double-check that the proposed fee includes GST before selecting a property manager.
Many agencies will charge additional fees on top of management fees, so it’s important to check the finer details when selecting a property manager so you can identify any hidden costs.
A fee closer to 5% could mean you’re paying for management fees only, whereas an ‘all-inclusive’ fee could cost you up to 15% of your weekly rental income. You can compare property managers, including their fees
What are the types of rental property management fees?
1. Property management fee
A property management fee includes the regular activities carried out by the property manager, which commonly include:
Rent collection
Organising repairs and maintenance
Organising keys for any inspections or tradespeople
Attending to the payment of council rates
Liaising with tenants and owners
Attending to daily admin tasks such as phone, tax and email enquiries
Liaising with the body corporate if applicable
Disbursement of the bonds
Organising water readings
2. Letting fee
What is a letting fee? A letting fee is a fee charged by a property manager for their services involved in sourcing a new tenant for a vacant property. This involves conducting private inspections and open inspections to find a suitable tenant, performing rental checks on applications received, drawing up legal documents, collecting the bond and lodging it with RTVB. It also covers the services of completing a condition report on the investment property.
3. Marketing fees
This is the fee for internet marketing on real estate listing websites and a ‘for lease’ sign board to secure new tenants. It may also include a professional photography fee.
4. Lease renewal fee
Generally, tenants sign a one-year lease agreement. At the end of the lease period, if you want to expand this contract, the property manager will charge a fee to sign the existing tenant onto a fixed-term agreement. This fee is often charged as a percentage of the annual rental return.
5. Routine inspection fees
As a part of the agreement, the property manager may inspect your rental property regularly to check on the condition of your property and therefore charge a service fee.
6. Annual Statement fee
The fee charged to obtain your annual summary statement covers the last financial year.
7. Civil and Administrative Tribunal fees
When you need to take a tenant to court, you may incur service fees, including court preparation and travel costs. This is usually based on an hourly rate.
How are property management fees charged?
1. Percentage-based property management fee
Most management fees are charged as a percentage of the gross weekly rental amount. Generally, the lower the commission fee percentage charged by your property manager, the fewer services are likely to be included. That’s why it’s important to ask your property manager for a breakdown of fees before you sign them on.
How do I calculate the dollar amount?
The commission is calculated as a percentage of the weekly property rental figure. See below for how to work it out using your calculator:
Property Price x Commission Rate (%) = Property Management Commission Payable
On a $400 per-week property at 7.66% commission, the following equation would apply:
400 (dollars per week) x 0.0766 (7.66 %) = 30.64 (dollars per week commission)
But keep in mind, this isn’t the only fee you’ll pay. A Property Manager will provide you with comprehensive property management – not just rental collection. For an overview of the services they will provide you with and other potential fees you may incur, visit our article here.
2. Flat-rate property management fee
Property management agencies can charge a flat fee rather than percentage-based management fees. There are also some companies that charge a flat-fee for ‘all-inclusive’ property management services, and this means all fees are rolled into one management fee. However, some of these services often don’t provide the same level of accessibility and may not allow for personalised service and local expertise.
How much does a rental property manager cost?
On your list of questions for potential agents to rent out your property will be the question, “How much are property management fees?” this is where you can find out property manager costs and how much each agent deviates from the average for each state and each major city.
What are the property management fees in Sydney, New South Wales 2023?
Property management fees in NSW are much lower than the national average and the lowest in Australia at just 5.8%. The letting fee is 1.1 weeks, which is also below the national average. Property management fees in Sydney particularly are low, at just 5.4%, but the letting fee is slightly higher than the state average at 1.2 weeks.
What are the property management fees in Melbourne, Victoria 2023?
Property management fees in VIC are the second lowest in Australia on average at just 5.9%. The rental fee is about 1.5 weeks. Property management fees in Melbourne, in particular, are about 5.8%, with the same average rental fees as the rest of the state.
What are the property management fees in Brisbane, Queensland 2023?
Property management fees in QLD are right on the national average at 7.5% as a percentage, but only 1 week’s rent is charged on average for a letting fee. Management fees in Brisbane are an average of 7.3%, which is slightly lower than the QLD average, but the letting fee is the same.
What are the property management fees in Perth, Western Australia 2023?
Management fees in WA are higher than the average for Australia at 8.7%, and the rental fees are 1.7 weeks on average. Property management fees in Perth are the same as the Western Australia average.
What are the property management fees in Adelaide, South Australia 2023?
Property management fees in SA are on the national average at 7.5%, but the rental fee is 1.9 weeks, which is a bit higher than average. Property management fees in Adelaide are the same as the whole state.
What are the property management fees in Hobart, Tasmania 2023?
Property management fees in TAS are the highest in Australia at an average of 8.7%, with the average rental fee at 2 weeks. Property management fees in Hobart are an average of 8.4%, which is somewhat lower than the Tasmanian average, but the rental fee is the same on average.
What are the property management fees in Canberra, ACT 2023?
Property management fees in ACT are a little lower than the Australian average at 7.1%, and the letting fee is 1.2 weeks. Specifically, property management fees in Canberra are 7.2%, and the letting fee is 1.2 weeks.
What are the property management fees in Darwin, Northern Territory 2023?
Property management fees in NT are amongst the highest in Australia, with the average at 8.5% for the state. However, the letting fees are lower at just 1 week. Property management fees in Darwin are 8.5%, with just 1 week as a letting fee.
Why do I need a Property Manager?
As a landlord, you can cut costs by managing your property yourself, as you don’t need to pay management fees. However, if you lead a busy lifestyle and don’t reside close to your investment property, hiring a good property manager can free up your time and reduce the stress of owning an investment property.
Property managers are trained for the job and look after landlords, tenants, prospective tenants and investment properties on a daily basis. They have connections with local tradespeople and are experienced with all regular administration and documentation that needs to be dealt with.
DIY property management can be a great money saver if you’ve got the time to spare. However, you may not have the same level of expertise or network of useful contacts as a property manager to manage your property efficiently, and emotional involvement can be a risk.
If you don’t have the time and patience to deal with any delayed or missed rent payments, complaints from neighbours and any damage to your property, the safe option would be to hire a property manager who can deal with these issues for you.
A survey of investors by Woolcott Research found that two out of five self-managing landlords interviewed had experienced tenants defaulting on rent. It also found that landlords who used property managers to manage their relationships with tenants faced fewer problems.
What makes a great property manager?
Ideally, you’ll want to find a property manager who can offer you the following:
The ability to achieve the highest possible rental return
A professional, personalised service
Experience in managing properties like yours
Education in property management
Superb communication and organisation skills
Questions to ask a property manager before you sign them on
Once you get in touch with a property manager, ask them the following questions:
How many years of experience do they have in the industry?
How many properties are they currently managing?
Does the agency also handle sales? (This could be useful in the future.)
What’s included in their property management fees? (Request a breakdown.)
What is their screening process?
How often do they generally contact landlords?
Explain how you handle repair requests.
How do you handle a tenant who doesn’t pay rent on time?
