Property management fees: An in-depth guide to understanding the costs and benefits

Investing in real estate can be a lucrative way to grow your wealth portfolio and set yourself up for a more comfortable retirement, but it also requires ongoing management to ensure a sustainable return. For property owners who lack the time or desire to handle real estate management fees and day-to-day operations, hiring a property manager could be an attractive option. However, this convenience comes at a cost, and you will need to cover a variety of property management fees for the services provided.

This helpful guide will cover what property managers do, the benefits they offer, the fees they charge and considerations for self-management. We'll also share tips on how to choose the right property manager for your needs.

What does a property manager do?

A property manager is a real estate professional who oversees the various aspects of managing a property – usually residential, but also commercial and industrial properties – on behalf of you, the owner. Their duties may include, but are not limited to:

• Tenant selection
• Rent collection
• Property maintenance
• Repairs
• Lease agreements
• Acting as an intermediary for any tenant issues and complaints

Property managers are essentially a go-between for landlords and tenants, and their job is to ensure the property operates efficiently and remains sustainable for the owner. Their knowledge in real estate laws and regulations, current rental market trends and property maintenance could make them a valuable asset to your investment portfolio.

What are the benefits of using a property manager?

Hiring a property manager is an additional expense on top of your mortgage payments, council rates and utilities, however their assistance could make your life much easier. Some top benefits include:

1. Time savings

Managing a property on your own can be time-consuming and stressful, especially if you have a large portfolio with multiple houses and apartments. A property manager will tackle all the day-to-day jobs, freeing you up to focus on more important things.

2. Tenant screening

One of the main roles of a property manager is to conduct thorough tenant screenings, helping you find the most reliable and responsible options among all the prospective tenants. After all, you want someone who is more likely to pay rent on time and take good care of your property.

3. Rent collected

Because property managers want to keep your business, they will structure the lease in such a way that rent is collected in a timely fashion. If there are late or missed payments, they can assist with managing the rent arrears process.

4. Property maintenance

They coordinate and oversee all property maintenance and repairs. That means you don’t have to constantly go to the property to check that it’s well-maintained, and they will address any of these issues promptly to prevent further damage.

5. Legal compliance

The best property management companies have staff who are highly knowledgeable in state rental properties, laws and regulations. They will work to ensure the property is always compliant with the relevant legal requirements.

6. Communicating with tenants

Rather than you having to deal with every minor issue, property managers will act as the first point of contact for tenants. They handle everything from basic enquiries to complaints, maintenance requests, and more.

What property management fees can you expect to pay?

Below are the most common fees charged by property managers:

Letting fee

The letting fee, also known as a tenant-placement fee, is charged whenever your property manager finds and places a new tenant in the rental property. The amount of the letting fee is usually a predetermined percentage of the first month's rent. Many property managers bundle the letting fee with other costs like advertising the property, tenant screenings and preparing the lease agreement.

Inspection fee

This property management fee is charged for regular property inspections. Inspections can identify maintenance issues and allay any concerns you might have about the tenants taking care of your property.

Advertising/management fees

Property managers may charge advertising fees to cover the costs of marketing the property to attract new tenants. Management fees, on the other hand, are the other ongoing costs and fees charged to oversee the day-to-day management of the property, which may include rent collection, maintenance and handling tenant communications.

Marketing fees

You might be charged a flat fee for marketing if additional advertising is required to attract tenants. This might be necessary if you’ve had a vacant property for some time, or for high-end properties.

Lease renewal fees

If the property manager helps with renewing your existing tenant's lease, they may charge a lease renewal fee. This leasing fee covers the administrative costs of preparing and executing the new lease agreement.

Tribunal fee

In the event of a dispute or legal matter that goes to the Queensland Civil and Administrative Tribunal (QCAT) and requires the property owner or manager’s involvement, a tribunal fee may be charged to cover the costs of representing your (i.e. the landlord’s) interests.

Annual statement fee

The annual statement fee covers the costs of preparing your property’s financial statements and reports, which outline any income and expenses related to the property itself.

Insurance claim fee

If you end up in a situation where an insurance claim is necessary, your property manager may charge a fee for handling the claims process on your behalf.

What's the average property management costs and fees per state/territory?

Property management fees can vary significantly between states and territories, and sometimes even from city to city. For example, you are likely to pay a higher ongoing property management fee in Brisbane than in a low-population country town.

The average cost is usually influenced by the local rental market, the type of property you own, the number of units managed (if any), as well as the level of service required. Let's take a look at some of the approximate property management fees you can expect for each state and territory in Australia:

The first figure is the average percentage (%) of weekly rent charged for metro areas, while the second is the average for regional areas:

• QLD: 9%; 7–12%
• NSW: 5–8%; 5–12%
• VIC: 5–10%; 6%
• SA: 9–15%; 9–11%
• TAS: 5–10%; 5–10%
• WA: 8.5–11%; 11%+
• NT: 5–10%; 5–10%
• ACT: 6–8%; 8%+

Source: Realestate.com.au: https://www.realestate.com.au/advice/what-are-your-property-management-fees-for/

Keep in mind that these property management fee figures are averages only. Individual firms may offer different structures and services within their property management fees. As an owner, it’s up to you to do your due diligence and compare property management fees, so ask for a full breakdown of their property management fees before deciding whether they are the right fit for your investment property.

Considerations if you want to manage the investment property yourself

While hiring a property manager can be the perfect fit if you are too busy with other work, some owners prefer to manage their investment property themselves. Self-management gives you complete autonomy over your property and can make your relationship with tenants much more streamlined. However, DIY property management comes with responsibilities and challenges, so consider whether avoiding the average property management fees and manager cost is worth it in the context of:

• Time commitment: Self-management requires a significant commitment of time, as you will be completely responsible for handle tenant enquiries, repairs, rent collection and duties.
• Legal knowledge: Are you familiar with Queensland tenancy laws and regulations? You’ll need to stay across them to ensure you are always operating within the legal boundaries.
• Tenant screening: Thorough screening is essential to find reliable tenants, and you must be diligent in checking their references, going through their credit histories and enquiring about their rental past.
• Property maintenance: As the landlord and property manager, you will need to take care of any maintenance and repair requests to keep your tenants happy.
• Emergency availability: Owners must be available for any emergencies that might arise at the property, 24/7.
• Accounting and recordkeeping: To avoid the ire of the ATO, you’ll need to keep accurate accounting records, and also monitor the property’s expenses and income for end of financial year.

Self-management might suit experienced property owners who have the time and skills to handle all these tasks and more. But if you are a new landlord or simply lack the time to manage the property yourself, hiring a professional property manager is a helpful solution.

Top ways a property manager can save you money

• Paying any type of property management fee might seem like an unnecessary cost when you already have so many expenses already, but hiring a property manager can actually save you money in the long run. Here’s how:
• Finding good tenants: Property managers are skilled at finding reliable tenants quickly who will always pay their rent on time. They can also help you avoid lengthy vacancy periods that may result in lost income.
• Timely rent collection: Property managers have the means and the experience to collect your rent on time, as well as take the appropriate steps if there are consistently late payments.
• Preventative maintenance: By addressing maintenance issues quickly, property managers can stop minor problems from snowballing into eye-wateringly expensive repairs.
• Legal compliance: Property managers will take care that your property is compliant with all state legal requirements. They may also be able to act on your behalf for any legal disputes.
• Reduced tenant turnover: A good property manager will have solid practices in place, such as maintaining open communication and addressing tenant concerns. This can keep your tenants more satisfied and subsequently reduce the chances of turnover.

5 tips to choose a great property manager

Selecting the right property manager can help you maximise the benefits of property ownership. Here are five ways to choose the best property manager for your needs:

1. Look at their experience and reputation: Seek out property managers with a proven track record and positive reviews from other landlords. As a bonus, they should be highly experienced in managing properties that are similar to yours.
2. Choose someone with a range of services: Ensure your preferred property manager offers the services you are looking for, and that their fee structure matches your budget.
3. Are they a good communicator? Effective communication is essential in property management – especially as they will be your go-between with the tenants. Choose a property manager who is responsive to your calls and emails, and keeps the lines of communication open with both owners and tenants.
4. Review their tenant-screening process: Ask about the tenant-screening process and how they will find reliable tenants for your property.
5. Make sure they have a transparent fee structure: Choose a property manager who is upfront about their costs, with transparent fee information that clarifies additional charges that might apply.

Property management services can offer so many benefits to you as an investor. Whether it’s saving you time that would otherwise be spent managing tenancy issues, or getting the best possible rental income for your area – an experienced property manager could be the best solution.

Whether you opt for professional property management or decide to manage the property yourself, it’s important that you understand the role of a landlord in Queensland and your legal responsibilities to ensure a successful and profitable real estate venture.

Read more articles about property management here.