You have bought your investment property in and are ready to now engage a Perth Property Manager. However, you feel confused – should you go for an all-inclusive fee or a pay-for-what-you-need fee? In addition, you are looking at various websites and offerings, and are puzzled by many of these industry terms.
Although there are several ways a property management contract is usually handled, we have put together a summary of the main elements of property management charges in Western Australia and an explanation to help you along your property leasing journey.
Property Management Fees are generally categorised into Ongoing Management Fees and Letting/ Leasing Fees.
- Management Fees.
This is usually charged at a percentage. It could be a set amount but the vast majority of the time, it would be a percentage. Management fee is collected on rent and any other invoices paid by the tenant such as water consumption, electricity and gas if applicable. This is the fee for managing the property such as following up on rent arrears, liaising with the tenant and owner in general, receipting the rent, paying out the owner, issuing monthly statements, rent reviews etc.,
- Leasing Fee.
This would usually be a multiple of a week’s rent, for example, 1,2,3 or 4 weeks rent. This fee is usually incurred when there’s a new property or the property is about to become vacant. The fees in leasing the property cover expenses such as organising viewings, inviting prospective tenants to attend, opening the property to prospective tenants as many times as it takes to lease it, giving feedback to the owner on each viewing, giving out application forms, processing applications, typing leases, collecting rent and bond prior to moving in, sending the bond to Bond Administrator, and signing the tenant up to lease.
- Internet Advertising.
This is the fee for putting the property on the internet, agency website, reiwa.com, realestate.com and many more. Each of these websites charges a monthly fee to agents to advertise properties and this fee would cover some of this cost along with the administration/ systems cost of putting the property on the internet.
- Lease Renewal.
Renewing a tenant’s lease is very important for the tenant and owner. The Property Manager would contact the tenant several months before the lease expires to discover their intentions. If the intent is to renew then a term and rent increase is negotiated. The Property Manager would do a rent review of the area and speak to the owner about a reasonable increase that allows the tenant to still renew the lease. The fees also include cover the following tasks: negotiate with both parties to come to an agreement, type the leases, get them signed by the tenants, input into the system and send tenants back a fully signed copy.
- Property Condition Report (PCR).
This comprehensive report details the condition of the interior and exterior of your property and is to be an essential record for future reference when comparing the condition of the property at the beginning, during and the end of the tenancy (see article on PCRxxxx). Generally, in order for a PCR to be completed, there would be a set amount charged, usually between $100-$400. The report is extensive and covers each room, and within each room walls, floors, windows, windows treatments, lights and light fittings, electrical, walls, cabinets and details the condition of each. The report may also include photos. The report itself would take anywhere from 2hrs to 7hrs to complete and then format as per Department of Mines, Industry Regulations & Safety’s (DMIR) requirements.
- Routine Inspection Fee
Once a property is let out, it is best practice for tenanted properties to be inspected by the property manager on a quarterly basis. Regular routine inspection is important to ensure that minor issues do not escalate and is prevented from turning into a major problem. It serves to protect both the Owners and Tenants ensuring that the general wellbeing of the property is looked after, safety and compliance issues are in order as well as identifying maintenance requirements.
This would entail giving the tenant the required notice of the inspection, attending the inspection, using an Inspection app, completing the report on the App and sending this report to the Owner, usually with comments and photos.
The initial routine inspection is carried out around the 6-week mark after the commencement of the tenancy, and thereafter at a 3-month interval. The necessity and regularity of these inspections may be part of the terms stipulated by the Landlord Insurance policies and not having them carried out appropriately may void the policy.
Based on the Residential Tenancies Act 1987, a maximum of four routine inspections is allowed each year.
- Final Inspection and Outgoing Bond.
At the end of the tenancy, a thorough inspection is carried out and an Outgoing Property Condition Report (PCR) is prepared with the outcomes of the inspection. This inspection is carried out and compared to the ingoing PCR where the original condition of the property prior to the tenancy is recorded in detail. If there are damages or cleaning or maintenance required, the outcomes will be discussed with the Owner and then claimed against the Bond (where applicable).
- Tenant Enquiry Fee.
As part of due diligence and best practice, this step in ascertaining the suitability of a tenant is important. Most agents would use one or both Tenancy databases in Australia, TICA and NTD. Accesses to both these databases cost money to use. The tenant enquiry fee would be to assist to cover these costs incurred.
- Administration Fee.
This is usually a nominal amount paid monthly ($5-10 per month) for property management incidentals such as phone calls, stationery, postage etc.,
- Annual Financial Summary.
This would be the fee to provide an annual summary of income and expenditure, usually provided to the Owners and their Accountant. This is very helpful during tax time. Once again, this is a set fee per annum that can vary from $15-$150.
- Meeting Attendance.
Sometimes an Owner might ask a Property Manager to attend a strata meeting on their behalf. In this instance, the meeting attendance fee would likely be an hourly rate.
- Court Attendance Fee.
This would usually involve a bond dispute. If the Owner and Tenant cannot come to an agreement regarding items to be deducted from the bond, then it may end up in the local court. This is highly time consuming for the Property Manager, both with preparation and attendance at court. An hourly rate would be charged for the PM’s attendance at the court which may be as little as 1 hr, or as much as half a day to a whole day.
When purchasing a property for investment purposes in Perth and hiring a property manager, it is essential that you conduct a thorough research and know which property services are covered or not covered in your contract. Find out as well if any of their property management services are outsourced or conducted in-house (see article on Outsourcing Property management).
The best Perth property management firms understand the financial objectives of their Owners, contract out reliable tradespersons to conduct repairs and maintenance of the asset well and truly cares for our property by securing the best possible tenants. Aside from keeping your investment property in top shape, top Property Managers also offers the best net return on your property. Although it may be tempting to save a few dollars by going for the lowest priced property management firm, it is often never worthwhile. Consider the reputation and the number of years that the firm has been serving the industry as well as their employment retention rate of their senior property managers handling your property. These are key indicators on which property management firm will serve your best interest.