Acquaint Yourself with 3 Important Property Management Fee Structures

16 June 2015
 Categories: Real Estate, Blog

If you've decided to give your investment property on rent, but don't want the hassle of handling the affairs on your own, then a property management company is right up your alley. Property managers will do everything you desire—from identifying potential tenants to collecting the rent on your behalf.

Like any other professional service, there's a fee involved with choosing a property management company. These fees may differ based on the services requested. Before hiring a property management service, get acquainted with these fee structures so you know exactly what you're paying for.

Rental Commission

A property management company will charge you a commission on the rent received every month to manage all aspects of your rental property. This may be from vacation rentals or residential tenants. Property managers usually withhold their monthly commission from the rent payment and will pass on the balance to you.

Most property managers will charge commission as a certain percentage of the tenant's rent. Before deciding on a property management company, be sure to check on their pricing commission structure, along with the services offered. It should help you make a decision when it comes to choosing the most reasonably charged commission with the most return value in terms of services offered.

Keep in mind that in most Australian states, the rental commission percentage is varied, so you can negotiate with the property management company. However, some states have a defined fee structure. For example, Queensland has set a cap of 5% plus GST on rental fees. In Tasmania, the residential property management fee is at 13.44%.

Letting Commission

A letting commission or fee is a one-time payment that you are required to make to your property manager before a new tenancy lease agreement commences. This fee usually comes out of the first rental payment from the tenant. This letting fee is paid to cover the cost of property advertisements, setting up tenancy agreements and other marketing initiatives undertaken by the property management company for your house.

Be sure to get clarity from your property manager about this one-time fee, so you don't end up paying more than you should, and don't be afraid to shop around in search of more affordable letting commission rates from property managers. While negotiable in most states, the letting fee in Tasmania hovers around 6.4% of the annual rent for agreements that last less than 12 months.

Repair fees

Property managers can also charge additional repair fees, if they are expected to supervise repairs and make replacements to your property. Since they manage several properties, they will be able to access several reputable tradesman, but you will need a written agreement for this service. The repair fees will vary and will likely be a percentage of the repair costs involved.

Hiring a property management company like Verse Property Group will give you peace of mind; make sure you're acquainted with the costs involved to avoid any hiccups in your professional arrangement.