You get what you pay for in property managers who work cheap
Working in the state of Victoria, we work within a deregulated market, so our fees for leasing and managing properties is fully negotiable nowadays and in fact it has been that way since the mid-1990s.
In the past 10 years we have seen the growth and establishment of property management into a long-term career rather than a side step into sales.
However, landlords must realise when management fees are heavily discounted, it can have a snowball event. In the most extreme case the agency’s rent roll is sold and subsequently purchased from one of its competitors because it could no longer continue to operate a business, let alone make any profit.
Other consequences will generally include the continue turn over in property manager or property management staff. Low management fees will generally equate to lower wages, less or no training and a continual churn in staff. Sometimes directors and/or senior managers are more focused on securing as many managements as possible irrespective of whether the agency can afford to properly service and maintain the business.
So after continual poor service, the landlord will move on to another property manager.
A further aspect that should be considered is what is actually included in the lower management fee. Can you honestly expect to receive the same quality of service and inclusions when you are paying 4% rather than the industry standard, approximately 7%??
Cheaper is generally never better so here are some things to consider;
- Are routine inspections included at the lower rate?
- How much extra will you pay if your tenant falls into arrears?
- How often does the agency pay its owners? Once a month?
- What is the true quality and experience of the property manager?
Just like all service industries, you pay for what you get. Cheap is never a good long-term solution. It may serve as a short-term financial fix, but in the long run and from my experience it results in the landlord having to pay an another property manager more money to sort the problem out!
Leah Calnan is the director of Metro Property Management in Victoria and is the chairwoman of the REIV Property Management Chapter.
