Forums / Property Investing / General Property / Do property managers / agencies receive kick backs?

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  • Profile photo of JimmyJJimmyJ
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    @jimmyj
    Join Date: 2007
    Post Count: 49

    I have always been dubious of property managers!  And unfortunately, as I grow my property portfolio and deal with more property managers I become more dubious, not less.  I was hoping it would be the other way!

    Today I received a renatal management statement with this comment at the bottom:

    "We are able to provide you with quotes for painting, recarpeting and curtains.  Please contact our office with your request."

    I have always wondered if they receive kickbacks, and I think this is confirmation.  Why would they offer to source quotes when there is nothing in it for them?

    Are there any ex-property managers who wish to confirm or deny whether agencies and property managers receive kickbacks from the suppliers they use?  Also, is this legal?

    Cheers,
    JJ.

    Profile photo of DWolfeDWolfe
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    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Hi,

    I would go the other way and think that they are trying to keep the property in the best possible condition in order to have an easier job renting and keeping tenants.

    Ours puts little things like reminders about gutters before winter and getting jobs done before the end of the financial year as to claim jobs on tax.

    Think about it from their point of view, a place with new curtains and carpets and paint is going to rent quicker and for more money than something that is old and run down. Better that they take care of than me waste my time and better that they remind all the cheap skate landlords who wont spend a buck as well. They have their preferred tradies but they are generally the cheap ones who don't charge the earth for jobs, so I would be pretty surprised if there was a kickback.

    D

    DWolfe | www.homestagers.com.au
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    Profile photo of Matt_ArnoldMatt_Arnold
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    @matt_arnold
    Join Date: 2006
    Post Count: 142

    Hi Jimmy J

    Does it really matter if they are receiving 'kickbacks' ( i prefer the term financial remuneration) for providing a service ?

    Eg. A) Intellectual Property – they are proving a short list / recommended list of qualified tradesman who can complete the required work.
     
    B) Project Management – They are responsible for overseeing the work and ensuring that it is completed to an acceptable standard.

    My only concern would be if the person they were recommending and contracting to do the work turned out to be the licensees nephew who hasn't even finished the 1st year of his apprenticeship, or alternatively, the person who was willing to 'pay them the most'.

    As long as the people they recommended were qualified and reliable, then i would be in full support of having them facilitate the required works…

    Profile photo of ducksterduckster
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    @duckster
    Join Date: 2004
    Post Count: 1,674

    If you aren't  happy with the quote then tell the property manager

    I have rejected over the top quotes I received throughmy property manager.

    Sometimes the suppliers think landlords are wealthy and try it on.

    Profile photo of JimmyJJimmyJ
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    @jimmyj
    Join Date: 2007
    Post Count: 49

    Matt,

    I disagree entirely.  If someone is receiving 'financial remuneration' (to use your term)  as a result of recommending or arranging a service for me then I expect to be made aware of this.  How can I be sure they are choosing the best supplier for the job, rather than the supplier which provides them the best 'financial remuneration'.

    Once I include all the fees for management of this specific property it works that I am paying in excess of 16% of the rent for the management fees.  Shouldn't this be where the agent gets their 'financial remuneration' for managing the property?

    I do have one agent who is using a family member to install items.  The cost was at market value, which I have no problem with this as long as they do a quality job comparative to having a professional do the work.  Unfortunately it is difficult to verify this until it is too late because of course the property is tenanted.

    So I assume this is occurring in the industry, and is legal?

    Profile photo of DWolfeDWolfe
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    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Why don't you call them and ask them. They should tell you straight away. If they umm and ahh about it then you know they do and that there is a questionable legal issue.

    Then call a couple of other agents in the area and ask them too. You may also ask them about their fees etc and might be able to get a better deal or a PM you are able to have a better relationship with.

     I have a working relationship with the three PM's we use (one who manages three of our properties) and they call or email the minute they need anything. They know my name and my face and I am not just one of the landlords who never spends a cent or is cheap, or a pain in the you know where. We get better service and they have an easier time with the properties.

    D

    DWolfe | www.homestagers.com.au
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    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,850

    AFAIK agents don't get kick backs for arranging quotes etc however they have to watch out that the works that they undertake does not require them to have a building licence eg if you get them to arrange repainting, carpet, kitchen replacement etc where it exceeds the limit set by the dept of fair trading.

    In the commercial field, where the agent is required to take on the role of facilities manager, then they get paid separately for this work ie for arranging ac maintenance, essential services certification, cleaning etc.

    Where an agent is receiving kickbacks they can be prosecuted under the crimes act for receiving 'secret commissions' ie remuneration for arranging works paid for by the suppier not the owner.

    Profile photo of KateMelbKateMelb
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    @katemelb
    Join Date: 2010
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    JimmyJ wrote:
    I have always wondered if they receive kickbacks, and I think this is confirmation.  Why would they offer to source quotes when there is nothing in it for them?

    Exactly. I've experienced this with landlord's insurance and smoke detector inspections, where the services plugged by the PM were signficantly more expensive than what I was directly offered by competitor service providers.

    Jimmy, if you don't trust PMs (I sure don't anymore), why not self-manage! Save money and have the peace of mind to know you're not being conned.

     

    Profile photo of rachelthelegendrachelthelegend
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    @rachelthelegend
    Join Date: 2008
    Post Count: 15

    hi guys, I'm a current PM in Victoria and can guarantee that I have never and will never get kickbacks. It is part of our authority that any rebates received must be listed and passed on to the landlord if the work was completed at their property. The tradespeople we use are employed by our company because they do quality work, reasonably priced and are willing to do those 'love jobs' eg. I sent my handyman out at 6am this morning to unlock a door that had seized closed – he lives an hour from the property – and he did it because we give him so much work, not as a kickback!

    Our regular insurer offered us a rebate when we signed on 100 new clients which we rejected, because it would mean dividing up the rebate amount between the $100 owners. instead we asked the insurer to spread the rebate over the owner's premiums for the next year when they renew so that the owner sees the direct benefit of signing with our preferred insurer. And in this case, the only reason this company is our preferred insurer is because they are BY FAR the easiest to deal with claims – processing times are 5 – 7 days instead of 4-6 weeks!

    The closest thing we get to a kickback is a nice bottle of champagne from some tradies at Christmas time :)

    Profile photo of jacqui_03jacqui_03
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    @jacqui_03
    Join Date: 2010
    Post Count: 142

    rachelthelegend,

    Do you mind advising which insurance provider is your preferred?

    Regards,

    Jacqui

    Profile photo of cuteyoungchiccuteyoungchic
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    @cuteyoungchic
    Join Date: 2010
    Post Count: 66

    From my experience, there are some Property Management agencies, who don’t only charge you the 9.25% management fee (incl), but will also deduct 9.25% from your rental income for other monies that pass through their hands, e.g. painting, gutters, rates, insurance, water etc, whether you’ve organised the service or they have. Personally I pay those types of expenses from my own account, as it can add to a substantial amount over a year.
    It varies from agency to agency.
    They are usually open about it if you enquire.
    Cheers,
    Liz

    Profile photo of cuteyoungchiccuteyoungchic
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    @cuteyoungchic
    Join Date: 2010
    Post Count: 66

    I’ve just started the ball rolling towards having 2 home units built behind an existing rental, so far just to the planning application stage.
    I’m 63, and perhaps quite ignorantly, assumed I could get my mits onto my super now.
    Monday I discovered that that is not to be, as I still work full time, my only option seeming to be that I may be able to draw a small pension from my super. Fat lot of good a “small pension” will be towards repaying my $400,000 loan!
    Am wondering if there is any way around this? Any ideas out there please?
    Cheers,
    Liz

    Profile photo of Ol PaintingOl Painting
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    @ol-painting
    Join Date: 2003
    Post Count: 123

    ABSOLUTELY NOT!!!

    I’m going lots of work for Real Estate agents for years as a trader – no one ever asked me about anything! They just source a trader that will do the work quickly and well, so it causes as little hassles for them. That’s all.

     

    I’d imagine RE would prefer property to be well maintained, as their fees will increase and maintenance will go down. But nothing wrong about this! You are the one getting the rent.

     

    If anything – we’ll give cheaper quote for RE. They are our bulk customers. The yare getting few quotes and I wouldn’t want to stand up as too expensive. Also we know who they are and that they will pay. When a stranger contacts you – you never know if you will get problems getting money from them and would allow for this.

       

    But… I myself had not a very good experience on my regional IP. Had to replace ceiling, and used trader RE recommended, as the one why does a lot of work for them and is good. The work was done quite poorly. Year latter I started reno. Every trader was asked me who on earth did THIS. And after hearing a company name they all said – oh, this guy’s wife is working at the agency and he has a very little experience and often call of the traders for advice on how to do things. I don’t trust this RE!

    Profile photo of thecrestthecrest
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    @thecrest
    Join Date: 2004
    Post Count: 992

    Been a PM in NSW.  Kept a few tradies in work, so they were always willing to do a bit extra here and there for some of the properties I managed, which is acting in the property owner's interests, which is what the PMs are meant to be doing by law at all times. Kick-backs would increase costs for property owners and would not be in their interests.
    Part of my job was to avoid any unpleasant liability for the licensee, cover his butt and mine at all times. 
    There were no kick backs on my watch.
    Cheers
    thecrest

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    Profile photo of dougcanedougcane
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    @dougcane
    Join Date: 2013
    Post Count: 1

    Yes I've had a problem with the smoke alarm 'service' pressure by my PM. Now they even want you to fill in a form of 'compliance' but more ominously I think they actually sabotage existing smoke alarms to pressure owners (especially those not living in the area) to  accept their over-priced service. I personally installed and tested a smoke alarm with a ten year battery life. A year later I inspected my unit and found the smoke alarm not working – the battery was taken out and put in backwards. The tenant would have no reason to do this as he was a good long term tenant, while at the time I noticed the person the management company had sent was very tall – they send the tall ones in to reach the smoke alarms without ladders. You might think that this is unlikely – but imagine several hundred properties being charged around a hundred dollars a pop for smoke alarm 'service' every year and the numbers (and the motivation) quickly add up.

    Worse, have you had that same dripping tap 'fixed' by their plummer they send you several times in a year? Or perhaps that blown fuse – created by your tenants faulty electrical appliance – now requires the replacement of the whole electrical board even though you've never had a problem with it before? Those things have happened to me and – out of the four or so property management companies only one hasn't gone bad yet – but that one is a family run company whose members I know personally. There are conflicts of interest and fraud in just about every sphere of business  – and property management in Australia is no exception. Keep an eye on your PM!

    Profile photo of TerrywTerryw
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    @terryw
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    I agree Doug.

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    Profile photo of PEACHYPEACHY
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    @peachy
    Join Date: 2004
    Post Count: 78

    I agree about watching your PMs…we have had some interesting experiences with ours of late. One double charging us for bills, another telling lies because she was lazy. I feel like I have to micro manager my managers which is frustrating!

    I will say as a tenant that we always pull the battery out of the smoke detector. Bad I know but the thing is so damn sensitive we can't cook ANYTHING without it going off.

    Profile photo of tlm1987tlm1987
    Member
    @tlm1987
    Join Date: 2013
    Post Count: 31

    My dad is a carpenter, always self employed – he used to do a lot of work for real estates and that was that. No kick backs his end

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