Forums / Property Investing / Help Needed! / Property Management Fee Structure – Confused!!

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  • Profile photo of stimesfivestimesfive
    Member
    @stimesfive
    Join Date: 2011
    Post Count: 5

    We have recently built a duplex and it is now tenanted at $335 per week each unit.  We are having trouble understanding our property management fees, and the answer provided by the manager has only confused us further!  We don't know whether the way we are being charged is usual, or if something fishy is going on. 

    The "management fee" keeps changing.  We expected to be receiving a static weekly rent less a static weekly management/admin fee.  This is not the case.  The fees vary ie

    Fortnight 1 : Unit 1 $58.96 – Unit 2 : $88.44

    Fortnight 2 : Unit 1 $57.20 – Unit 2 : $58.96

    Plus a monthly admin charge of $9.90 flat.

    The property manager's explanation was that the fee was charged at a percentage of "money in bank" at the time.  This still seems like gobble-de-gook to me.

    Can anyone help?

    Profile photo of BoughtWithEquityBoughtWithEquity
    Participant
    @boughtwithequity
    Join Date: 2013
    Post Count: 68

    I've honestly never heard of anyone charging this way.  It is usually a percentage of the monthly rent here in the states…somewhere between 8 & 10% is typical.  Do you have a contract with them.  You should….and it should all be spelled out there for you.  I'm in the states so not sure about fortnight but I think it means every 2 weeks.  Looks like they are running around 8.5%. Here in the US, rents are mostly by the month. Everything I do is shared housing so I am dealing with usually 3 to 5 tenants at each property per month and we usually charged 15% to 20% of monthly rentroll to manage….but bear in mind that it's 4 times the work to deal with multiple tenants.  Try to check with some others in your area and call some real estate agents and see if they have any recommendations for you.  LUCK!

    Profile photo of Dave WardDave Ward
    Participant
    @dave-ward
    Join Date: 2004
    Post Count: 37

    The management agreement is your first port of call. Have a look in there and see what it says. It has to be stipulated in there by law, so that is the easiest way to resolve your issue. If they have an unusual way of calculating the fee, it would have to be articulated in the agreement clearly so it can be worked out in the event of a dispute. 

    Dave Ward | Geronimo Finance
    http://www.geronimofinance.com.au
    Email Me | Phone Me

    Property Investor, Property Investment Expert & Advisor, Finance Expert & Strategist

    Profile photo of jenni_nextplace.com.aujenni_nextplace.com.au
    Member
    @jenni_nextplace.com.au
    Join Date: 2013
    Post Count: 36

    Management fee is usually charge on the amount of rent that is received in that period. So the amount will vary but not the percentage.

    E.G One fortnight you may receive $600 in rent and your commision is 8.25% then you will be charged $49.50

    Then in the next fortnight period you may have received $1500.00 so 8.25% is $123.75 commission charged. 

    Profile photo of stimesfivestimesfive
    Member
    @stimesfive
    Join Date: 2011
    Post Count: 5

    Thanks for the input everyone.  Jenni, I think your explanation is closest to the agents'.  However I still don't understand how this is a fair arrangement.  Rent is being paid weekly by both tenants, so that doesn't vary.  And the agent is paying us on a fortnightly basis, and that doesn't vary either.  The only thing that varies is the management fee.  Is this standard across all agencies?  We are currently with The Professionals.

    Profile photo of eilatan28eilatan28
    Participant
    @eilatan28
    Join Date: 2010
    Post Count: 44

    Did unit 2 pay a weeks rent in advance ??  The difference is $30 which is about 8.5% of 1 weeks rent. My agent charges 7% of the total rent received by my tennant, so if they are in advance, the management fee changes from fortnight to fortnight

    Profile photo of N@than[email protected]
    Participant
    @n-than
    Join Date: 2010
    Post Count: 241

    What eilatan28 has said is most likely the case. I know for my properties I get paid by the agent Monthly but the amount I get in rent varies as sometimes the tenants pay 2-4 weeks in advance and so the agent takes their slice when the money comes in. You should get a rental statement and it should be pretty easy to see on that?

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