You’re just about to settle on your next investment property. One big choice you have to make is whether to self-manage your property or outsource it to a property manager. Before you make this decision, you would want to know how much a property manager would charge to do this.
Outsourcing the job to a property manager means that they’ll take some of the day-to-day pressure off you. If you’re far away from your rental, or too busy at work, you’ll almost definitely need the help.
But as with any service, it’s going to cost you. So, how much do property managers charge? What types of charges are there? Are there any hidden costs? Are the charges negotiable?
At Rentdesk, we had the same questions. Our goal is to help property investors save costs and get the most out of their property. In order to help property investors save on property management costs, we first had to understand what the different property management costs were.
Our Mystery Shopping Experiment
At first, we tried to look on various real estate agencies websites on what the costs would be. However, it was quite hard to find as very few agencies displayed the costs involved.
So we decided to conduct a mini survey. We randomly selected 20 real estate agencies across different suburbs in the Greater Sydney region. The final set included both franchised agencies as well as independent ones. Our researcher messaged each of these 20 real estate agencies to enquire about cost and pricing. 8 of them responded.
Here’s what we found.
How Fees Are Organised
Each property manager charges slightly differently, but we managed to classify the fees into a few major categories.
Base Management Fee
This fee covers all the ongoing management that your property manager will need to handle. The property managers we surveyed all collected a percentage of the rent collected.
Property managers charge this fee to cover things like collecting the rent and following up on arrears.
However, what was covered beyond this varied between agent to agent.
For example, while two-thirds of agents covered regular inspections of the building to ensure that the property is in good condition, the remainder of agencies quoted a separate regular inspection fee.
In all cases, the base management fee was not all inclusive, there were also ancillary fees and letting fees.
While some agents offer an “all-inclusive” fee, many don’t. There may be other miscellaneous fees that you’ll need to pay your property manager in order to run the property. The most commonly charged additional fees include:
Admin fees: Depending on the agent, this would include things such as the cost of document storage, photocopying, postage, and any other admin work that will need to be done. While some will charge a single admin fee, others may charge a separate bank fee, document fee, or incidentals fee. Regardless of the name, be sure to check with the agent exactly what is included and not included in the general “admin” fee.
Inspection fees: These are usually covered by the management fee, but you can sometimes be charged separately for them. This fee generally covers start of tenancy inspection, periodic inspections and end of tenancy inspections. Some agents had quoted a higher end of tenancy inspection, presumably as more attention is required if the details were to be used for a bond claim. Where the inspection fee is quoted separately from the management fee, we have found that the management fee tends to be lower. This works well if you don’t require frequent inspections, and in return pay a lower base management fee.
Tribunal fees: The hope is that everything will go well when you’re renting out your property. If something does happen, and you need to attend a tribunal, you can request the property manager to attend with you. We have found that some agents quote an hourly rate, where the final fee will depend on how long it takes for the agent to resolve the matter. Others charge a fixed fee to cover the entire process.
Trade quoting fees: These are usually covered in your management fees, some agents charged a separate fee to obtain trade quotes and organise tradespeople to fix any maintenance issues brought up by your tenants.
Other fees that can also be charged, but not mentioned by all agents include:
Set-up fee or lease transfer fee: A set-up fee gets charged when you first sign up with an agent. For owners with existing tenancies, the agent needs to transfer you over from your previous agent. So, this fee covers activities such as collecting documents, transfer process, and setting up your account in the agent’s system. For a property with no existing tenancy, there is less work involved and the activities are generally covered by the letting fee. Although we have found in a few instances where a nominal set-up fee is charged.
Tenancy database check: Before you enter a tenancy agreement, you may choose to conduct a tenancy database check. This check tells you about any adverse tenancy history your prospective tenants may have. Usually the agent just passes on the cost from the providers, ranging from $12-50 per check.
Lease preparation fee: After you have selected your tenant, the agent will help you prepare the lease agreement to be signed by you and your tenants. To organise these documents and facilitate the signing process, the agent may charge an additional fee on top of the set-up fee.
Lease renewal fee: At the end of a fixed term tenancy, your tenant may choose to roll over on to a periodic tenancy. However, if you prefer for the tenant to roll over to another fixed term tenancy for security of income, your agent may charge a lease renewal fee. This fee includes negotiating new lease terms, preparing documents and facilitating the process.
Insurance claim fee: This is quite rare, but when something goes wrong, you may want to make an insurance claim. An agent can help you with this process including obtaining evidence and preparing any documentation required to make the claim.
This is just a selection of fees that may need to be paid. You’ll need to talk to your property manager to ensure all fees are laid out and explained to you before you taken them on.
This fee is what you’re charged when a new tenant takes on your property. The property manager will take on the work of finding the right tenant, so it’s essentially their payment for this work.
The fee covers the letting and marketing of your property. This can include things like creating a marketing campaign, photography of the property, advertising, and so on. Once the agent gets interest from potential tenants, they will organise an inspection to show them around, conduct background checks, and negotiate the terms of the lease for you.
Advertising fees: These fees are mainly for photography and advertising when looking for new tenants. They’re usually covered in the letting fee, but sometimes can be charged separately.
The fee usually comes out at about one week’s rent, although this can vary. For example, if your property is in a very desirable area, it’s not going to be difficult to find potential tenants. Therefore, it will cost less to advertise the property in the first place.
Agents may also refer you to third party service providers to help with any issues (e.g. maintenance). Depending on your state, the disclosure requirements may vary based on the amount of commission received. It’s best to ask your agent if they are receiving any commission from these providers as the cost of providing these commissions may be passed on.
Fee variations between regions
Our research focused on property management fees in Sydney. But what about elsewhere? We have found that anecdotally, property management fees in regional areas or less busy fees can be higher. We have some thoughts about the factors causing this, including lower economies of scale, less competition, perhaps even higher service demands, which we are keen on investigating more about in a future study.
What fee disclosures are required by agents?
In New South Wales, agency fees are regulated under the Property and Stock Agents Act 2002. In advance to charging any fees, agents are required to document and disclose in writing any potential fees that may be charged in relation to your property management. Failure to do this may limit the agent’s entitlement to the fees.
How Much Do Property Managers Charge?
Let’s look at an example of property managers in New South Wales, so you can see what they may charge on average. In this example, an owner has a $750 per week rental property and an agent charges the median ongoing management fee of 6% plus ancillary fees. Let’s take a closer look at the breakdown of fees.
For an owner who is at the start of the rental property lifecycle, there will be listing and tenancy set-up fees. The costs involved are:
|Listing on online portals||300|
|Marketing and listing photos||500|
|Letting fee (average 1.5 weeks of rent)||1125|
|Weekly ongoing management fee (6% of rent)||2340|
|Document and statement fees||100|
|Lease renewal fee (per renewal)||300|
|Total per year||$4665 or |
12% of rental income
On average it would cost 12% of your rental income to hire a property manager to look after your property.
Another thing to note is that the above example assumes that your tenant will remain at your property for a year. In situations where new tenants need to be found and onboarded, or the tenancy is renewed multiple times during a year, the costs will quickly increase as the lease renewal fee is charged per tenancy renewal. The table provides a comparison of situations where the tenants change over different periods:
|Item||Cost for new tenants every 6 months ($)||Cost for new tenants each year ($)||Cost for new tenants every 2 years ($)|
|Listing on online portals||600||300||300|
|Marketing and listing photos||1000||500||500|
|Letting fee (average 1.5 weeks of rent)||2250||1125||1125|
|Weekly ongoing management fee (6% of rent)||45||45||45|
|Document and statement fees||100||100||200|
|Lease renewal fee (per renewal)||600||300||300|
|Total per year||$6890 or |
17.6% of rental income
|$4665 or |
12% of rental income
|$3552.5 or |
9% of rental income
As you can see in the examples, quite a bit of your rental income will go towards the property manager. Is there another, more cost-effective option?
How does Rentdesk charge?
Rentdesk helps property owners who don’t want the high fees associated with hiring a property manager, by empowering owners to list and manage their property. Using the online Rentdesk platform, owners can list their property on multiple listing portals, vet and onboard tenants, collect rent, conduct inspections and manage the day-to-day aspects of their property.
At Rentdesk we aim to keep fees as simple and transparent as possible. For a fixed management fee of $15 per property per week, this covers the key activities in your rental property’s lifecycle. The management fee includes activities such as:
- Standard advertising
- Lease preparation and execution
- Rent collection and reporting
- Arrears management
- Lease renewal
- Maintenance requests
- Document management
Taking the example above for a property that is renting for $750 a week, this means you will pay $15 per week of the rent, 2% of the weekly rent.
Rentdesk also provides services such as the premium listing service for an extra cost. Taking the same situation as above, for an owner who is at the start of the rental property lifecycle, the costs involved are:
|Listing on online portals||199|
|Weekly ongoing management fee (fixed)||15|
|Total per year||$979 or 2.5% of rental income|
In comparison to the average property manager, Rentdesk can help an owner achieve considerable savings over the course of the property lifecycle.
So if you are a property owner who is interested in saving a bit of money, but happy to put in some effort into managing your property, Rentdesk would be a great option.
Now you know what property managers charge in New South Wales, and what those fees cover. With this information, you can now make the right decision about how you manage your property.
Check out our infographic below with a quick breakdown of property manager costs.