Property Management
Getting the Most from Fees and Services Provided

Why should you pay for property management?

Or perhaps the question should be: when!
And which services will be included? And how much should you pay?

Although property management companies have a standard service menu and contract that they offer, it does not mean that you have to subscribe to it all. Any company should be open to discussion and negotiation.

exchanging contract and keys

It's up to you as landlord actually.

Firstly, all the Free Real Estate Contract Forms are supplied here when you Become a Landlord so you can do your own real estate management.

However - when your property investment portfolio has grown to such as extent that it becomes too time consuming or you live too far away, you may need to look at a professional property management service.

We'll give you a good overview of the various services and their costs. And we have a number of free landlord forms to help you with a service agreement that will suit your requirements:

  • Commission Agreement - If you only want to use an agent to procure a suitable tenant and perhaps assist you with the lease agreement.
  • Property Management Agreement - An extensive document that covers a full service agreement. Easy to edit to either take out parts you do not want, or add in other clauses.
  • Power of Attorney - This document is specifically geared to authorize an Agent to act on your behalf for all matters regarding rental properties.

For links to all our other free real estate and landlord forms,
please refer to our main Real Estate page.

Do you only want to make use of their tenant procurement and leasing services?

It may include any number of the following:

  • Visiting your property to evaluate and determine (and thereafter realizing) the Best Rental Price for your property;
  • Photographing, listing and advertising your property effectively;
  • Showing your property to prospective pre-qualified tenants;
  • Do tenant screening including credit checks, criminal background checks as well as employment and rental history and obtaining references from previous landlords;
  • Completing the Property Rental Agreement and inventory checklist. As a landlord I prefer using our standard lease agreement for all our rental properties, because it's just simpler to keep track of all the various clauses.
    Note: In some jurisdictions a property manager must be a licensed real estate agent in order to do the lease;
  • Collecting the security deposit and first month's rent and where applicable the utilities deposit, pet deposit, move-in deposit etc.;
  • Facilitating and recording the move-in inspection and inventory checklist to avoid deposit disputes at a later time;
  • Handing over the property to the tenant.

The above is mostly what we (personally) need and use our rental agents for. As soon as we advertise a property, we have quite a number of Agents contacting us, offering us their services.

Because we are hands-on landlords and prefer doing our own property management, we enter into a simple Commission Agreement with agents. This makes provision for a once-off finder's fee commission upon successful placement of a tenant.

We'll get to the property management fees for the above in a minute.

property manager

Do you want the full property management service?

Apart from the leasing service, this would extend into:

  • Offering an interest bearing trust account for amounts received;
  • Collecting monthly rentals, issue receipts for payments and issue letters of demand for late payment or non-payment;
  • Regular property inspection, supervised maintenance and repairs;
  • Attending Body Corporate / Homeowner Association Meetings.
    There are a number of ways to authorise your Manager to vote on your behalf: Either a very simply Proxy Form issued as and when, or having this voting right included in your Power of Attorney for Real Estate referenced earlier;
  • Paying utilities, taxes, levies and insurance;
  • Dealing with tenants complaints and knowing Renters Rights;
  • Attending to emergency repairs outside business hours and during weekends and public holidays;
  • Dealing with Eviction Forms and processes;
  • Finalizing the rental agreement, facilitate and record final inspection and doing deposit refunds at the end of the lease period;
  • Paying monthly service accounts on behalf of the landlord;
  • Supplying monthly and year-end accounting reports;
  • Incidentally, do they offer a rental pool that landlords can belong to?

Property Management Fees

How much does a Property Management Company charge for their services?

In our sample property management contract we've left those spaces blank and there will obviously be a huge variance in different areas.

But to give you an idea:

bites of apples

  • Procurement - To do all the advertising, viewings, screening and to find you a good quality tenant and thereafter do all the paperwork - 8% of the total monthly rental over the lease period. If the lease is for one year, it will therefore cost you roughly one month's rent.
  • Lease Renewal - If the same tenant renews the lease - 4% of the extension period. If this again is one year, it will then cost you roughly half a month's rent.
    You may argue that the Manager did nothing second time around (except do a Lease Extension Agreement) to earn this fee. Perhaps so, but we value high quality tenants and a vacancy of one month or having a dodgy tenant next will cost a lot more!
  • Monthly management fees - 10% of the monthly rental. Some months the manager may not have anything to do except collect the rent and pay any amounts over to the Owner. At other times the Manager may need to tend to a number of queries within weeks e.g. blocked drain, faulty alarm, storm damage, leaking faucets etc. etc.
  • Monthly service payments - an additional 2% of the monthly rental or a flat fee.
  • Call out fees after hours - you can either pay per hour or per visit.

Some properties have higher maintenance requirements than other e.g. older house vs new condo. If you know your property well you will be in a good position to judge a fair rate of compensation to the Manager.

When it comes to vacation rental, property management companies will charge a much higher fee.

There's a much higher turnover of tenants and with that comes a higher demand of service from the Manager. For example:

half eaten apple

  • Quite often guests will check in or out at weird and wonderful times of the day (well beyond business hours) and the management company has to do the meet and greet, explain some features of the Property, collect payments etc.
  • A higher demand on cleaning services e.g. change of linen, refuse removal etc. which also necessitates more employees and their salaries.
  • Emergency call-outs. Incidentally, many times the Manager gets called out for really stupid reasons e.g. a child messed with the TV control and the parents don't know how to reset it, or a guest complains there is no hot water but it's because they couldn't figure out how the mixer faucets work. True stories.

There are many more reasons for the higher fees, but suffice to say that this service could cost around 30% of gross rental - in comparison with 10% in our pricing model for long-term tenants.

Who Makes the Payments for Property Repairs and Maintenance - Management Company or Owner?

handyman with tools

Keeping Costs Down

If you have a handyman that can take care of most of the ongoing repairs and maintenance i.e. leaking toilet, stuck sliding door, broken lock etc. it will cost you a lot less than getting an agent to handle that for you.

But you need to consider (at a minimum) whether to authorise the Agent to do emergency repairs in the event you cannot be reached!

This is important because timely repairs may be necessary to prevent further damage to your property or prevent possible injuries.

You can put a cap on the amount that the agent may spend on any repairs and anything over the amount specified, must first have submission of a quote and acceptance in writing by the landlord.

We have a clause catering exactly for this in our free Property Management Contract.

As landlords we insist on being notified of all repairs - regardless whether it's a minor or major repair - as soon as a request comes through from a tenant and thereafter we want confirmation that the work has been completed satisfactorily.

The most important reason for this is because we need to know that the tenant is being looked after! If we demand the payment of rental on time, so too should a landlord (or his manager) address maintenance issues in a timely manner.

How does the Managing Agent make payments for repairs?

There are a number of ways this can be done:

  • They collect the monthly rental and after any deductions for payments they've made on your behalf, pay the balance over to you.
  • hey set up an operating account into which you deposit an amount of money, replenishing as and when. They obviously have to give you a statement of account and proof of invoices and payments made.
  • They facilitate and oversee the work and charge you a flat fee for their time and you pay the repair invoice directly to the contractor that did the work.

Whichever way, repairs are always paid for by the Landlord but you need to spell out how it will be done in your Management Agreement.

How to Find the Best Property Management Agent

property manager candidates

Word of mouth referral is always the preferred way. Ask your fellow landlords at your homeowners association for a recommendation. Then interview them.

  • Do they promise you unrealistic rentals on your property just to secure your business?
  • Do they want sole mandate to let your property for an extended period?
  • Go through our management contract template to see some typical clauses and talk to them about their way of doing business. See how flexible they are on some of the pressure points.
  • Ask them how they would handle a non-paying tenant. If they are too conservative in their approach (yes, they have to stay within the law) and just do the "notice of rent past due", think again. The legal process is lengthy and expensive. You do not want too aggressive an approach either, but a bit of creativity is a good sign.

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