Great Topic Colleen ( @rent ) - one of the points I try and encourage teams to focus on, especially for new business and when they are analysing their RR is a process I call “above the line / below the line”.
Firstly - the Agency needs to identify what the “cost of managing a property is” and this is a dollar figure, not percentage (this is usually first face palm)
Then once you have identified the cost to manage a property - then you would need to add your expected profit - 20-30% at least
So if the cost to manage 1 property comes out at $1,000 per year - then you add your profit, you end up at around the $1,200 - $1,300 range (net of GST)
Or approximately $100 pcm net
I think Ben White has regularly spoken, and I am sure that @adamhooley can clarify, that the industry average across Australia is about $120 pcm net ($1,440.00 AAMI)
So when you strip out your rent roll into an excel spreadsheet - then you can add your AAMI ($1,200 or $1,300 or $1,440) and the sort for your properties - above the line, or below the line
If there are Red Flags in the initial discussion - doesn’t matter how much you charge - it may not be worth the headache
In am office I am working in at the moment, we have a $150 (inc GST) pcm as the minimum monthly amount - so if there is a low rent - (like $300 p/w) our team know to revert to a fixed monthly management fee (not percentage) and it is so much easier to sell this to a LL when the rent is low - the cost to manage a property properly, and the amount needed to charge has no bearing on what the rent is - the cost & expected profit are the same
By focussing on the AAMI (and if your ancillary fees are another 25- 40% above the AMMI each year) then you are a long way to only bringing on profitable properties
Hope some of the points I have raised - help. If you are reading this post, and never conducted an above the line below the line exercise - you might be surprised (typically disappointed) at what percentage of your portfolio is below the line…these are great properties to identify and hopefully list for sale through your Agency - convert a non profitable property into a $10,000 - $15,000 sales commission -