Management Fee % vs Fixed Term

#1

Hi All,

I run my own business and for the last couple of months I have been toying with the idea of changing from the old trusty % of rent management fee to a fixed amount.

Just wondering how many other agents do this and those that do does your fixed rate take in everything (as in letting fee, routine inspections if applicable) or are they still separate?

Thanks
Lia

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#2

Hi Lia, One thing to consider is that the current % format allows for you to get an increase in $ fees as rents increase. Traditionally we have used this increase to offset increases in operating costs. If you had a fixed fee you would be restricted to your flat $ rate. Over a period of years, you will be doing yourself out of quite a bit of money.

#3

Hi Adam,
The rents don’t increase much here (I’m in Gippsland, so 2.5 hours South East of Melb). What I was thinking is doing an average and then a round up.
So, our standard rent for a 3 bedroom basic home is $280-$290 per week, then letting fee for me is 1.5 weeks rent plus gst. So one letting fee and a years management fee is about $1800, so round up to $2,000 plus gst for a flat fee.

Another thought is this is for rentals up to $350 per week, anything $350-$500 per week is a higher flat fee. These properties are less common though and for every 30 average properties, you may get 1-2 higher priced. So I don’t think I will be doing myself out of much moving forward. Plus there is nothing to stop me from raising the flat fee every 5-6 years either.

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#4

Hi Lia, What a grade idea, love it! Keep us updated!

#5

Hi Lia

I oversee 3 rent rolls and we introduced an inclusive package (10%) with no extra fees some time ago and found this to be our most popular package

Not sure that I would go with flat fee - but it would be good to do a fee comparison for each and every service that we provide on a per hour basis - as owners would then see what we would do and how much it would cost

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#6

We have a inclusive package which we offer along size the standard package, we call it an all up fee, the fee is approx 3% higher than our normal management fee but includes everything including letting and advertising fees. Our standard package is still the most popular.

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#7

I like that you are offering multiple packages as an option @jason.bb. Generally, with a % fee, we rely on an increase in rent to increase our revenue over time. What is your strategy to increase revenue on fixed-fee clients?

#8

Hi Adam, the fixed fee is on the rental income so as the rent increases so does the revenue.

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