The topic of property management fees always stirs great debate and having worked with many departments helping them to add and increase their fees, and seeing so many departments during business performance health checks, we felt it time to point out the biggest mistakes we see when charging and representing fees.
Here are the top ten mistakes we see:
Discounting- let’s talk about the most obvious one first! Discounting occurs for a number of reasons. A lack of confidence, no skills in overcoming common fee objections and a need to ‘win it at any cost’! However, I have also seen a few agents shine amongst the pack mentality, having received the skills to win the business every time. I have seen an agency successfully charge 3.3 weeks rent as a letting fee when all their competitors charge 2.2 weeks rent. I have witnessed a charge of 9.9% management fees in a surrounding market than charges 8.8% and recently a 2.2 weeks rent lease renewal fee in a market that charges either nothing or up to $88 for the very same service!
We are convinced that if you believe you are worth your fees, you can justify them you will get the fees you are after! It really is largely a mindset game!
Wrong Mindset- being similar to the first mistake, I have personally witnessed staff giving discounts before the client has even asked for a discount! In these cases it is because deep down the staff member believes that the agency fees are too high, so with this belief, they automatically think the client has this in mind also. A very dangerous and unprofitable mindset and assumption!
Misquoting GST- I see this one all of the time, where fees are quoted separately from GST. For example, a letting fee quoted as ‘2 weeks rent plus GST’, where legally this must be quoted inclusive of GST being ‘2.2 weeks rent’. The Trade Practices Act 1974 has some recent amendments released in 2009, connected with Sec 53C with misleading and deceptive conduct. This amendment with regards to ‘clarity in pricing’ is focussed on prices needing to be quoted as ‘all-inclusive’, and GST must be priced into your represented fee structure. GST was introduced in 2000 and it’s not going to go away so we may as well do the right thing and quote everything being inclusive, in line with legislation.
Charging Less because of GST- recently I have come across a couple of offices who for example, in a marketplace where everyone charges 2.2 weeks letting fee, this office was charging 2 weeks rent inclusive GST, which means that the income the office received after GST was subtracted was only 1.81 weeks rent for their letting fee.
There is no logical reason to do this, with only the profit margin being affected. We need to be aware of what the market is doing to ensure you are not unnecessarily shortchanging yourself!
Low Hourly Rate- most offices have fees based on an hourly rate, particularly when they attend tribunal/court or lodge insurance claims etc. However what I see is low fees being charged like $55 or $66 per hour. My point is simple. If I had a virus on my computer and called ‘dial-a-geek’ for someone to come and fix this problem, their billing rate starts at $110 per hour!
I believe that a professional property management agency managing millions of dollars worth of real estate is more valuable than a computer geek, per hour! With this in mind, this hourly rate charge should be upwards of this comparable example!
See Part Two as we continue to reveal the next five important keys.