How Much Does a Property Manager Charge?

If you're considering engaging a property manager, one of the first questions you're likely to ask is: how much does property management actually cost? It's a perfectly reasonable question. After all, your property is an investment, and the fees associated with managing it form part of the overall cost of owning that investment.

The answer isn't quite as simple as quoting a single percentage. Property management fee structures vary between agencies, but there are generally three main costs property owners should understand: the letting fee, advertising and marketing costs, and the ongoing management fee. Understanding what each fee actually pays for is just as important as comparing the numbers.

The first is the letting fee, sometimes also called a leasing fee or success fee. This is generally charged when an agent successfully finds and establishes a new renter for your property. Finding a renter involves considerably more than placing an advertisement online and handing over the keys. A professional leasing campaign can involve preparing the property for market, arranging advertising, responding to enquiries, conducting inspections, processing applications, undertaking reference checks, discussing applicants with the owner and negotiating the terms of the tenancy.

Once an applicant has been approved, there is another important stage: establishing the tenancy correctly. This can include preparing the rental agreement and associated documentation, arranging the bond and initial rent payment, completing the required bond processes, preparing an ingoing condition report and coordinating possession and the handover of keys. In simple terms, the letting fee pays the agency for taking the property from "available for rent" through to an established tenancy with the renter in possession.

Depending on the agency, the letting fee may be expressed as a number of weeks' rent, such as one or 1.5 weeks, or as a percentage of the property's annual rental income. When comparing letting fees, don't compare the number alone. Ask what is actually included. A great property manager should be able to explain their leasing process, how they assess applications, how they determine the recommended asking rent and, importantly, how they maximise the likelihood of securing the right renter at the right rent within the right timeframe.

The second cost commonly associated with finding a renter is advertising and marketing. Today, the largest component will usually be online advertising, allowing your property to appear across the major property portals and reach renters actively searching in your area. However, marketing campaigns can vary considerably. Depending on the property and the strategy being recommended, additional marketing may include professional photography, floorplans, premium online advertising, video, 3D tours, signage, print advertising or even property styling.

Not every property needs every marketing product, and spending more doesn't automatically produce a better result. Try to find a property manager who can explain why they are recommending a particular marketing strategy for your property rather than simply offering the same package to every owner. The objective isn't to create the most expensive advertisement. It is to expose the property effectively to the right renter market and generate sufficient enquiry and competition to achieve the best overall leasing result.

The third, and probably most familiar, cost is the ongoing management fee, sometimes referred to as the management commission. This is generally expressed as a percentage of the rent collected and covers the agency's ongoing management of the property and tenancy. Depending on the agency, property and service model, management fees might commonly fall somewhere around 5% to 7% of rent collected, although fee structures can vary.

Typically, rent is collected by the agency, the applicable management fee and other authorised expenses are deducted, and the balance is disbursed to the property owner. But the service behind that management fee should involve considerably more than simply collecting rent.

A strong property management service should encompass areas such as rent collection and arrears management, communication with renters, maintenance coordination, routine inspections, compliance, rental reviews, tenancy documentation, financial reporting and ongoing advice to the property owner. More importantly, a great property manager should be helping you manage the performance of the asset, not simply administer the tenancy.

That distinction matters when comparing fees. If one agency charges 5% and another charges 6%, the obvious assumption might be that the first represents better value. But what if the second agency achieves a stronger rental result, leases the property faster, attracts better applicants, provides more experienced management and gives you proactive advice about your investment? Saving a small amount in management fees can quickly become insignificant if poor advice results in unnecessary vacancy, below-market rent, inadequate renter selection, unresolved maintenance, compliance problems or missed opportunities to improve the property's performance.

This is why price should absolutely form part of the decision, but it shouldn't be the only consideration. When comparing property managers, ask how they determine market rent, how they select renters, how frequently they review your property's performance, who will actually manage your property and how experienced that person is. Ask how they handle maintenance, compliance and arrears, what technology and market information they use, and how they will communicate with you.

Most importantly, ask what they will do to help you achieve a better overall result from your investment.

At Woodards, we believe property management should be about considerably more than collecting rent. A property is a significant investment asset, and the team managing it should understand the responsibility that comes with that. Our approach combines local market knowledge, experienced property management, leasing strategy and practical advice to help owners understand not only what their property is earning today, but where opportunities may exist to improve its performance tomorrow.

So, if you're comparing property management fees, speak with your local Woodards team. We'll explain the costs, what's included and, more importantly, what you should expect from a great property manager in return.

Woodards. Property management with local knowledge, experience and a strategy behind every property.