Why the most expensive property manager really costs you the least in the long run.

Congratulations! You’re popping the champagne and celebrating the purchase of your first investment property, the hard yards are over! However, there are a few more decisions that need to be made before your investment is pulling in some income (and maybe even equity) for you. One of the biggest and most significant decisions that is often neglected, is that of choosing your property manager.

Property management is often delegated off to the agency from where you bought your property, without appropriate level due diligence being done to check their credentials in respect of their experience in managing properties. Otherwise, the most inquiry that is often done is to ask about fees and not much else. To break it down for you a little more, here are some figures on the cost of a property manager.

Let’s say your property is valued to rent at $500 a week. 4 property managers quote you 8.00%, 7.5%, 7.00% and 6.5%. Respectively, the associated management fees would be $40.00, $37.50, $35.00 and $32.50 a week.

Commission Rate

(ex GST)

Cost Per WeekCost Per MonthCost Per Year
8.00%$40.00$173$2,080
7.50%$37.50$163$1,950
7.00%$35.00$152$1,820
6.50%$32.50$141$1,690

The saving between a cheapest property manager and a property manager that hits the average, or industry standard commission is approximately $390 a year by these calculations. For a property manager to recoup that $390 for you in a year, they would simply have to rent your property faster, achieve a higher rental price or have a higher retention rate for tenants. These are the things that reputable property managers, with fees that can sustain a small, solid portfolio are able to do with ease.

Doing your research and diligence in ascertaining the value of your property manager, rather than just their cost can actually save you money in the long run, rather than costing you more as their fees may indicate! Often, you will find that property managers who can only compete on price, struggle to compete on expertise and talent!

So when you’re looking for your next property manager, ask them about their average time on the market, retention rates and portfolio size before you begin to compare their fees. These factors will give you a much better insight into the quality of property management for your most valuable asset, rather than being stuck on price! A good quality property manager is the one, indisputable and invaluable key to your investment’s success.