Investors urged to compare fees as analysis reveals significant rate variations

Investors are being urged to compare their property management fees to ensure they are getting a good deal, with new figures showing a big disparity in charges.

A survey of Sydney property owners found ongoing management fees varied by up to five percentage points across the city, leaving some homeowners hundreds of dollars worse off each year.

Property management fees chew up 6.2 per cent of weekly rent, on average, according to the findings released by :Different — a flat-fee property management service.

Co-founder Ruwin Perera said the independent survey, commissioned by :Different, showed fees paid by property owners varied across price brackets, age groups and regions.

“Fees ranged from 4 per cent to 9 per cent or more,” Mr Perera told Domain, with owners of property in the inner suburbs charged the highest commissions — an average of 6.4 per cent — while those in west and south had the lowest at 5.9 per cent.

The analysis of more than 500 survey responses and thousands of data-points revealed that those in more expensive locations were charged higher rates, but also that rates were also affected by rent prices.

Fee rates for inner-city properties renting at between $600 and $800 a week, were a full percentage point lower than those for properties renting at more than $1200 or more a week. While it sounds like a slim difference, Mr Perera said the latter would end up paying hundreds of dollars more in annual fees.

“Agents know weekly rent has no bearing on the cost of managing a property. They just charge more because they can get away with it,” Mr Perera said.

The analysis also showed age was also a factor, with investors between 55 and 65 charged the highest commissions, while those 65-plus were getting the best deal.

Mr Perera put this down to retired investors having more time to review costs and ask for a better deal. He said many would have been with the same agency for years and have had their fees slowly climb.

“Sometimes loyalty to existing property managers can cost you money,” he said.

Real Estate Institute of New South Wales (REINSW) president Leanne Pilkington said commissions usually ranged between 5 and 7 per cent.

“It comes down to the philosophy of the agency and whether they feel they can demonstrate their value at a higher percentage requires,” Ms Pilkington said.

She noted pricier properties often required more work because they were generally larger and had more facilities, but said the percentage of rent claimed as fees shouldn’t typically increase.

With ancillary fees and lease renewal fees also ranging between agencies, Mr Perera said there needed to be more transparency for property management fees.

“Real estate agents hide their property management fees to stop property investors comparing prices. This is unfair to ‘mum and dad’ property investors, who are hurting enough right now.”

Mr Perera said the data would be made public so property owners could see how their fees compared to similar nearby properties, and would also continue to collect results via their website.

“Making this data public will help property investors push back against overcharging by their agents,” he said, noting that with vacancy rates and interest rates charged by the banks rising, property investors needed to make savings where they could.

Among those who’ve made the switch, are Ashwin Nanayakkara, who was seeing 5.5 per cent of the weekly rent for his Woollahra investment property going to the managing agency.

“They were good, I can’t fault them, it was just more expensive, and the sort of property I’ve got doesn’t require much maintenance, so they were really just processing automatic payments for me.”

He’s made the move to flat-fee providers and estimates it’s saving him more than a $1000 a year in fees.

Ms Pilkington said property owners should always negotiate, but needed to be clear on what their service expectations were. “If you pay a lower fee you need to expect that you are likely to get a lower level of service,” she said.