New start-ups have joined the property management industry, offering flat fees at a lower cost. But what impact does this have on landlords and the value of their investment?
In recent years, the property management industry has seen several start-ups emerge that aim to change commission-based fee structures and service models.
But when low cost typically means low service, what does this mean for investors looking for the right property manager? We take a look at the pros and cons.
The Low-Down On New Start-Ups In Property Management
On the whole, property management companies usually work on a percentage fee structure. This means they receive a certain percentage of the property’s rent in exchange for full-service management of a rental property. This fee varies across companies, geographic areas and occasionally across property types. But like in most professional services, a higher percentage charged usually equates to a higher standard of service from more experienced professionals.
The start-ups we’ve seen entering the market over the past few years are proposing an entirely different model by offering one flat fee to all landlords, either on a monthly or yearly basis. While this sounds appealing, this fee only covers the basics of property management, such as finding tenants, arranging the lease and sorting repairs, but not any value-adds or specialised advice that landlords often need. In addition, these new players don’t have the depth and breadth of experience of longer running specialist property management companies or real estate agencies.
The Issue With Low-Cost Start-Ups And Flat Fees In Property Management
Our main concern with the start-ups we’ve seen entering the market over the past few years is their low quality of service and lack of experience. These new companies are offering flat-fee structures at a lower price, designed to make the process cheaper for landlords. But we know low fees are where service really suffers. In a situation where high-quality service helps retain excellent tenants and maintain or grow the value of your investment, that seems like a dangerous risk to take on one of your most valuable assets.
A flat fee structure is also problematic in itself, as it removes the ability to tailor the property management service to clients’ individual needs. If everyone pays the same amount, those who may need more support or specialised advice on improving their property are likely to miss out.
The lower cost also means lower profit margins, and makes it a volume game. So start-up employees are likely to be overworked as they take on more and more clients to offset their low fees. The biggest impact of this for the landlord is a property manager who is unable to dedicate enough time to care for the property and offer proactive service with repairs or maintenance. A lower cost start-up could also mean a less experienced property manager combined with the inexperience of a new player overall.
The Benefits Of A Commission-Based Property Management Company
Specialised property management companies that run on the percentage fee model tend to offer a higher quality of service. At Taylors, our focus is entirely on maximising your investment property’s potential by dedicating our time, expertise and decades of property management experience to support you at every step of the way. This may come at a higher cost than flat-fee start-ups, but our levels of client satisfaction tells us that it’s worth it.
This premium service extends beyond the basic requirements of property management, into additional services and expert advice tailored to your needs. This might include advice on specialised areas such as how to maximise capital growth, how to use a self-managed super fund to buy property, when to add to your investment portfolio and much more.
Property management companies that prioritise excellent service also avoid overloading their property managers. At Taylors, our client relationship specialists look after a lower number of properties compared with that of a start-up, so they have more time to dedicate to each and every one of their clients. Our team of specialists are also experts in the Eastern Suburbs, so they understand the current market your property is in.
Considering If A Start-Up Or Commission-Based Agency Is Right For You?
If you own an investment property in Sydney’s Eastern Suburbs, get in touch with our team of specialists today to find out how we can help you get the most out of it.