Have you ever head of the saying ‘you get what you pay for’.
When selecting a property manager it is fairly easy to choose any agency that offers the cheapest fee. The very first question that is often asked to us from a prospective investor is ‘What is your Management Fee percentage? At The Leasing Network we are very transparent when disclosing our fees, and we are happy to share that we are not the cheapest fee agent in town. We offer a Premium level of service, and invest money into having the best available resources and opportunities always available for our Investor clients.
Over 70% of investors invest in property, whereby the investment property is the vehicle to create their wealth and financial freedom, and often this is their nest egg to allow them to retire comfortably. We like to educate our investors; and the investment properties that we manage on behalf of our clients are most likely one of their most valuable assets, and I would expect to pay a premium fee to ensure the best person is managing this asset, as opposed to saving a few dollars. Statistics say that a 1.1% reduction in management fees will save you approximately a cup of coffee a week.
We share with you some reasons why hiring a cheap agent can be more trouble than good.
1. Cheap Agents Attract New Business by offering Cheap fees
Agents not knowing their worth, their points of difference or who cannot provide evidence of their good service, gravitate towards offering cheap fees in an attempt to secure new business. It’s all they know, and they are accepting they need to give a discount in order for them to gain a new management. Investors are then caught up in the fact that they have found the cheapest fee agent, and they do not understand, nor consider the different service levels that may be offered, and potentially what else could be available to them, instead they are too pleased with themselves for getting a bargain, unaware of the problems to come.
2. Cheap Agents Mean Property Managers Now Have to Manage More
Many cheap fee agents are managed in a combined traditional sales/property management office, whereby the Director is a Sales agent, and unfortunately not knowing the experience and expertise required to proactively manage an Investment Property portfolio. They work on the model of the quantity not quality.
Despite the fact that most agencies have comparable wages and outgoings, the cheap fee agent now has an issue, as their income is lower due to fee discounting, so in order to make the same profit level, the staff must manage more properties, creating a greater burden for that staff member. Too many properties become very difficult to properly service and because of low fee levels, this cannot be changed.
3. Cheap Agents Means Greater Staff Turnover
As the property manager is now burdened by managing larger portfolio sizes, they become stressed and burnt out. This pressures them to resign because of a work environment that is too stressful. In this instance, the agents cheap fee policy has forced the department into this situation.
4. Cheap Agents Means Poor Service
Even a reputable property manager is not recommended to manage a high number of properties on their own; let alone an average property manager. And a greater cycle of staff turnover is now the outcome.
The landlord who has long forgotten about the cheap fees is now frequently dissatisfied with the poor service they are receiving. They then decide that what they require is in fact an agent who focuses on their quality service to attract new landlords and are now happy to pay a bit extra knowing their property is being professionally managed.
Is your investment property not reaching its full potential? We recommend instead of focusing on the fees charged, start focusing on your best interest, and ensuring that you are receiving the best possible service is delivered.