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Double whammy warning on discounting fees

30 June 2014 Elyse Perrau

An industry leader has said discounting property management fees should be the “last card in the pack”, in a warning on the negative impact it could have on the cash flow and asset value of a business.

The comment came in response to voiced concern among property managers around the discounting  of management fees leading to being underpaid and overworked.

Leading Property Managers of Australia (LPMA) executive director Bob Walters said he does not advocate discounting of any kind, but if you are going to give a discount, mark down anything other than your management fees.

“The double whammy of discounting management fees is that you not only discount your cash flow, you're discounting the asset value of your rent roll, because the value of your rent roll is a multiple of management fees,” he told Residential Property Manager.

“So if you have lower management fees, you have a lower value for each property on your rent roll.

“It might be that you discount your marketing fee or throw in free professional photography, or you do an additional inspection free of charge or something like that rather than discounting management fees,” he added.

Mr Walters said the theory of property managers being “underpaid and overworked” is a minority because smart property management businesses today recognise the value competent property managers bring to their businesses.

“Increasingly, business owners understand the high value of their rent roll asset and the risk they run putting that in the hands of overworked and underpaid people, since they are then playing Russian roulette with their biggest asset,” he said.

“Now there is no doubt there are some examples in some offices and in some areas where there are instances of people being underpaid and overworked, but in the better property management businesses that is certainly not the case,” he added.

Mr Walters said the best way to boost business or win business is by adding value to your clients rather than being competitive only on price.

“It is a matter of being able to demonstrate to clients the value you add to their investment by the services that you may offer that others don’t, or the skill level your team might have as opposed to the skills competitors might have,” he said. 

Double whammy warning on discounting fees
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