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There is a certain amount of talk going on right now about how discounting is causing a crisis in the industry. How this has happened is easily understood.
Blogger: Darren Hunter, LPMA director
A number of players in every marketplace seem to use discounting as a main point of difference, forcing down management fees, creating a discounting culture and forcing pressure on other agencies to bring down their management fees as well.
If discounting is reducing revenue and margins, and other expenses like salaries, marketing, insurance and other overheads keep rising, a crisis will, (and has) resulted!
And it is simply unsustainable!
One of the key issues I see is the mindset that most of our revenue reliance needs to be on the management fee being the main ‘breadwinner’, with not much emphasis on other fees.
The statement of ‘but what’s the management fee for?’ is common place in the industry, particularly on the east coast in Victoria and Queensland and to a lesser extent in NSW. However, South Australia, Northern Territory and Western Australia seem to all enjoy having several ancillary fees over and above what is charged as a typical fee structure on the east coast.
Therefore, I feel that if we are to become and remain profitable, emphasis must be placed on adding extra ancillary fees, because continuing to hold onto the management fees as a majority breadwinner with not much else, will eventually put you out of business!
You might say, "But adding extra fees, won’t our clients choose to go elsewhere?"
My answer is always the same and that is, you need to understand the ‘Law of the Main Game’ in that landlords, a majority of the time, place emphasis on mainly the management fee and to a lesser extent the letting fee, but place little to no real focus or emphasis on anything else.
Therefore if you are generally keeping your management fee and letting fee at the market rate, then adding other extra fees can be done quite easily, as long as these two factors are in place:
1. You believe (you know) that you are worth it!
2. You know how to justify the extra fees.
Mindset rules supreme in this arena, and once you establish that it is possible to increase and add some fees, you will be pleased with the results - once you know how.
A healthy profit margin can be generated from adding ancillary fees, and has been proven to work time and time again.
It’s up to you whether you believe it will work for you.
If you say you can, or you say you can’t, this will become true for you!
About Darren Hunter
Darren Hunter is a national and international property management trainer, speaker, consultant and authority on property management fees, and income maximisation strategies all designed to grow your rent roll profit, without extra rent roll growth required.
A consultant and trainer now for over seven years, Darren has previously worked as the state property manager with one of Australia’s most respected real estate brands recruiting, training, implementing policies and procedures and managing 28 property managers in 18 regional offices over South Australia and the Northern Territory. Darren has presented for the real estate institutes in WA, SA, NT and TAS and has presented at the Leading Property Managers of Australia Forums(LPMA) each year from 2007 to 2012.
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