A Queensland principal refused to charge a percentage and made the radical call to switch to flat fees, and this has served her business well.
When Active Agents principal licensee and principal leasing agent Tara Bradbury established her own agency in 2019, she made a decision most property management principals would consider commercially reckless.
She chose not to charge a percentage-based management fee. Instead, every landlord would pay the same flat rate, regardless of whether their property rented for $400 or $1,000 a week. She has reaped the benefits of this model, as her rent roll has surged to 400 properties under management.
Speaking to REB director and Managed co-founder Alex Whitlock in The Property Management Excellence (PMX) Podcast, Bradbury recalled that the idea came from a conversation with her husband, who had used a flat-fee model in his financial planning business.
“I said to him, I don’t want to do a percentage because that’s what everyone else is doing,” Bradbury said.
“I want to try and think about how I could do something different.”
Under this flat-fee model, every client pays the same dollar amount, reviewed periodically through a formal process. Bradbury said she has completed two rounds of fee increases across her rent roll, with each increase presented to landlords alongside evidence of the value being delivered. These fee hikes are typically timed to coincide with rental increases so the net position for the owner improves.
Bradbury said the flat fee model naturally filters the properties that enter her rent roll. Higher-rent properties find the model very attractive, while lower-rent properties that carry disproportionate maintenance loads relative to the income they generate are less likely to come on board.
“What I’ve seen in my training experience is that agents are accepting huge portfolios of properties that are all at 4 or 5 per cent,” Bradbury said.
“They’re all lower-end properties that have a huge amount of maintenance, and the income that they’re generating is sometimes not even $1,500 a year, which is scary when it comes to your bottom line.”
Bradbury acknowledged that charging a flat fee does not come without its costs, with some prospective landlords walking away because they cannot negotiate the rate. She affirmed that she is comfortable with that trade-off.
“I do know where we have missed business because I won’t negotiate. Everyone pays the same flat fee,” she said.
The model also eliminates a structural problem Bradbury observed across the industry: property managers accepting properties at rates that do not cover the cost of servicing them.
“If you’re not over $2,000 a year per property, then how are you surviving with all the expectations of what are required of us and the investment that we put into the programs and taking everything that we use?” she asked.
Bradbury challenged other agency principals to examine their own numbers.
She said: “You have no choice but to be at that level. So, create a model that presents that way in the market to attract those clients and also attract the right people into your business to work in your team as well.”
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If you’d like to find out how Managed can help power your growth, call Conor on 0452 298 394 or book a discovery call today.