Alex Whitlock, co-founder of Managed and director of REB, has challenged the property management industry to rethink the logic of percentage-based fees, drawing a comparison that he believes exposes a fundamental flaw in how the profession prices its services.
In The Property Management Excellence (PMX) Podcast with Active Agents principal licensee and principal leasing agent Tara Bradbury, Whitlock said the pricing model inherited from real estate sales does not translate to property management, where the work involved in managing a property is largely disconnected from the rental income it generates.
“If I go to see a specialist, a surgeon, for example, and I ask what their fee is – if I’ve got a minor infection or a minor problem, or if I’m on death’s door, the fee’s going to be the same because you're engaging somebody that is going to deliver a service,” Whitlock said.
Whitlock, who has been an active property investor for more than three decades, said the flat-fee model operates on the same principle. The value a property manager delivers – compliance, maintenance coordination, tenant management – does not scale with rent. A $400-per-week property can demand as much or more work than a $1,000-per-week property.
Whitlock contrasted the flat-fee dynamic with the negotiation that typically accompanies a percentage-based sales commission, where a vendor will almost always attempt to reduce the rate before signing.
“When I’m selling, the first thing I do with the agent is negotiate the percentage. If they’ve got a percentage of 2.2 per cent, I will argue that it’s got to be 1.7 per cent. So, I’ll negotiate – and why wouldn’t you?”
A flat management fee, Whitlock argued, is more defensible precisely because it is not framed as a share of something else. It is the cost of engaging a professional to deliver a specific service, and that service does not vary in proportion to the rent.
Whitlock said the dollar return to the owner – the rent – is easier to quantify over time than a percentage pinched from it. Fee increases tied to rental growth conversations, rather than presented in isolation, allow the property manager to demonstrate value at the moment the owner is most receptive to hearing it.
“I think dollar return matched with the dollar fee makes a lot of sense.”
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