Income from Property Management Copy
Many people underestimate the value of a rent roll, and just how valuable it is to the business. Understanding how a rent roll is valued will help the agency to implement strategies to increase profit.
The saying “Work Smarter Not Harder” is very true when it comes to increasing agency profit through property management.
Let’s take the example of a medium size rent roll of 200 properties.
This would typically be managed by a Property Manager, possibly with the assistance of a Property Officer. Often, there may also be a part-time accounts clerk to supervise the trust account (or an accountant may do this).
If we assume that the average property on the rent roll is rented for $350 per week and the rent collection and management fees that the property owner pays in total is 8%, then every week each property brings in about $28. You are probably thinking that it’s not that much…
Over a year, that equates to about $1,456.00 income per property, and the whole rent roll brings in about $291,200 in management fees, without adding any income for letting fees, or other fees and charges payable by clients.
Other charges that may be levied by the Property Management department include:
- Letting fees (where a landlord pays a fee to find a new tenant).
For a new rental this is generally set at one week’s rent.
If we were to assume that 50% of the properties managed change tenants once per year, letting fees could bring in revenue of up to $35,000 a year.
- Administration Fees
Admin fees of between $5 and $8 per month are charged to landlords. Annually these could be worth $25,200 (at $6.00 per month)
- Re-letting Fees (where a landlord pays a fee for a lease renewal of an existing tenancy)
Not all agencies will charge this fee. However, it could be an amount equivalent to half a week’s rent for the Property Manager to renew the lease of a current tenant. Let’s assume that 40% of the properties managed renew their lease once per year. That could bring a further $14,000 per year.
Over a year, the total potential income from the above Property Management department could reach up to $365,400.
However, if we put that into perspective, it still only equates to $35 – $36 per property per week.
What that means is that the income for each property allows for one hour’s work per week on that property.
Spend any more time than that on managing the property at it will be running at a loss to the business.
Managing property requires skill in order to contain costs and ensure that landlords and tenants receive a high quality and professional property management service.