Letting fees are the new reality for landlords – how can you manage the impact and what is a property manager doing for the fee?
This is the year of the letting fee. We can no longer pass the cost of finding a tenant onto the tenant, which actually makes perfect sense, but it’s never nice to be hit with a new cost when you were getting something for free. If you continue to pay the letting fee (aka tenancy fee), what are you getting for that money?
- Organising and conducting viewings for prospective tenants
- Receiving tenancy applications and reviewing them.
- Checking tenant referees.
- Running credit checks on tenants.
- Looking at Tenancy Tribunal decisions
and police recordsfor tenants.
- Preparing a legally binding tenancy agreement including insulation and smoke alarm statements
- Inducting the tenant on the new property
- Processing and lodging the tenant bond
The final decision on which tenant to choose remains with the landlord. If you don’t want to pay the letting fee, you could find your own tenant and then pass on the management onto a professional. However, any property manager will tell you that the worst problem tenants are almost always people who weren’t vetted effectively – and DIY landlords are the most likely to take shortcuts. When the tenant turns out to be an issue, the DIY landlord hands it over to a professional, who is then faced with dealing with an enormous problem.
The best way for landlords to counter the new tenancy fees is to keep your tenants for as long as possible. High tenant turnover is expensive; if you can keep every tenant for an extra 20% longer, you’ll find your profits improve markedly. This means managing your tenants well, being extremely responsive on maintenance and treating them as the valuable clients they really are. Contrary to what many DIY landlords think, it doesn’t necessarily mean keeping the rent supressed. Doing a fantastic job as a property manager means your tenants will be happier about paying market rent – because they’re getting a better-than-market-average experience.
For example, we have an online system for logging maintenance claims and a rapid resolution process, with 100% resolution of the claims. This is a big deal for tenants and they appreciate the way we keep their properties in good working condition. We also keep regular lines of communication open with both the tenant and the landlord, giving both parties the opportunity to ask questions and mention problems before they get out of hand.
From the owner’s perspective, it’s also vital that you understand the Residential Tenancies Act inside out and you know all the implications of the new regulations. We’re still seeing many DIY landlords who are failing to comply with insulation and smoke alarm rules – these people are not taking their responsibilities seriously and run the risk of receiving serious fines. As professionals, it’s our business to know exactly what our clients need to do in order to be compliant – our work helps to protect our clients from the potential pitfalls of non-compliance. There’s a $4,000 fine for failing to have working smoke alarms, and from July 1 this year it’s a $4,000 fine for failing to meet insulation requirements. That’s a serious chunk of money, and tenants are quick to report serious breaches like these.
If letting fees are going to cause you problems and you’re considering managing your own property, I suggest you start studying now and make sure you keep up to date. Honestly, though? This is where the real value lies in using a property manager. It’s a kind of insurance policy against changing regulations and relevant Tenancy Tribunal rulings, as well as a way to keep your tenants longer with excellent management.