Investors, Are Your Interests Really Being Served…?

10 April 2012

Investors, Are Your Interests Really Being Served…?

Managing investment rental properties can present owners with unpleasant and unexpected pitfalls which explains why many are now opting for what they perceive as the more painless option offered by professional property management.

But one Auckland real estate leader warns owners seeking a good return on their investment for additional income, capital gain or those saving for retirement to take care when choosing a rental manager.

“Before you sign up an agency to manage your rental property make sure you read the fine print” says Colin Varney, owner of Harveys/LJ Hooker offices in Parnell and Manukau. “Check costs and what some agents list as ‘extras,’ otherwise you could be paying much more than you planned.”

Mr Varney says the majority of property management companies charge a percentage of the rental income (plus GST) - anywhere from 7-10% - to take care of client rental properties.

However he says other fees which a number of agents are keen to invoice the client include checks on prospective tenants, tribunal application fees, 3-monthly property inspections and disbursements. In his view, property inspections should be included as part of the property management service and not incur an extra fee.

“They try suggesting these are legitimate extra charges, but where is the transparency? Surely good practice should be the only consideration.

“In my view agents acting as Property Managers are obliged to protect their client’s investment and make a real effort to minimise expenses. We know managing property can be a time consuming and frustrating exercise. Many owners also find it difficult to separate themselves emotionally from the whole business.

“So as responsible agents our role is to remove the stress and hassle out of property management, not inflict greater pain with extra charges.”

According to Mr Varney one of the biggest ‘rorts’ is the practice of charging a percentage - similar to that of the standard management fee for arranging and supervising repairs and maintenance - if the agreed management fee is 7.5% of all rents received, the agent also asks the same percentage for any repairs.

“These invariably run into the hundreds - and often thousands of dollars - where agents collect another 7.5% plus GST on the total cost of repairs. This virtually gives agents an additional incentive to encourage higher maintenance costs, effectively a conflict of interest. Yet it is widely practised by agents and independent Property Managers across Auckland.”

Mr Varney says his company charges a FULLY INCLUSIVE fee, set at a standard industry rate for ALL Property. “With us clients do not incur extra charges. Our philosophy is to make the rental business as painless and as profitable as possible, for our owners.”

Mr Varney urges property owners in Auckland seeking greater peace of mind and less price gauging to give him a call at Realty Executives Limited.

ENDS

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