PM Collective - The ART of property management
The ART of property management with Ashleigh Goodchild is a leading platform supporting collaboration not competition through an online community and events throughout the year with one purpose: to create happier property managers. She creates connections for property managers looking to create momentum in their careers and personal life. Join Ashleigh and her guests as they discuss challenges, struggles, mental health, mindset and give advice to property managers and anyone in the industry. To get the support in your property management career, join our PM Collective Facebook and Instagram community.
PM Collective - The ART of property management
Fee Schedules Reimagined: How to Maintain Income While Meeting Market Demands
Property management fee structures can be creatively reimagined to maintain profitability while meeting market demands. My experiment offering tiered pricing based on property manager experience revealed that 95% of clients chose senior managers despite higher fees, showing clients value expertise over cost savings.
• Tried a junior/senior PM fee structure similar to hairdressing salons with different experience levels
• Even when promoting the junior option, almost all clients chose the more expensive senior PM
• Experimenting with "membership" models rather than traditional fee structures
• Reducing percentage fees doesn't necessarily mean reducing annual income
• Add technology fees or adjust inspection charges to maintain revenue while appearing competitive
• Two business growth philosophies: rapid growth accepting any fee vs. selective growth with premium fees only
• Understanding competitors' low-fee strategies helps develop effective marketing counterpoints
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I was recently at the RE Bar Camp in Perth, which is one of my favorite events each year that I love to go to. So for those that don't know about that, it's like an unconference. So the idea is that you rock up and you have some post-it notes and you write down a topic that you would be most interested in and they put it up on a big whiteboard and then they sort of like group everything together and then divide into rooms during the day so that then you can then go into the room that suits sort of what interests you and you can, you know, walk off and go to the next room, like it's really casual and flexible. Anyway, one of the sessions was I can't remember what the actual topic was for that circle, but when I had walked in they were talking about fee schedules and this worry that we are all going to be, you know, having to reduce our fees and you know where the industry is heading with these cheap fees that are popping up. And it's weird because, like, I hear about them and people come to me and complain and say, oh my God, ash, you know this person's now doing 3%, that's doing 4%, and people out there, really, you know, yeah, rushing to bring the fees down, and I have a bit of a thought on it and I thought it was sort of worth mentioning. And I'm not suggesting by any means that I recommend anything, that I'm suggesting I'm just sort of opening up the conversation with reasons why people might offer cheap fees. You know like just the mentality behind it, just for people to understand.
Speaker 1:So what was interesting and I had to pipe up in this session where everyone's like, yeah, fees are on the way down and that's what clients are wanting, and I shared an experiment that I did 12 months ago where I was losing management to cheap fees, just like everybody else, and I was like, well, how can I sort of capture it? How can I give the client what they want but still protect the business? And so I had a junior property manager at the time and a junior property manager you pay significantly less than a senior PM. And so I was like you know what, if a client does want a cheap fee schedule, I would be prepared for them to come on board and have our junior property manager look after that property, but I wouldn't want our senior PM to have it, if that makes sense, just because from a budget point of view it wouldn't work out. So I was like, let's give this a go.
Speaker 1:And so the concept was very much similar to a hairdresser, where if you go into any hairdressing salon, you've got a price for the apprentice, a price for the senior and then a price for the director. And I was like, why can't we do something like that in property management? And I did the fee schedule. So this was about 12 months ago and the fee schedule very specifically said junior property manager fee package and a senior property manager fee package. And what was actually really interesting and it's just so important to hear this that I say 95% I don't know the exact numbers, but it was a good 95, maybe 98% of owners, new clients chose the senior fee package.
Speaker 1:And it blew my mind because I would be talking to these clients and letting them know yep, we have the two packages. We've got one with our junior PM and one with our senior, and I would actually be doing a full sale on the junior. I'd be like you know what she's great, she's fresh out of a course. She is doing the junior, I'd be like you know what she's, you know she's great, she's fresh out of a course she is doing amazingly well. I've actually had properties where she manages a second property for a client and the client's actually chosen her over the senior. I couldn't have given her a better reference. And yet owners were still like oh listen, I know that sounds good, but I think this time I'll go with a senior, sorry. So I was like this is really, this is really weird, like, and so I ran with it for about 12 months. Anyway, it's been 12 months. It the the PM now has obviously more experience, so she's quite interested in you know, um, taking that stigma off, which is totally fine.
Speaker 1:But it didn't actually work as well that I thought it would. But the important part of this conversation is that I gave it a go. I gave something a go.
Speaker 1:A change in your fee schedule does not mean you permanently need to leave it like that forever. You can give things a try and see. Now, if that actually stuck, I'd be like okay, I'm onto something. But I think what I love the most is that not only did it not work, secondly, it really changed an investor's mindset to really value someone with experience. So it got them thinking about the experience and distracted them from the actual fee. So it got them thinking about the experience and distracted them from the actual fee. So I think it's really an incredible lesson for everyone to take away. That it has been, you know, tried. Now that obviously was in a WA market. If you're someone listening to this over East, you know. I think you should give it a go in your area. I think it would be interesting to see if you had the same result as me.
Speaker 1:So if you were complaining about losing business to cheaper fees, potentially look at the option of introducing a cheaper fee schedule, but one that matches that is going to still be beneficial for the company, ie a junior PM, or removing services from it. So that's the first thing. So now that that hasn't worked, my next step is like okay, well, I need to take it off my fee schedule. I always like to have a couple of options. What other options have I got? So for the moment, I have just defaulted to our regular fee schedule and our multiple landlord fee schedule, but we're putting in a third column, which previously was all inclusive, which a lot of you are doing. I'm going to change the wording to membership, a SoCo membership, and I'm going to see how that goes and then when I've trialed it as I do it all my stuff I trial it first and I'll come to the market and I'll let you all know if it worked or not. Maybe it worked, maybe it doesn't, I don't know. But I want to change that name, that mindset around it and where that sort of came from is.
Speaker 1:I've always thought about having property managers be more of a membership service for clients. It's ultimately like between you and me, it's just like a fixed fee service, but sometimes it's the way you market it. But the reason why I started thinking about it more was because I just recently had my contract to sign with my accountant and my accountant. I have to sign a contract and I pay quarterly or monthly a fee package. So it was like your council rates, you pay quarterly or yearly. Everything these days is on packages. These days is on packages. So why wouldn't a property manager be the same as an accountant, where you have a monthly or a quarterly or you can pay yearly if you want to discount fee package? So I'm giving that a go, I'm going to see how it works and if there is a lot of interest and people are sort of quite drawn to it, then maybe there might be different levels of membership. There could be a basic membership, there could be more of an on-demand membership, there could be different layers of that, but we'll just start with the one option and see how that goes.
Speaker 1:At the RE Bar Camp, when people were talking about the fees, I think one thing that's really really important to understand well, actually there's a couple of things that are really important, but one of them is that when you feel the need to reduce your fee, you do not have to reduce the income you are bringing in over the year. Really really important. Because people think, oh, I'm dropping my fee, I'm dropping my income. No, how about you look at what the alternate looks like, that if you were to drop your management fee but you were to add on a $25 technology fee per month, that potentially it's still the same amount of money each year. So I've done this exercise. I haven't done it for this, but you guys can work it out. But let's just use this, for example Look and calculate if you were to reduce your management fee from let's just call it 8% for argument's sake down to 7%, but you were to add on a $20 monthly technology fee, what would the difference be per year for the income for the property?
Speaker 1:I don't think it's going to be much different. I think it's going to be pretty much the same. Or maybe it's that you add on an extra $20 onto your routine inspections per year per inspection, per year per inspection. Maybe that's the difference between that cheaper fee schedule and the normal fee schedule, but you're still receiving the same amount per year. The only thing I would say to you is that if you are trying to balance the yearly income, but just balancing out with the routine inspection fees and the management fee, just make sure it's the regular services, so that is, monthly admin, monthly technology, routine inspections and management fee, because you can't really do it based on just the letting fee or just the ongoing report, for the pure reason that those things are not necessarily regular. They could happen once a year, they could happen once every five years, so it's a bit hard to actually get the benefit from that. So that's my tip Just because you're reducing your management fee does not mean you have to reduce your annual income for that property.
Speaker 1:Ultimately, I just want to see people start getting a little bit creative and just trialing new things and seeing how it happened, like what happens and what the feedback is. You might only want to try it for, probably, like I think six months is good. I mean, 12 months is better, but six months goes pretty by pretty quick. Keep your normal fee schedule in there. I'm not saying take it out, but just have that alternate one that you're going to get creative with and just try something new. The last thing I want to leave with you is not necessarily. This is the bit where I'm like it's not my opinion. I'm not saying you should do this, but I definitely think you should think a little bit more about it and I think you should take this into account with, you know, designing that fee schedule. And that is the mentality.
Speaker 1:There's two types of people in the world or that I've come across that are setting up businesses. No right or wrong by any means. I'm absolutely not saying I need to stress that. I'm not saying there's one right or wrong, but it's just food for thought. Person number one starts from zero and takes on all properties, takes on whatever fee, fee matches, just wants to build that portfolio, wants to get to a hundred as quick as possible. Some people would say that that's reckless. Person B what did I say? Person A, person B really wants to set up their portfolio perfect from day one. We're going to get every single ideal client, ideal property. We're going to make sure our fees are strong. We are going to have that good, clean business straight up because we're designing the perfect business and that business is. I want to be ballsy and say I guarantee you is not going to grow at that same level as person A and it's going to be a lot slower and it's going to be a lot drawn out. And if you did the figures and the numbers, you are probably going to find that person A is going to have a better business and a lot quicker and a lot more income coming through. I mean, I think we can all agree with that.
Speaker 1:I did my business that way and it worked for me. And I'm not saying that you would have to do that forever and that would be your game plan for the rest of your business career. It wouldn't be. Would it be a fantastic head start? Absolutely. And I think that when you get to that 100 or that 80 or whatever, your limit is that you want to start bringing in that income and paying yourself. When you get to that point. Then you can start being fussy. You can afford to be a bit fussier. You can start swapping out those properties. You've got some good new leads coming through. You get rid of the bottom ones, you start tweaking your business and, like I said, I'm not saying right or wrong because I have got dear friends who do it both ways. I've got a couple of friends who are person A and I've got a couple of friends that are person B and both are happy, without a doubt. But I feel like a lot of stress could have been removed if a little bit of person A was in person B. So that's just sort of like what I see independently.
Speaker 1:And I guess you know playing devil's advocate. We're very quick to have a go at these businesses that are offering, you know the cheap fee schedules and I totally get it. It does bring the industry down. There is a hundred reasons why I could tell you they need to stop doing that like, without a doubt. But I'm also somewhat a savvy business owner and I can see why, because and this is what I want to explain to people so that they can just have a different perspective and, like I said, it's it's. It's not necessarily the right opinion. It's just an explanation of why some people might do that.
Speaker 1:Number one. They might be doing those cheap fee schedules for that reason. They just want to quickly build to 100 or whatever it is, 200, 500, whatever their goal is, and then they'll tweak it later. Option second reason is that they see the value in selling their rent roll. They have a rent roll to feed the sales department and I know you're all like going they shouldn't be doing that, maybe not. But from a completely unemotional business point of view, if you've got a property and the rental property on your portfolio, let's say that it's worth $8,000, $7,000, and that's the value of the business. But a selling agent could sell that property and make $15,000 commission for the property for the business and have the potential of retaining that as a management and still continuing having that money.
Speaker 1:Can you sort of see why an agency would value that property on their portfolio for the sale? Because it's going to bring more money in for the sale to sell it. That's if they get the sale. There's no guarantee that they do, but that's a reason why. And so I do understand that concept, while I don't agree with it, because I love property management and I love property managers. I can see that.
Speaker 1:So, now that we know, sometimes, those reasons, how can we bring that into our marketing, into how we sell our services and how we can showcase our point of differences that we manage properties not because we want to sell them.
Speaker 1:We have your property because we love property management and, like we are really invested, we actually want you to hold your property for as long as possible.
Speaker 1:I don't want you selling your property, so I don't know what angle someone might want to go down, but, like I said, when you understand the reasons why someone might do that, it might help you think of ways to market your services better, and I think that that's sort of what I'm wanting to get you to take away Enough ranting from me.
Speaker 1:I hope there was something in that little chat about fee schedules and creativity that gets you thinking, if nothing else, and gets you thinking about different ideas, being curious into trying something new and having some empathy and understanding for why some people are choosing to drop their fees and drop their pants for the property, so that when you now know that, you will now be able to better market your services. So I'm going to leave that deep thinking with you. Send me a message if you've got any questions. If you want to comment, tag the podcast in a post with your opinion, would love to hear it. Send me an email and don't forget to leave me a review on my podcast if you like what you're listening to, and I look forward to having more conversations with you guys when I see you next.
