Property Management Fee Maximization with Darren Hunter

Our topic today is maximizing fees, otherwise known as value-added services. The main revenue source for most property management companies is their management fee, but there are many value-added services that can be incorporated to increase revenue. Our guest, Darren Hunter, specializes in this and is a household name in the Australian property management community. He has spent most of his professional life helping property management companies figure out their business and today he’ll go over fee maximization for property managers.  Learn: * The typical profit margin of property management companies in the United States. * The psychology behind landlords and three-part pricing strategies. * How you can implement 3 different value-added services today. Who is Darren Hunter? Darren Hunter began as a property manager in 1989. A consultant and trainer now for the last 11 years, Darren works with property managers and their companies in Australia, New Zealand, and the United States. He has specialized in helping real estate business owners earn more money not only with new business but with their current business as well. It’s called fee maximization, which is the ability to increase and add fees with current owners. An Overview of Value-Added Fees In Australia, there is a mentality on the east coast that the management fee should cover everything. Property managers are afraid to charge for things other than management and leasing. So, those companies typically earn 15 percent of their revenue outside of management and leasing fees. On the west coast of Australia, however, you find 50 to 60 percent of income coming from fees outside of management and leasing. Those are the best earning companies in Australia. In the United States, most of a management company’s revenue is coming from management fees and tenant fees, but not anywhere else. It’s an interesting breakdown, and sets you up to easily double your profit margin. NARPM did a survey that said 20 percent of the average property management company’s revenue is profit. If you are earning a total fee income per property of around $2,000 per year for one property, and your profit margin is 20 percent, it means you’re only earning $400 on that property. With traditional thinking, to double your profit margin, you need to double your roofs and front doors. But, all you really need to do to double your profit margin is find another $400 a year in these extra value-added fees. That’s a more efficient way to double profit. You won’t need more doors and more staff and more overhead costs. On DarrenHunter.com, you can find a knowledge library that includes 11 Profit Laws Regarding Fees. The first one is easy. Two people meet each other at a barbecue and discover they own investment properties and they each use different management companies. Those two people will talk about what they’re charged in management fees but not any other fees. That’s not as high on their radar, and it’s not as important as management fees. Focus on getting the management fee to be the market rate. Then, maximize the leasing fees. A lot of areas in the U.S. don’t have leasing fees at all. But, if you maximize that fee to the accepted market rate, you can then do the work in the add-on fees. That’s where you get your results. Property owners really focus on the management fee. You can work with add-on fees because your owners are not thinking those are as important. Three-Part Pricing Strategies Some management companies will set up a tier system where they have a low fee option that comes with optional add-ons, a middle fee option that includes most of the management services but still leaves room for add-ons, and the highest tier,