I see plenty of ‘behind the scenes’ detail on Queensland’s real estate offices in my work as a broker. PM fees and commissions, team training and culture, recruitment hopes and dreams… all the raw challenges faced by principals across this state. And it’s natural to wonder what others are charging and how their businesses are handling all this. And how’s it impacting rent roll prices?
Across my last 25 rent roll sales the average residential management fee was 7.58% plus GST. There’s naturally some market differences: one agency had been through aggressive growth using fees to secure clients, and was the lowest I’ve sold at 6.60%. A more recent one had earned its 9.03% average management fee with a long, respected reputation in its market.
My observation? Many principals recognise their cost of business has risen, especially wages, and are looking for income growth to match. They want sustainable, profitable businesses.
Many are doing this through rent roll acquisitions, growing their earnings without a big lift in expenses. My enquiry over the past month has been unusually strong and I’ve had far, far more calls from rent roll buyers since the federal budget than sellers. And from all corners of the state, looking for both big and small rent rolls.
There’s a lot of focus on average management fees when it comes time to value a rent roll. That’s to be expected, as the multiple we use to set a price is applied to the average annual management income (AAMI) across the whole portfolio.
But there’s more to maximising the multiple your rent roll achieves than just a high average fee. The geographic spread, the number of properties per landlord, the history of the roll and its team. These and a number of other factors impact that final price.
And growing in importance is the additional income your PM team collect. Historically we’ve seen letting fees and maybe some monthly admin. But many of my past clients charged for reletting, advertising, EOFY statements, inspections, insurance claims and similar. Across those same 25 past rent roll sales I’ve made, these ‘extras’ added an average of a further 17% onto management fee income. One was at 28% and buyers really pay attention when these top 20%.
Rent roll owners are really fortunate their assets are sold on a multiple of income only, and not profitability. This is rare in business sales.
So it’s understandable principals are very focused on total PM income and finding ways to grow this. Just don’t be too despondent if you think everyone else is getting cracking high fees! My stats say that’s not always the case.
If you’d like a confidential chat about your rent roll, your fees and a sale, I’d love to help. I’m on 0423 332 022 or rob@honeycombe.com.au
NB: The data provided in this post is strictly historical, aggregated data compiled from the past 25 real estate agency sales managed by Rob Honeycombe – Rent Roll Broker. This information is intended solely for educational purposes. Real estate commission rates are completely unregulated and every business must set its prices independently based on its own operating costs and market factors. This business does not recommend, dictate, or advise on current or future fee structures for active real estate businesses.