We start a business to make money or provide the lifestyle we want, right? But what happens when your clients, your competitors, or the market conditions forces you to reduce your fees, and you keep reducing them so low that at the end of the day, you’re pretty much working for nothing. And I don’t know about you, but that doesn’t sound like smart business to me. So maybe it’s time we took a stance, like those 80s supermodels who wouldn’t get out of bed for less than a million dollars a day. Of course, we’ll be getting out of bed for much, much less than a million dollars a day. But shouldn’t we be focusing some, if not a lot of our energy and efforts on the fees we are charging. This is still one of the biggest questions every real estate business owner wants to know. But is that really the right question to be asking all the time? What about a new conversation? One around fees? Like what fees should we charge? How much should we be charging? Should we be discounting? Asking these questions are every bit as important, especially if we are looking to increase our profits and income, which of course is the ultimate goal for any business really. charging higher or more fees and discounting less can be just as financially rewarding to a property management business as growth. Who better to have a conversation with around this topic than Darren Hunter. He is an national and international property management trainer, expert and leading industry authority in fees and overcoming fee discounting. He’s written a whole book around the topic of fees. And in this interview, he shares his advice on how to overcome the top fee objections and how to avoid discounting even when everyone else is doing it.
THE GURU OF PROPERTY MANAGEMENT TRAINING – DARREN HUNTER
‘I have been in property management since 1989. I first started as a very green and unconfident with a property manager in Adelaide in a little place called myelin did 15 years frontline property management in both metropolitan and regional. And I’ve also done two years as a state property manager for elders managing 28 property managers spread over 18 offices over technically four states. A lot of fun. And in really since 2005, I’ve been a full-time trainer and consultant in property management now, you know, teaching property management and fees over you know, three countries now. So, it’s been a lot of fun.’
WHAT ATTRACTED YOU TO PROPERTY MANAGEMENT?
‘Okay, so I guess what attracted me was it was just the first real job I could have. Because before that I was pumping petrol at a petrol station and replacing tires and trying to sell tea towels over the phone for the rural guide dogs Association and selling fertiliser over the phone. And those jobs sort of sucked. And I had an opportunity. Someone saw, gentleman could Lynn Andrews is it’s a guy and he had had a series of offices in Adelaide, and we connected, and you saw that I had potential to be a property manager. And he threw me in into the deep end. And that was the start. It was the first job where I had to wear a shirt, you know, shirt and tie.’
THE BIG FEE TALK – HOW TO OVERCOME THE BIGGEST FEE OBJECTIONS
‘Alright, so, straight off the cuff the biggest objections. What we need to understand Kylie is that there’s a few things here is that when we have a prospective owner come to us and wanting to challenge us, it’s called the art of negotiation. If you’re in real estate, that same owner goes down to McDonald’s and buys a buy a Big Mac. They’re not going to ask for a discount, right. They go down to the woollies, Woolworths and ask you know, and buy something, they’re not going to ask for a discount with the cashier. But because we work in real estate, it’s fun time. It’s a thrill. It’s, you know, how often do we get to negotiate our price. If we’re on Facebook marketplace, looking for our next lounge suite, or next piece of furniture, we’ll negotiate if we are looking for a car will try and negotiate. And of course, in real estate, everyone knows you’re in real, you know, it’s negotiation time when you hop on a plane, and hopefully we get back to Bali or go to Thailand, what part of the fun of the holiday is negotiating, you don’t pay full price. And so, because that principle exists in real estate, people are just going to try you and try you for a discount, because it’s just, there’s just the fun of the game. And so, you need to be ready to play the game not be offended when someone asks for a discount, just be ready for it, because they just going to do it anyway. And so, the biggest objections you’re going to get the big ones are, is if you can match your fee with the other agent down the road, the other agent is cheaper, it’s the same thing, really, your fees are too high. And you know, can you just give a discount, because I just want you to give a discount. So, it’s all about the thrill of the kill. And so, your job is to understand some key principles, and be ready for those because the objections I’ve just given you is probably what you’re going to deal with 80% of the time. So, if you can just now those four objections, you’re going to be able to know and have confidence to step up to the plate and deal with deal we’ll deal with those.’
ROLE PLAYING THE FEE CONVERSATION
Let’s just do a little bit of a roleplay, then I’m a landlord, and you’re my property manager. And I’ve come to you, and I do say the agency down the road is 2% cheaper than new. Can you match it?
‘Okay, so firstly, understand, we’ve got to get into some psychology here. And understand first and what I’m about to say is going to be so liberating to the people that are there are tuning into this podcast, if I’m a new agency, right? And I’m coming into the marketplace, and I’m looking at my 10 different competitors. And Kylie, you’re from Queensland. Is that right? Yep. So instead of 10 competitors, you got 50. Okay, if you’re in Queensland, because it’s so competitive up there. And so you’re going to go out to the marketplace and go, Okay, what am I going to charge for my management fee, my leasing fee, my other fees, and you’re going to go and you’re going to go roll that agency down the road there, they suck. I think they look terrible. I’ve heard bad things about the business owner of that business hates property management, he only hazardous as a side thought he focuses on sales. So I know I’m better than them. So I know, I can price myself more. All right. And they will also keep on going, I got all that agency down the road. They’re specialists, property management, I know the boss there, they’re really, good. I don’t think I’m as good as them. Therefore, I’m not going to price myself as high as them. And this is how people when they come in, they don’t just go and invent their management fee leasing fee. They do it based on what they think or where they fit in the market. All right, so coming back to your script now of all if you can match the other fee with the other agent, they’re 2% cheaper. We’ve got to keep that in mind. So, Mr. Smith, thank you for bringing it up. And we’re aware of what others charge but did you know they also know what I charge to? And despite knowing that they’ve priced themselves 2% cheaper, because they know that they cannot compete with us. They know they’re not as good as us on our level of service. Otherwise, they wouldn’t be 2% cheaper. If they felt, they were the same as us. There would be charging the same fees as us. You need to be very, very careful.’
WHAT’S YOUR RESPONSE TO ANYONE WANTING A BUDGET AGENCY?
‘Well, look, I understand that the you want the budget aims Let’s say Mr. Smith, because you want to feel that value around getting those, you know, less of fees at the front end. But you’ve also got to take into account with the budget agency, the mental anguish you’re going to experience and the sleepless nights you’re going to have trying to micromanage the property manager or the series of property managers with the revolving door they’re going to have, because those property managers are going to completely overloaded, because they’ve got to earn a profit. And you just, it’s just going to be really, really bad for you. And this is what typically happens with budget agencies.’
WHY DO WE FEAR THE FEE CONVERSATIONS?
‘So, I think we paint a target on our back, as Pick Me Pick Me for fee discounts, when we have deliberately not allowed ourselves to have strong points of difference. Because when an owner comes into the market, and he sees a red brand, green brand and a yellow brand, and that’s the only differences he can sing, he’s proactively come in, who’s going to stand up, who’s going to be my hero, who’s the person and I’m going to be able to put my half million $1 million investment into their hands. And after speaking to three or four agencies, don’t forget to didn’t even return his call, all right. And speaking to them, he can’t now still see a difference. They all process tenancy applications, they all do routine inspections, same, same, same same, he’s now going well, I’m now going to be looking reactively looking for a difference. And I’m now going to be focusing on fee. So where there is no point of strong points of difference, the focus is now on the feet. And we’ve got property managers out there that just think that all owners want cheap fees. But they’re not seeing the obvious in front of them, is they’ve simply set themselves out without really powerful, effective points of difference that makes them stand out in that first phone inquiry at the listing presentation as the hey, we’re better because.’
HOW DO WE IDENTIFY OUR POINTS OF DIFFERENCE?
‘Well, it’s all about understanding just looking different and being different to the owner at the front end, or at the front end, as in when that phone rings right up to the point of a listing presentation, all up to the point of actually signing a management agreement, you only have to be that much different wanting to different in head than your competitors to win the race. Because in the race, you win the prize, which is a management agreement. And if you’re second, you get nothing, but you only have to be a little bit better. So how are you going to stand out? So, there are various ways and means that you can do that. Now firstly, when the when the phone rings, and you speak into them. And this is where we get into our affected points of difference that my business partner Dennis use of really goes into, you need to be talking about proof statements. Mr. Smith, last month, we had 98% of our properties occupied, and our tenants paid on time rate was 99.5%. So points, proof statements. Okay. And Mr. Smith, I know that you may be speaking to some other agents as well. We can you make sure that you ask them about their occupancy rates and their tenants paid on time rates are by the way, if when you ask that question and ask to their percentages, and they sound like they don’t know what you’re talking about, I don’t have a clue. Make sure you call me back. It seems sitting in setting up your competitor because they’re not going to know those stats, they’re not going to have them ready because they probably didn’t listen to this podcast. All right, and so you are setting that up. So, making a difference that when you get off the call, you got to send them the prelisting email template. Now, you want a copy of that it actually goes with Denison’s book the PN lead secrets, just go to pmleadsecrets.com. When you get the book, you’ll automatically get the prelisting email that key news that you send out immediately to the owner as soon as you’re off the call,’ he said.
‘Now the other thing you’ve got to do is that you’ve got to get out if you want to stand out and be different. It’s a game of trust. Real estate is not a game of fees. It’s a game of trust, who gets the most trust first wins the deal. So, we’ve got to put trust maximising strategies in immediately to make you feel different from the two or three other competitors they might be speaking to just get out your mobile phone, and I know a lot of ladies are going to hate me for this but yes, we’re going to do a video very simple because hold it up. Do it like you’re going to take a selfie. Get the video going. Hi, Mr. Smith look really, good speaking to you right now. I’m looking forward to seeing you at your rental property tomorrow at four o’clock. And I’ll make sure that I’ll also bring along some rental valuations or amount for the going on the air. But I look forward to seeing you then buying SMS. Now guess what? None of your competitors did any of that. And suddenly, now, they’re seeing you. They’re hearing you; they’re meeting new digitally. And now you’re the favourite because now you’ve got the most trust. And your competitors did none of that. And that SMS strategy and the prelisting email I’ve got, we’ve got so many stories of people that have done that, and said, we just land home the deal, or the owner called me back a few minutes later, or whatever. It’s just simple things like that. And that is points of difference in itself.’
TO DISCOUNT OR NOT? THAT IS THE QUESTION
‘So why don’t we go with the objection, the other agent is able to give a one 1% discount, why can’t you? You want to get into that. So, your response is really simple. Look, Mr. Smith, if the other agent was quick to drop their management fees, just like that, and they panic like that. What did they just say to you about their ability to negotiate? And let’s say they’re listing your property for rent, and prospective tenants coming along, and want to discount on your rent, what have they just displayed, they’re going to do to your rental amount. That’s why you need a strong negotiator with your rent. And that’s why we need to get full fix,’ Darren said.
‘And this is not my this is stuff that I just borrowed from a guy called Tom foster from the 80s. He was a real estate King in America. And I’ve just talked to some of the into that panic thing and just wove it in. But I just want to encourage everybody, there is a response to every objection that you get in a way that’s going to impress them. And I just want to encourage everybody with this just to understand if someone’s come to you with the language of, but if you can discount, if you can match your fee, the other agent is cheaper. This is actually what they’re saying to you in their head. This is the conversation going on in their head when they make that statement. And it’s simple. They’re saying, we want you, we love you. We don’t like the other agent, but I’m one of those people that I like to, you know, have my cake and eat it too. I want to be able to sleep well at night, I love you. I like their fees, if I can have both, I’ll be happy. That’s what they are doing. So, when you hear that they’re actually saying they want you is just about the fee, and you only now have to come up with a really good objection to bounce it back. And you’re there. It’s a little speed hump. And if you can impress them like that. And if they can see that you believe in your fees, and you believe in your service, they can see it in your eyes, I can see it in your body language that can share your conviction. When your prospects see that you believe it. They will believe that to.’
FEE NEGOTIATION AN ESSENTIAL SKILL
At the end of the day, we can’t work for nothing either, can we? So we’ve got to make it we’re in business to make a profit and provide a lifestyle for ourselves. So I think this is an essential skill would you agree for all property managers or BDMS business owners to have? And also, do you think there is when property managers are going into a negotiation around fees? Should they know at the top end of the negotiation, what they can negotiate on rather than having to say, Look, I’ll have to go back to my boss, and I’ll come back to you with what I can negotiate on.
Darren Said: ‘possibly, I think we need to go in there with the assumption we’re going to get the business, so this is the actual two necessary ingredients to walk away with the deal. Confidence and enthusiasm and confidence. Enthusiasm comes when we are equipped an arm to the eyeballs with effective points of difference. And we know our face scripts, that’s going to make us feel like we’re walking in seven foot tall and we’re going to be ready and equipped for anything that comes our way. Because if they simply are asking for your fees and then simply want less no matter what your fees are, we’ve got to counter that with effective fee scripts and the reason why they feel like they have to have their discount when and we loaded up already with our points of difference. Our prelisting email. We have our Video SMS text, we have a proof statement also having a property owners handbook and a tenant handbook as well to show them that Mr. Smith, when you sign up with us, here is a typical handbook that we give to our clients. I can’t leave this with you, I can only give it to clients that sign up with us. Also, here is this if you sign up with us, this is the level and depth we go to an educating the tenant here, have a look at our tenant handbook as well. And before you know it, you are so different from the other agencies. And after you’ve done all that, and they say, well, if you can match your fee with the other agent and Mr. Smith in that, can I just can I just confirm, do you feel that we need to match their fee? Because you feel that we’re the same as them. And we do the same? Is that why? Of course, that’s a loaded question. You’re likely going to get well, yes. Okay. Well, Mr. Smith, did they show you their property owners handbook? Did they show you their tenant handbook, because we’re only a 1% difference? And another thing for everyone out there is that as as property managers, usually not all the time, but if we’re good property managers, it usually means we suck at maths already. And if we suck at maths because I failed maths at high school, by the way, and because I just haven’t got that brain. But if we suck at maths, our clients probably due to what is 1% because of the rent is $600 a week. 1% is just six bucks. It’s a cup of coffee a week, some people have to die. And so in that case, and Mr. Smith, you actually really know what the difference between us and other agent is only a cup of coffee. And you’re now dispelling this fantasy the thing that they think 1% is too high, and suddenly most people go oh, my goodness, I never realised before, you know, you’re signing the management agreement. And you’ve dealt with those objections effectively.’
THE BIBLE ON FEES
‘It’s a labour of love, it’s really more 20 years on getting better fees. And there is some fee maximisation principles, but it’s all about you on overcoming discounting, I’ve got the scripts that we’ve just talked about. They’re all in there. I’ve got over 50 scripts in there, right down to but I want to manage my own property, I want to put a family member in there, I’ve got multiple properties, I deserve a discount, so many different fee objections in there. And the book is free. You just got to pay shipping $9.97 Inside Australia, it’s $19.97 if you’re in New Zealand or where ever you are based. So, it’s called PM Fee Script Secrets.
PROPERTY MANAGEMENT FEES YOU SHOULD BE CHARGING
For somebody just about to start out in property management or start a real estate business. What are the key fees that they should be charging these days? It’s one thing to have the let fee and the management fee and the or the rent collection fee. But what are some other fees that we can be using to maximise our income?
‘So, one of the laws that we teach in the book is called the law of the main game. I’ve actually written 11 laws, but the law of the main game is really simple to understand two owners are at a barbecue or having a chat about property management. Who’s managing your property? I’m with ABC real estate? Oh, my goodness, I’m with XYZ Realty. Just down the road. What are you being charged? Or I’m paying 8%? Oh, really? I’m getting 7%. But they didn’t talk about any other fees, did they? Because either they’re overlooked or they’re unimportant. And so, you need to understand that with the law of the main game, is that it is the management fee,not, the leasing fee that is generally focused more on by property owners than anything else. That’s what owners consider is the main thing. Alrighty. But the other stuff just flies under the radar. So, it’s more your mindset. I’ve got people right now, and probably the worst the place in Australia, which is the Gold Coast and Brisbane. And I’ve got people that I can easily charge $99 routine inspections, shock horror, everyone’s saying, Oh, but what’s the management fee for? Well, no one’s actually ever written a book. And I certainly haven’t written a book on what the management fee must include and what it’s not to include. There is no regulation in Australia that says you have to include this in your management fee. If it’s no rulebook, or legislation or regulation or law, then it’s your mindset that says what has to be included in what doesn’t. So, this leads us to the law of the better fee, which is also in the book. Even if your competitors aren’t doesn’t matter, you believe with conviction, you should be charging it. And you know how to give or justify or give a reasonable response as to why you’re charging it, then you get it. Clearly a lot of people think that fees are simple yet because that’s what they believe they can get, and they can’t get any more otherwise, they’d be charging more. And that’s called the law of the fee lid. And we break that, by again, we believe that we should be charging something else. And then simply an explanation on how to do that. And I give all those justifications for I think, is around about 15 to 20 different fees in the wall.’
THE TRUTH OF THE FEE CONVERSATION
I’ve charged that routine inspection fee for a very long time. I also charge an advertising fee as well; I don’t advertise properties unless they have professional photos as well. So, I have quite a few different fees built in. When we first started, which was 13 years ago, the only additional fee we had was the sundry fee, the old postage fee. And you know, some people still do charge that. And that’s always an easy fee to discount if you are forced to discount your fees. Although by the sounds of it with your philosophy, we will never need to discount again?
‘You don’t you load yourself up and points of difference make yourself look like the clear market leader. Because the game is on trust, not on fees, they want the person they can trust the most. And you’ll come in with your full fees that way now, with different fees and stuff like that in the book, I’ve got over 34 different fees and fee packages that are charged over Australia, New Zealand and the United States. And would you like me to rattle them off?’
FEES YOU SHOULD BE CHARGING
‘This is going by memory, I’m probably not going to come up with all 34. But you’ve got your you’ve got your management fee. And you’ve got five different types of management fee, you’re thinking oh my god, there’s one none. And there’s actually five. So, the first one is a standard percentage, okay, your run of the mill vanilla percentage on rents collected, the next one is a fixed fee. So, it could be a straight $195 or $150 a month. All right. And then on top of that, you’ve got goodness me, I’m not remembering the five. Now let’s go for four, you’ve got your all-inclusive, so they are all inclusive fee. All right. And that’s everything, all your all your fees into one-on-one percentage. And one of the biggest mistakes that people make bear is just not doing the numbers. And so in Adelaide, I was charging 16 and a half percent, I was working with clients on the West Coast, and we had up to 19% already. Now your numbers are based on everything, but you got to do your numbers, right. And in Melbourne, the rate should be up around about 1213 14% Because that’s what all of these other add on fees add up to as a percentage. Now you’ve also got the all-inclusive or what called the hybrid all inclusive, where you’ve got your own inclusive plus, you may just charge a leasing fee and marketing fee when the property turns over. Alrighty, so there’s some management fees, leasing fee charges. To get your leasing fee, you’ve got your marketing fee, you’ve got an ongoing inspection fee as well, every agency in Western Australian charges that hardly anyone else does, because they think it should be part of the leasing fee. But again, that is your mindset. Alright, remember the lore of the better fee, we’ve got your exit or your final inspection fee. Also, if you want to charge for a virtual tour, all right, so 360 virtual tours, if you want to charge for a video tour, course you got your professional photos as well. And those fees, you’ve then got your routine inspection thing, you then got your monthly administration, or you can call it a technology, but don’t call it postage and pettings Those days are gone all writing, just call it something else. Don’t call it also a statement fee because there are laws exist in Australia, where those monthly statements that you give are not to be charged for you have to legally account for how you use their monies. So don’t get into calling a monthly statement fee. All right now, we do have an annual statement fee which is an add value, you’re not regulated to provide that that’s just an extra service you can provide. So we got that fee. We’ve also got payment disbursements if you’re paying a water bill or a plumbing bill or whatever on behalf of the owner a small charge there to put that through. You’ve also got repairs and maintenance fee as well which is percentage of those repairs. Now you’re thinking about what’s the management fee for remember that roll It’s whatever you say it is All righty. You’ve got a rent increase fee. So if you increase the rent by an extra $2,000 A year well you might charge 10% of that, for example. So yeah, the fees just go on and on but we’ve got all 34 fees and fee packages in the book. How did I go Kylie?’
THE ADDED VALUE WITH THE FEES
I think it is important to highlight all of the value that you’re adding behind the fee. So, all of the extra services that your clients may not realise that you do behind the scenes, the communication with tenants, the preparation of all the administration side of things, the court appearances, all of those little things that your landlords, I think, take for granted. So, when you are presenting fees to them, and I do this as part of my fee presentation, I have all of the services that are inclusive in those fees as well.
‘You’ve got to outline and at dinner, so you’ve got to really be putting down, hey, we’re saving you money because we’re doing regular routine inspections that will save you. This happens. It can cost you thousands of dollars. And it’s always good to have stories around service levels and horror stories. Have you heard with cheaper agents? Because if they start talking about the cheaper agent and say, yeah, look, and this is what I know, this has happened. This owner thought he was saving money by going to a cheaper agent. In fact, this happened. This happened one or two years later. He’s on the phone to be crying, telling me this shocking story. This is what happened, because usually when a property investor, someone’s coming into the market for the very, very first time, they don’t realize how important communication is. Having a quality property manager is. They do on the second- and third time round. I think horror stories are something that everybody needs to learn. And when you hear about those from cheaper competitors. We’re quick to talk about those to get those first-time property investors off the track of thinking I need a cheaper agent.’
VIRTUAL PROPERTY MANAGER OBJECTIONS
A few years ago, we had a lot of those online property management companies coming into the marketplace. They were offering really low flat fees. As I started losing some management to them, I actually looked into what they were offering a lot deeper, which is, I think a really good lesson for anyone listening. Don’t just accept the loss management, look into your competitors and what they’re charging and what I actually found. And I’m terrible at maths as well. But when I actually broke down the numbers and yes, they were charging a really low management fee, I think it was like 3% at the time. But they’re re advertising fees were like over $1,000. And I spoke to a few people who had gone to the agency. They were only offering six-month leases to tenants. So, they’re making the and I think it only ended up being about $50 less than my management fees, even though they thought they were getting this amazing discount and deal with this really low percentage. But in fact, it wasn’t a deal at all.
‘So, my response to that with those apps that come out saying that they can replace the property manager and they’ll connect the owner directly with the tenant, blah, blah, blah, blah, blah. My response to that is really simple is that the day the tenant pays the rent on time, looks after the property, and returns the property perfectly. Less fair, wear and tear is the day that the property manager is no longer required. End of story. Because it’s the things that don’t go right, they give us a job in property management. How often do things go wrong? All the time. So, because we’ve got people living in the property called tenants, the houses aren’t locked up, kept empty because we’ve now got another factor called the tenant living in a property that creates the industry of property management and those apps have failed. The owners want peace of mind, they want to be able to sleep at night and only a quality property manager is going to be able to do that. No app and no cheap agency is going to be able to provide that.’
PERSONAL DEVELOPMENT TOOL
‘I’m a real student of time management. So, getting better with your time as a property manager. The more you’re in control, the more healthy you’re going to be, the more feeling in control, the more mental health you’re going to be. Therefore, you have to become a master with not so much time management, but task management because we can’t control time. The clock just ticks with or without. You can’t control that. But it’s all about the allotted time that you’ve got to get your tasks done. And that’s what you need to become a master with. Anything good on time management. Probably one of the greatest books that I’ve read, too, if you want to get into quality time management. Actually three books on three different levels. Here’s your bronze, your silver and your gold. All right, levels if you want to go with it. The bronze basic level learning with time management is you can go to Amazon, you can go to Audible.com, where I do my learning. Of course, Eat That Frog, the universally accepted book around time management, 21 different productivity skills and tasks and things that you can learn. The next book now that’s by guy called Brian Tracy. The next book is the Silver version, which goes into a lot more depth called Flight Plan. And that’s again by Brian Tracy. That’s around about four or 5 hours long. A lot more in depth than Eat That Frog. And the next level up is about 9 hours. And I just love it because I just can’t get enough of being in control is called Time Power. But I’ve also written a little book. I’ve got it here. It’s a hundred different tips on time management. You can get that for free, just pay for postage. Just go to Pmpowerkeys.com. That’s Pmpowerkeys.com and you can order that book. I’ve only got about 20 or so left. So that’s all my 100 tips on being in control of the property manager.’