Why free management fees are a scam

Free is such a great word isn’t it?   Getting something for nothing is enough to get many people excited and can be extremely tempting for those investing in property.   Between rates and insurance, smoke alarm testing, repairs and interest rate hikes, it’s no wonder that the idea of free property management is appealing.

Here’s why you should run away from agents who are dangling the free management carrot:

  1. They will rent your property to ANYBODY just to get the job done. The sooner somebody is in the property, the sooner they can turn their attention to one of the dozens of other investors they have lured with their promise of something free
  2. Because you aren’t paying, there is no sense of obligation for the agent. Didn’t do their job properly? What leg do you have to stand on when you haven’t paid anything for the service?
  3. An agent who isn’t charging management fees can only stay afloat for so long. A properly managed investment property should cost the agency approximately $500 to $750 per year to service.   Therefore, the agency isn’t only “not earning” money when they manage for free but they are actually SPENDING money to manage for free.   The only way for an agent to counteract the loss is to cut back on things like managing arrears, proactive lease renewals and thorough inspections.

Rather than looking for free, look for VALUE FOR MONEY.   Selecting a property manager is not the time to be stingy – choose a great agent and you’ll come out way ahead of looking for the cheapest.