While both charge a percentage of net rent, DHA’s service fee and traditional property management fees provide significantly different benefits and services.
Unlike traditional property management fees which cover the cost of the day-to-day management of your property, DHA’s service fee includes benefits such as guaranteed* rent for the duration of your lease and most non-structural repairs.
In this article, we’ll highlight and quantify the differences in these fees. You’ll see how their inclusions can impact your investment returns so you can make an informed decision on which is best in your circumstances.
Understanding property management fees
Management fees charged by a real estate agency or property manager cover just that, the general day-to-day management of your investment property. Management can include coordinating repairs, liaising with tenants, and managing payments such as rent and council rates.
Management fees are not uniform across the industry. Agency to agency there may be differences in what is covered and, in some cases, may require you to pay for additional services such as:
- letting fees - to cover the costs of securing a new tenant, such as running open homes, performing checks on applicants, drawing up documents, and collecting and lodging your bond. Letting fees are generally between one to two weeks of gross rent plus GST.
- administrative fees – to cover the cost of preparing your monthly statement. These fees are generally between $5.50 and $6.60 per month.
- other fees – may include costs for advertising your property to new tenants, database fees, and preparation of lease fees.
Comparing DHA’s service fee
When signing a lease to rent your property to
DHA, you receive all of the benefits of the Property Care Contract under one service fee. Day-to-day management of your property is included as part of the service fee. However, it is only one of the many benefits you receive.
Outside of management-related expenses, the most significant value provided under DHA’s service fee is the undertaking of most non-structural repairs. According to research conducted by BIS Oxford Economics, these non-structural repairs represent between 6.4% and 16% of the annual gross rent for a detached house.
Similarly, DHA’s rental guarantee* means that the owner bears no vacancy costs for the duration of their lease as long as their property is habitable. According to BIS Oxford Economics, lost rent and letting fees will, on average, cost 1.7% to 3.6% of the annual gross rent for a detached house.
Traditional property management fee inclusions:
- coordinating repairs
- liaising with tenants
- managing payments such as rent and council rates
DHA service fee inclusions:
- coordinating repairs
- liaising with tenants
- managing rental payments
- letting fees
- monthly statements
- vacancy management
- maintaining grounds if vacant
- non-structural repairs
- lease-end repair and clean
- emergency repair coordination
- scheduling and facilitating inspections
- annual rental reviews by independent valuer.
How much do they cost?
Both property management fees and DHA’s service fees are calculated as a percentage of gross rent.
Property management fees differ by location, ranging from approximately 6.1% to 10.3% of gross rent. The table below provides indicative management fees for major cities and regions where DHA has a presence. However, we recommend contacting property managers in your area to get an up-to-date quote.
| Wagga Wagga
Source: BIS Oxford Economics, 2022
DHA’s service fee is deducted from your monthly payments. Depending on the property type, we charge:
- a flat fee of 16.5% (inc GST) for most free-standing houses
- a flat fee of 13.0% (inc GST) for properties where a body corporate is responsible for most of the common areas, including external paint.
The bottom line for your returns
When calculating your expected costs of an investment property, it can be tempting to only look at the property management fee. However, we recommend gaining a complete understanding of how DHA’s service fee compares by:
- speaking to at least three prospective property managers to understand their fee cost, what is covered, and any additional charges which may arise.
- calculating the annual cost of lost rent and re-letting and advertising fees based on the location of your property. Our Property Management Fee Comparison report provides indicative numbers based on current vacancy rates across all capital cities.
- understanding the expected costs of non-structural repairs for your property. Our Property Management Fee Comparison report includes indicative costs for non-structural repairs based on the analysis of our portfolio’s almost 17,000 properties under management.
Adding these costs together will provide a holistic picture of the comparative cost of leasing your property to DHA rather than through a property manager.
Analysis conducted by BIS Oxford Economics has shown that in most cases, investment property owners will save money leasing their property to DHA. In their “most likely” scenario modelling, investors leasing a house can save up to 12.7% per annum leasing to DHA, while investors with an apartment can save up to 9.3%.
Download the DHA Property Management Fee comparison reports to read the full comparison, including data related to the typical costs expected for your investment property.
Next steps and more information:
* Rent may be subject to abatement under certain circumstances such as loss of enjoyment or amenity, or breach of lease terms. Rent is paid where the property is habitable. Should a property become uninhabitable during the term of the lease, or lessor breaches the lease terms, the rent may cease or abate and the lease may be terminated by DHA. Guaranteed rent is subject to the terms of the lease. DHA does not take into account an investor’s objectives or financial needs. Investors should always seek appropriate independent advice before making any investment decisions with DHA.