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The FIVE Types of Owners You Shouldn’t EVER Increase Fees With (6 minutes)
Not all landlords are ready for a fee increase, and doing it with the wrong landlords can unnecessarily lose clients.
This article outlines the FIVE TYPES of landlords you should avoid when considering fee increases.
Knowing when not to increase fees is just as important as knowing when to do it.
I want to talk about a crucial aspect of increasing fees with your current clients—knowing who NOT to increase fees with.
Over the past 20 years, I’ve helped hundreds of rent rolls across Australia, New Zealand, and the United States successfully raise their fees, regardless of economic climate.
One of the key rules is understanding which clients you should not target for fee increases.
When one of your landlords receives a fee increase notification that says, “We’ve had to review your management agreement due to increasing business costs, legislative compliance, and human resources,” then they need to be reasonably happy or better at the point they receive your email letter.
If they aren’t in a place of peace of mind, that notification could push them to exit your rent roll instead.
Let’s dive into the five types of owners you should avoid increasing fees with.
1. Owners in a Fixed-Term Management Agreement
This one’s pretty simple. If an owner is still in a fixed-term management agreement, you should not raise their fees.
This is especially relevant in places like South Australia and Western Australia, where fixed-term agreements are more common. In Western Australia, agencies often raise fees when the agreement renews every two years, while in South Australia, management agreements typically go open after an initial 12-month fixed term.
If fixed-term agreements aren’t common in your area, this then likely does not apply, but it’s important to recognise when a contract limits your ability to adjust fees.
- Standard Marketing Fee This fee covers the costs of listing properties on portals. In Australia, you’re likely familiar with the two major portals that charge fees. New Zealand has its own marketing portal costs as well. Make sure you’re covering those costs, and if you haven’t updated your fee recently, ensure you’re adjusting it, as portal charges tend to increase on a regular basis.
Don’t forget to factor in any additional marketing efforts, such as Facebook or LinkedIn campaigns. Always check your local legislation to ensure you can on-charge these costs. - Professional Photos If you’re taking professional photos for listings, you should be charging a fee to cover those costs. It’s a straightforward service, but make sure it’s reflected in your fee structure.
- Video Walkthrough Fee Offering video walkthroughs is becoming increasingly common. If you’re walking through the property with a camera or phone, narrating as you go, that takes time—editing and uploading included. You should be charging for this service, and the suggested fees are detailed in the book.
- Virtual Tour Fee Using high-tech tools like Matterport or 360-degree cameras to create virtual tours can be time-consuming and require expensive equipment. This is another service where you should be charging a fee for the value you provide.
2. New Clients Signed Within the Last 12 Months
Any owner who has signed up in the past 12 months shouldn’t be targeted for a fee increase.
As far as they’re concerned, they’ve just entered a deal with you, and it’s too soon to ask for more.
If you come to them six months in asking for a fee increase, it could lead to dissatisfaction and churn.
Wait at least 12 months before considering a fee increase for new clients.
3. Rent Rolls Purchased in the Last 12 Months
If you’ve recently purchased a rent roll, leave it alone for the first 12 months.
Your priority is to get these owners settled, build trust, and make them forget about their previous agency so they’re ‘sticky’ with your agency.
Only after they’ve had 12 months to experience your service are are ‘settled in’ should you consider increasing their fees.
4. Owners Upset About Something
If an owner is upset—even if it’s not your fault—don’t increase their fees.
Maybe they just paid $2,000 for a new hot water system/heater, or they’re frustrated that a tenant left the property in a not-so-good state.
Even if their frustration is not your fault, you need to give them time to cool off.
Once they’ve had time to settle and move past the issue, then you can consider a fee increase.
Timing is everything here—wait until the ‘waters have calmed’.
5. Owners with a Vacating or Recently Vacated Tenant
When a tenant is leaving, owners go back into anxiety mode from their place of ‘peace of mind’, especially when it hasn't happened for a while.
They’re worried about how long the property will be vacant for and how they’ll finance the mortgage during that time.
The worst thing you can do is hit them with a fee increase while they’re already stressed.
Wait until a new tenant is secured and has moved in.
Then, after the owner has had time to feel settled and secure again (about 4-8 weeks after the new tenant moves in), you can approach them about a fee increase.
The Rule: Only Increase Fees with ‘Settled’ Clients
The key takeaway here is that you should only increase fees for owners who are settled and in a place of peace of mind. I call these clients ‘sticky’.
They’re happy with your service and not currently dealing with any major stressors related to their property.
Avoid increasing fees for anyone who is not sticky enough or has become unstuck. This will prevent unnecessary exits from your rent roll and keep your business running smoothly.
Know When to Increase Fees
Knowing who not to increase fees with is just as important as knowing who is ready.
By focusing on only settled clients, you’ll minimise the risk of losing owners while still achieving your fee revenue goals (which is earning a lot more than you were before for the same amount of properties).
If you want more insights and a step-by-step procedure for increasing fees with your current clients, check out our book, Win Your Worth Secrets. It’s free—you just need to cover the shipping.
You can grab your copy at WinYourWorthSecrets.com or head to IGTCentral.com for more books and podcasts.
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BDM skills and techniques that will take you to 20-30 properties a month.
