Understanding and Reducing Administration Fees
Rental management is an essential component of property investment, giving owners peace of mind and maximising their rental income. A crucial aspect of rental management is the selection of a competent property manager, whose fees represent a significant proportion of operational costs.
A property manager's fees for rental management cover all the services provided by this professional to manage a landlord's rental property. These services include, but are not limited to, finding tenants, managing tenancy agreements, collecting rent, managing repairs and maintenance, and representing the owner in dealings with various parties (tenants, service providers, etc.).
Scale of fees
Generally, the fees for these services are calculated as a percentage of the sums collected (rent, service charges, etc.), typically varying between 5% and 8% exclusive of tax (excluding VAT) of the amounts collected. This range may vary depending on the range of services offered and the location of the property.
The impact of unpaid rent insurance on fees
In addition to management fees, unpaid rent insurance is another expense to consider. This insurance, which costs around 2% of the rent, inclusive of all taxes, provides protection against the risk of a tenant defaulting on payment. The addition of this insurance increases the total fees to between 7% and 10% (excluding VAT) of the sums collected, representing a significant increase in management costs.
Tax deductibility: an opportunity to optimise costs
An aspect that is often underestimated, but which is crucial in assessing the real cost of rental management, is the tax deductibility of property management fees. Both management fees and unpaid rent insurance premiums are deductible from property income as part of the owner's tax return.
This deductibility offers a significant tax advantage, reducing taxation on rental income. In practice, this means that the effective cost of management fees and insurance can be reduced by an average of 30%, depending on the owner's marginal tax bracket.
Source : Cabinet Gratade
