Whether you own a single rental home or an entire portfolio, understanding property management fees and what they cover is fundamental to strategically managing your investments. Leasing Fees are just one component of this.
In this article, we will discuss what a leasing fee is and why it plays an important role in securing the best possible tenant for your rental property.
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Understanding Leasing Fees
A leasing fee, also called a “letting fee,” covers the work that property managers undertake to ensure a rental property is occupied by responsible and qualified tenants. Unlike a standard management fee, which is usually an ongoing monthly charge covering routine tasks like rent collection and maintenance coordination, a leasing fee is typically a one-time payment whenever a new tenancy begins.
It recognises the additional workload tied to preparing a property for the market and managing the transition from one tenancy to the next.
For property owners, leasing fees represent an upfront investment that can help minimise future risks, such as rental income loss from an unoccupied property or issues arising from unvetted tenants.
All property management companies have different policies regarding how often a leasing fee is charged. Some companies charge a leasing fee each time a new tenant signs a lease, while others may also charge a lease renewal fee when an existing tenant extends their stay.
How Leasing Fees Are Calculated
Leasing fees can be calculated in one of two primary ways: percentage-based or flat-rate. Property management companies often choose one approach over the other based on factors such as market norms, local demand, and the depth of their services.
Percentage-Based Leasing Fees
Percentage-based leasing fees are highly common in NSW property management. Property managers typically charge between 50% and 100% of the first monthly rental income. However, the figure can fluctuate depending on shifts in local housing demand and the scope of property management services provided.
For example, in a competitive rental market where securing quality tenants is more time-consuming, property management fees might skew towards the higher end of that range.
Flat-Rate Leasing Fees
The alternative to a percentage-based system is a flat-rate leasing fee, in which the property management company sets a predetermined amount for its leasing services. This rate typically does not vary, regardless of whether the monthly rent is high or low.
While a flat fee may be less beneficial for the property manager, it can bring budget certainty to property owners, especially in situations where the rent price is unpredictable or prone to fluctuation.
Services Included in Leasing Fees
Leasing fees usually encompass a range of services that aid in showcasing your rental property and selecting the best possible tenants. While each property management company may structure its packages differently, most leasing fees cover the following areas:
Marketing and Advertising Services
Securing a reliable tenant begins with effective marketing. From professional photography and virtual tours to online listings and social media promotions, a well-rounded advertising strategy helps draw attention to a vacant rental property.
At Leah Jay, we invest in multiple platforms to maximise visibility, tailoring our approach to specific demographic groups.
Tenant Screening and Selection
One of the core functions of a professional property management company is thoroughly screening prospective tenants. This may include background checks, credit verification, reference checks, and employment history reviews.
At Leah Jay, our property managers diligently examine each candidate’s financial stability and rental history to reduce the risk of future disputes or rent arrears. Leasing fees typically fund the screening process, ensuring it is carried out thoroughly and efficiently.
Lease Preparation
Administering a new tenancy involves more than just drafting a lease agreement. It includes arranging property inspections, facilitating key handovers, and explaining the property’s policies and rules to incoming tenants. If not handled correctly, these tasks can be time-consuming and have legal ramifications.
Because new lease creation and tenant onboarding often happen quickly, a leasing fee offsets the extra workload required, ensuring the property manager can dedicate enough attention to each new tenancy.
Making Informed Decisions About Leasing Fees
When deciding how to handle leasing fees—whether you’re a landlord or a tenant—there are a few key points to consider:
Evaluating value for money: A leasing fee is not a stand-alone cost; it interacts directly with your broader property management costs and may influence how you price your rental property. A seemingly high fee might be justified if it results in thorough tenant screening and minimal vacancy.
Assessing market competitiveness: Familiarise yourself with average leasing fees in your area to determine if you’re being offered a fair deal.
Long-term outcomes: Remember that a high-quality long-term tenant typically reduces turnover costs, which can more than offset a slightly higher initial leasing fee.
Ultimately, an experienced property management company understands that striking the right balance between cost and service quality benefits both landlord and tenant, facilitating a more stable rental environment.
Key Takeaways
- A leasing fee/letting fee is a one-time payment covering the work that property managers undertake to find tenants for a rental property.
- Leasing fees represent an upfront investment that can help minimise future risks, such as rental income loss from an unoccupied property or issues arising from unvetted tenants.
- Percentage-based leasing fees are highly common, & mean Property managers typically charge between 50% and 100% of the first monthly rental income.
- Flat-rate leasing fees are when the property management company sets a predetermined amount for its leasing services.
- Leasing fees encompass marketing & advertising, tenant screening & selection, lease preparation & finalisation.
Talk to the Leaders in Property Management
Leasing fees are more than just another line item on a property management invoice—they’re a strategic tool that supports both property owners and tenants throughout the letting process.
A leasing fee covers essential services such as property marketing, tenant screening, and lease administration, ensuring that a rental property is effectively showcased and occupied by responsible tenants. This safeguards an owner’s investment and minimises vacancy periods.
If you’d like expert guidance on property management fees and our range of available property management services, contact our dedicated team at Leah Jay. Our property managers can help you unlock the full potential of your rental property while ensuring a smooth lettings journey for you and your tenants.
