Setting a letting management percentage that covers the work

3 days ago
3 min read

Updated: 2 days ago

Introduction

Management fees are almost universally a percentage of rent, which is simple to quote and a poor description of the cost. The work is per property, not per pound: a flat letting at a modest rent needs the same inspections, certificates, contractor coordination and tenant correspondence as one letting at three times the figure.

A book weighted toward lower rents is therefore doing the same volume of work for materially less income, and because the fee is a percentage nobody notices until margins are thin across the whole business. By then it is a book-wide problem rather than a pricing one.

Setting the percentage properly means knowing your cost per property per year and applying a floor. Both are simple once the number exists.

1. Setting a letting management percentage starts with cost per property

The property is the unit of work.

Cost a year of managing one property

Inspections and travel, certificate coordination, maintenance calls, arrears handling, statements, deposit administration, tenancy renewals. Add the share of overhead. Do it once, properly, and the answer lasts a year.

Compare it against the fee at your lowest rent

That comparison usually shows the cheapest properties in the book are unprofitable. Count how many of those you hold.

2. Apply a minimum monthly fee

A floor solves most of the problem.

Set a minimum regardless of rent

Stated in the terms. New landlords accept it without comment. Below a certain rent the percentage cannot cover the work, and a floor is easier to explain than a higher percentage. Set it from your own cost figure.

Explain it as a cost of service, not a penalty

Landlords accept a minimum when they understand the work is per property rather than per pound. Say it in exactly those words.

3. Charge separately for the things that recur

Compliance is real administration.

Price the certificate cycle

Gas, electrical, energy performance, alarms, and whatever else applies in your jurisdiction. Coordinating these is work and belongs on the schedule. Diarise every renewal date.

Charge for inspections and their reports

Time, travel and a written report. A stated fee per inspection is more honest than burying it. Include the report in the fee.

4. Handle maintenance coordination openly

This is the largest hidden cost.

Decide and state how you charge for arranging works

A percentage of the works, a flat coordination fee, or free below a threshold. Whichever you choose, publish it. Landlords dislike discovering it on a statement.

Disclose anything you receive from contractors

Both good practice and, in many jurisdictions, required. Concealment here is what generates complaints. Put the figure on the terms of business.

5. Review the book annually and act

Fees drift out of line every year.

Rank properties by fee against workload

Maintenance calls, arrears incidents, tenancy turnover. Turnover is the most expensive of the three. Some properties consume many times the average. Keep a simple log per property.

Reprice or release the worst

Present the data. A landlord shown the call log usually accepts an adjustment. Make the conversation factual rather than awkward.

Conclusion

The work is per property rather than per pound, so cost a full year of managing one — inspections, travel, certificates, maintenance calls, arrears, statements and renewals — and compare it against your fee at the lowest rent in the book. The cheapest properties are usually unprofitable.

Apply a stated minimum monthly fee and explain it as the cost of service rather than a penalty, since landlords accept it once they see the work is per property. Put the certificate cycle and inspections on the fee schedule as the administration they are, publish how you charge for coordinating maintenance and disclose anything received from contractors. Then rank properties annually by fee against actual workload and reprice or release the worst, with the call log in hand.