Am I paying too much in property management fees?

img | April 27, 2024
fee management

Bali property management fees and beyond

When owning a rental property, managing the fees and cost could be quite tricky to ensure you gain the optimum profit and revenue. But no need to worry, we at Bukit Vista have gained over 10 years of experience so you don’t need to worry about what fees to pay and ensure a sizable return on investment for your property. Also, with our experience working in different OTAs such as Airbnb and booking.com, we know firsthand the fees in managing rental properties, especially in Bali and Yogyakarta. But before that, what do property managers do anyway and how are they paid?

How do property managers make money?

The typical business model of property managers or companies revolves around offering the services of financial, legal, and maintenance or managing the owner’s property in exchange for management fees. A property manager’s responsibilities typically include booking new rentals, collecting rent, maintenance, and repairs, as well as marketing the landlord’s properties.

If you own a property and want to save time and headaches, property managers are helpful since they manage the property and handle guest issues on behalf of the landlord by responding to guests promptly and handling the property’s ongoing day-to-day operations. 

So let’s breakdown how’s property managers make money.

property management fees
Bali Villa Management Services - Online Guest Support Service

Management fees

Property management fees are what clients pay to ensure their property is maintained and managed properly throughout the year. They cover services such as rent collection, maintenance coordination, property inspections, and tenant communication. Most companies include all these services in one management fee.

The cost of Bali property management fees depends on factors like property type, size, condition, location, and management services. Property managers calculate the management fee based on these factors to generate business and profit. Most property management companies prefer to charge a percentage-based fee, usually between 15%-20% of the rent collected each month.

There are two common choices for charging the percentage-based fee: percentage of rental value or percentage of rent due. Charging a percentage of rental value means the fee is charged even if there is no rent being paid, whereas charging a percentage of rent due means the fee is only paid when there is rent collected. Despite the fee’s complexity, it generates the most revenue for managed properties. Property managers can also charge other fees to generate profits for the company.

Onboarding Fee

When you hire a Bali property management company, you may be charged an onboarding fee, which is a one-time fee that covers services like property inspection, evaluation, and account creation. This fee is usually based on the number of units you need to manage. Some managers don’t charge this fee and instead charge for services separately

Early Termination Fee

An early termination fee may be included in a property management agreement, and it’s charged to the client if they end the contract before the agreed-upon time. This is typically a flat fee ranging from $250 to $500 or more. It’s essential to inform the property owner of this fee to avoid disputes later on when the agreement ends. If the property owner is unaware of this fee, it may come as a surprise and cause disagreements.

Bali Property management fees

Most of the time, Property and villa management fees in Bali deploy a commission based percentage based on the reservation revenue gathered from the property with some additional fees. In Bukit Vista, we use a revenue sharing model, so property owners have zero fixed management fees.

Let’s say a guest books a room worth Rp.1,000,000 worth or reservation value. The property manager would then receive 20% of the reservation value or Rp. 200,000 for the service they provide, and the rest (Rp.800,000) would then be received by the property owner.

As you can see, this model incentivizes a mutual and transparent collaboration between the property owner and  property manager as the higher reservation they receive the higher revenue they’ll gain. Furthermore, by showcasing the amount each party received on the reservations revenue, it allows for a more transparent process, as Bukit Vista app – BVGO can show and track revenue details in real time so there’s no hidden cost.

property management fees
BV GO - finance report by Bukit Vista

Who pays the expenses?

Depending on the property managers and contract signed, it is common that the cost of maintenance, repair, and supplies is handed over to the property manager in condition that the property owner follow some conditions. However, some property managers might request that the property owner cover these expanse themselves. So, it’s better to do your homework first when choosing a property manager and their cost details.

Besides the cost of managing a property, tax liabilities is also one of the main areas of focus when renting your property in Indonesia. Here are some property tax details in Bali, Indonesia.

  • Rental income or Lease tax is levied in the amount of 10% of the Lease Value for tax residents in Indonesia. For non-tax Residents the Lease Tax due is 20% of the Lease Value.
  • Land and Building tax is levied based on 0.1% of the sale value for properties valued at less than IDR 1 billion or 0.2% of properties valued above this. The sales value of the object (NJOPKP) is determined by the local revenue office.
  • Land and Building transfer duty is levied at an amount of 5% and is payable by the Buyer. The tax is generally calculated based on the transaction value or the assessed value – whichever is higher.

 

It’s also good practice to reach out to tax consultants and experts before you start renting your property. So be well aware of the legalities and rules when renting your property. 

How do fees work at Bukit Vista?

If you’re still unsure of the fees and costs or whether hiring property managers is worth it. Our zero fixed management fees ensure that we only make money when you make money.

While other companies might charge fixed fees regardless of how much revenue they drive for you. Bukit Vista pricing employs a revenue sharing model so property owners and property managers are on the same team and drive for growth together. We have two packages available: Business Package (15% revenue sharing) and Full Board (20% revenue sharing). You can find more information about each package on our pricing page.

So if you’re interested in a hassle free and transparent way to let someone manage your property, we’re here to help all your needs and transform your rental property into a money making machine

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