Do Tenant Letting Fees Affect Your Rental Profits?

20th April 2013 | By: Dave Smyth

A tenant paying tenant letting fees for rental propertySome (not all) property managers insist on charging tenant letting fees to the equivalent of a week’s rent plus GST.

Possibly there are some property owners who either don’t know, or don’t care, that this extra fee is being charged as it does not directly impact on them.  However, if they look more closely into the situation they may discover that it can affect them in a variety of ways.

Is the profitability of the rental unit being affected?

Actually a letting fee can affect the income in various ways as detailed in the following paragraphs which will be covered in more detail in other newsletters.

1.  Reduction in income – The letting fee is paid to the property manager not the owner thus increasing their income but not yours.  Another point to think about is that the more times the property manager lets the property the more income they get thus a high tenant turnover is to their advantage and could be classed as a conflict of interest.

2.  Where does the manager’s interest lie?  Basically by charging letting fees the manager is playing both sides of the fence – is their loyalty to you or the tenant?

3.  Haggling – If the tenant is not happy paying the letting fee they may try to drive down the rental because of that – the manager wins either way whilst the owner can lose income.

4.  Quality of tenants – A premium tenant with a good background of work history and references knows their worth.  They will not expect to pay a letting fee.  Therefore the owner is more likely to get a second level tenant and not the best they could.

If you are an experienced property investor the search for a tenant is equivalent to the process of hiring staff – in other words you want the best you can get.  When letting fees are involved however,  as mentioned above, this may not be the case when the property manager is receiving income from the tenant.

5.  Damage/Wear and Tear – The more second-tier  tenants you have in your property then the more likelihood there is that damage and wear and tear will occur, and if your manager charges letting fees a high turnover of tenants is what they will encourage.

Consider avoiding tenant letting fees

To maximise the  income from your rental property letting fees are not the best way to go and can take on a life of their own by causing a variety of scenarios any or all of which can reduce the owner’s income from the property (not to mention unnecessary stressful issues).

We would suggest that having a property manager who does not charge tenant letting fees will give you more peace of mind in addition to the best income from your property.


barry bridgman is an auckland property managerBarry Bridgman has been managing his own investment property portfolio for 25 years. During this time, there has never been any occurrence of rent defaults or property damage and Barry’s goal is to achieve the same for your property. Bridgman Property Management is based in Auckland Central, where Barry has lived for more than 18 years.


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