Topic: How do you explain an Administration Fee to a prospect?

How do you explain an Administration Fee to a prospect? (not an application fee FYI)

we call ours a reservation fee. once you have been approved in order to reserve one of our beautiful apartment homes you will pay a reservation fee of $200 which reserves the apartment home, prepares your welcome home letter including the processing of your lease agreement.

Does it go towards deposit or is it a true fee?

Connie Mathes it’s a true fee. we collected over $5k in the month of May in the reservation fee. we have no issue with it. we also started collecting a one time utility setup fee to offset the admin fees that the water billing company charges and we collected over $2k in May but it’s not due until move in.

It is for the administrative work that goes into the application process such as the employment and rental verifications that are completed as well as the lease preparation.

Ok so if you use that verbiage for an admin fee, what do you say about an application fee

The application fee covers the credit and background checks

I have always thought that properties should do away with admin fees. Nickle and dimeing new residents is a shame. Just raise the monthly rent by $10 if you need to have an admin fee! OR, raise the application fee to cover any "expense".

I agree. It can be a big turn off the more “extra” costs you have to explain. That’s why I don’t like having to explain that water, sewer and trash fee is added on to rent. Some people interpret it as being misleading when they are told it’s included

Our jobs are to increase the bottom line. If your competitors are NOT charging admin fees and this is preventing you from renting, then talk to your supervisor. Otherwise, our job is to increase NOI.

Jaren Sutton A short term increase in NOI doesn't help much if you get a reputation for charging lots of little fees and people avoid your property. Same holds true for those charging $1 per nail hole on a move out. They think they are doing right by the owner but all they are doing is kicking a tenant on the way out who will go tell everyone not to live at your property. LOTS of other ways to increase NOI!

I disagree our job is to provide service (exceptional) and through that increase NOI. If your property has a stellar reputation I can guarantee you can increase your rents much more so than ancillary income sources.

In all my years as a property manager I’ve had huge successes with NOI and not having the best other income sources. But I can tell you my properties have always had the best reviews in their market.

There will come a time when you maximize your NOI through these fees and it will result in less revenue because you’ve nickel and dimed.

I always go with the admin fee goes to the city (it really mostly does), it covers the occupancy permit upkeep/inspection and pays for crime free drug free housing. In our area they charge a lot per door for that, we do obviously make some profit. I also know our admin is right on par or a little less than our comps. See how yours compares, easier to explain when it is everywhere and right on par.

That sounds deceptive. Why not have a ‘owner mortgage fee’ and a ‘property tax fee’ as well because those dollars also go somewhere else? That way you can advertise an incredibly low monthly rate.

It's not though and it isnt deceptive. That fee covers the occupancy permit that every property is required to have and if the resident were to have to do that it would be more costly and take more time. They also have the knowledge that we have Crime Free Drug Free Housing and what all falls in that. It is expensive, but a neighborhood doesnt have it as a "perk". In our prospect folder we have every fee and deposit laid out. Nothing is hidden and every and all questions are answered open and honestly. There is no way we could operate at an "incredibly low monthly rate" by adding on just 1 time fees. I have read comments and honestly I don't understand the hate for the admin fee. While yes we are providing a home it is also still a business. There are fees. There is a join fee when get a gym membership, there's admin fee/usage fee/etc on just about every bill you get. Rather than add that amount to the rent having it an upfront fee and what it goes to makes more sense and honestly I have had no issues explaining it and no one has had a problem with it.

Wouldn't labeling something as "crime free" especially if you're saying a fee covers it, put the property at liability if something happens? Not trying to be argumentative, but genuinely would like to know what you have done to ensure a crime free home.

The Crime Free Drug Free program is something we are required as multi family housing to participate in with our city. It allows us to have a 3 strike policy, we get a copy of the police report anytime they come out, they do random sweeps of property to make sure cars aren't derelict our have expired tags and will "ticket" cars with reminders if they leave valuables in their car to not do so, they also respond VERY QUICKLY to calls on property, if there is an issue on property or around town they will up the patrols they do.

Some huge lawsuits over "admin fees" brewing around the US.

It’s to hold the apartment then covers the cost of the legally prepared documents.

I let them know it is for the prep of legal documents just like doc fees when you buy a car

The app fee covers cost of applications, forms and membership to the apartment association. Admin fee covers any costs associsted with processing and screening.

Extra fees are just a way to deceive the renter into starting the leasing process by advertising a lower per month rate. If you’re trying to cover the costs of the application process, call it an application fee. If you’re adding on an admin fee, a trash and water or sewer fee, or a security fee, that’s just deceptive advertising of the true monthly rate up front. It’s no better than the cable company charging a ‘local broadcast fee’ and a ‘regional sports fee’ after you’ve already been drawn in by the $49.95 per month advertised rate.

Scott, these are one-time up front fees. Unless you are excluding these fees when quoting move in fees, it is not deceptive. Do you not quote the security deposit and app fees? When someone asks "What is your security deposit?" It should always be answered with the app fee, admin fee and required deposits.

Just tell them it's extra income for the property/owner. Joking... Don't ever say that

If you can’t explain why you’re charging it then.....WHY are you charging it?

This has been a topic in my office. And you hit the nail right on the head. if you can't explain it, you cannot charge it! unless you like lawsuits...then charge all you want with no explanation or actual need for the fee.

In my daily life, I *despise* add on fees. I don't fly Spirit Airlines ever because I don't know how much I'm going to end up paying for the flight after all of the fees. I fly Southwest whenever I can because I know what I'm going to pay when I book. I don't bank with banks because of all their extra fees and charges - I bank with credit unions. The last several years I rented, I refused to rent from property management companies because of all the extra fees and charges - I rented from private owners. To me, there's no way to explain it because it's nothing but added profit and should just be called as such.

An application fee covers the costs the company incurs from other agencies to pull credit and background checks. The Administrative Fee covers the cost of the office staff needed to input the data into the credit bureau/3rd party reference check systems and then prepare any other documentation required to have a contract ready for the new resident to sign. In government contracting, they call that a G&A burden on top of a direct cost.

I hear you but conceptually isn't the cost of the staff processing the fee the cost of doing business? It's a hard sell for me except that all the competition does it.

Connie Mathes I can see your point, however, I have been doing pricing for commercial and government contracts for the last few years and the cost of doing business is buried in either the gross profit margin (commercial contract) or G&A plus overhead and then add on profit (government contracts). It made me look at the back side of business differently.
Now the less technical way is to compare it to TicketMaster, I mean $18+ in fees per ticket. Maybe we should ask them to explain their fees, cause we all pay them!

Hi

To offset the cost of holding the unit offline while we process the application.

If asked, that’s usually what I say, too. I let them know that it’s pretty rare to have someone move in on the actual day an apartment is ready and it helps make up for occupancy loss during the process. Never had any kick back from a prospect or applicant with offering a forthcoming and honest answer

Ahhhhh, the holy grail of answers...I have been trying to master this response for 7 years...i am bowing

Think long term, little fees are thinking about the short term! Property reputation and word of mouth is more important then little fees we may charge a new resident or one on the way out.

Reservation fee

Covers lease paperwork and keys.

We’re legally not allowed to charge them in Oregon, but I’d probably up my app fee to the max allowed, or at least whatever the app+admin fee is. And eliminate the admin fee. No more explaining, problem solved.

I'm in Texas. We can still charge them although some may disagree. I tried it the way you mentioned and got more backlash this way. When I told people our app fee is $125 they threw a fit!

I tell prospects that it covers the cost of the lic. fee for the lease and all of the paperwork.

It is a way to scare off applicants who are not qualified.

Ha...doesn’t work on properties where it’s refundable if app is declined...pain in the @#$ getting two money orders for applications...i do my best to pre-screen when I was on those properties but you still get the idiots who think they’re smarter than the CoreLogic

If you advertise a rent price, then tell someone when they come to look at the place or when they start the paperwork that you are charging an admin fee, you just committed an unfair and deceptive trade practice. It would be like Best Buy advertising a TV for $1000 and when you go to pay, they hit you with a fee or force you to buy a warranty. The class actions already hit the hotels for the undisclosed resort fees which is why they are all disclosed now at the time of reservation and in the fine print of the quoted prices. Someday your luck will run out!

We eliminated the admin and increased the app fee. Success!

What does your company say that fee covers?

We started just charging a reservation fee of $150 and just put it towards the first month’s rent when approved. We also charge an application fee $35.

Admin fees have always been BS! They know it but more importantly... We know it! Up the app fee and do away with "admin fees"! It's our job to process the app... Get the rental and employment verification, do the paperwork blah blah... It's what we do!

Ask your owners to be "fee-free" and distinguish your community from the competition - it's a great selling feature, and you can make it up in rent if you price your product correctly.