There are sizable differences in residential rent payment frequency between different states, which real estate entrepreneur Ben White says has significant implications for real estate agencies.
In Victoria, more than 70% of rent is paid on a monthly basis, but in Queensland most rent is paid on a weekly or fortnightly basis, with less than 5% on a monthly basis.
NSW is similar to Queensland, with just 11.5% paid monthly and then rest paid fortnightly or weekly.
Paying on a monthly basis is much more beneficial to agents, tenants and landlords, says White, and he thinks this should be the norm.
“Monthly is better for everyone. Tenants often prefer it, and it’s much more efficient for a property management business because they have more predictable cashflow coming through. It just makes more sense for everyone to have lumpier transactions,” White says.
“In Queensland a property manager will spend two to three times as much time on rent collection and arrears than their Victorian counterpart.”
The data comes from White’s property management company, Atmosphere, which handles $30 million a month in rent for agents around the country.
White says the difference in frequency between the states comes from cultural and historical differences.
“The industry in each state has evolved under different cultural norms. There’s no law one way or the other it’s simply the way people expect rent to be payed,” White says.
“You see a lot of practises in industry that are determined by how they were taught by their predecessor.”
White says agents in Queensland and NSW need to change the accepted practises of paying month weekly.
“Our recommendation is to have a payment system that automates and has direct debit authorities, modern payment systems et cetera but also look at the industry practises.”
White says changing to a monthly system not only has efficiency and cash-flow benefits but also improves relationships with landlords.
“When you start having weekly rents versus monthly rents you end up having often have a situation where even low levels of arrears have a disproportionate effect on the relationship with the landlord,” White says.
“If someone misses one in 10 weekly payments the end result is you have a much higher frequency of the landlord getting short-payed.
“When it comes to landlords evaluating property managers, whether they are short payed is a critical factor.”
White will be speaking at the wealth conference in August next year, a conference aimed at property management professionals.
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