Say you’ve invested in a buy-to-let London property, or you’ve become a landlord by accident with an inherited place to rent out. Working out how you’ll manage your new role is probably your first big decision.
You might decide to place the property in the hands of a letting agent. This option can take many of the stresses of being a landlord off your shoulders, but are such management companies worth the fees?
The answer really depends – on how much time you have to spend on the day to day running of your property, your level of knowledge and how involved you would like to be.
To help you decide it’s worth getting to know the different levels of service you can expect from your letting agent and the pros and cons of using one compared to going it alone.
It’s also important to choose your letting agent wisely – get this wrong and you could find the process even more stressful than managing the rental yourself.
What does residential property management involve?
Depending on the package you opt for, property management services or letting agents keep residential properties well-maintained and legally compliant. They make sure that vacant homes are filled quickly and that tenants find the right properties for them.
Estate agents can act as the main point of contact between landlord and tenant, helping with everything from collecting rent to managing repairs – their level of input will largely depend on you, your needs and your budget.
There are 3 main types of service levels letting agents offer.
Those include: Let Only, Let Only + Rent Collection and Fully Managed.
Below we go over each one as well as how much agents charge for them:
A “let only” service is where the letting agent:
- Markets the property via their website or any of the portals
- Undertake all the viewings
- Vets all tenants to find you the mist suitable one
- Reference checks them
- Draws up the tenancy agreement
- Conducts the inventory (usually by using a 3rd party service provider)
- Moves them in
Then once the tenant is in, you’re on your own.
Typical letting agency fees for a Let Only service are charged as either:
- A percentage of the annual rent (5-8% is typical)
- A one-off fee (maybe £500-1,000 depending on the area)
Let Only + Rent Collection
In addition to the Let Only Service, agents can arrange for a standing order to be set up so the Tenant can send rent directly to them.
This allows the agent to keep on top of the rental payments and issue any late payment letters if the rent isn’t paid on time.
Rent is then sent to the landlord’s nominated account once the agent are in receipt of cleared funds, less their agreed fees and expenses.
The letting agent’s fee for rent collection are typically a little higher than the Let only, usually around 6-8% of the monthly rent.
Full management should cover everything that needs to be done in the course of dealing with your tenants.
- Collecting and passing on the rent, and chasing it up if it isn’t paid on time
- Inspecting the property regularly, and updating you on its condition
- Taking care of your legal obligations, such as gas-safety certificates
- Arranging any maintenance that’s needed
- Responding promptly to tenant requests and keeping them happy
- Handling rent increases, renewals, check-outs and so on
Fees for full management are usually charged as a percentage of the rent. Depending on the area, with London being the most expensive, the fees are in the range of 7% to 15%. Agents might also charge separately to find tenants in the first place, or this might be absorbed into the management fee.
Towards the end of the initial fixed term, managing agents will contact you to find out if you would like to renew the Tenancy. They will also review the Rent and advise you if an increase is possible or desirable depending upon current market conditions.
This is a service landlords need to pay for and cannot be passed on to the tenants any longer.
Are there any extra lettings agent fees for landlords?
You’ll also want to check what services you’ll have to pay extra for, as some agents won’t include things like inventories, rent reviews, gas safety certificates, vacant room charges and check-ins in their standard fees.
Some contracts will also include a clause that gives the agent a percentage of the price if the landlord sells the property to a tenant.
Also note that any maintenance cost, such as redecorating, is still a responsibility of the landlord, even if you are paying for a full management service.
The pros of putting your property in the hands of a letting agent
Dealing with tenants
- They can find tenants for you, helping you avoid the awkward and time-consuming process of showing people around and carrying out credit, background and identity checks.
- Their experience means that they should be able to find you reliable tenants who will pay their rent and keep your place in a good condition.
- They can collect the deposit and on-going rent on your behalf; making sure it’s transferred to your bank account and that you receive regular statements.
- They can also deal with missed payments and re-negotiate your rent.
- If you want to end the tenancy, the managing agent can give notice to your tenant and carry out the necessary end-of tenancy checks.
- They can also ensure the place is re-let as quickly as possible, avoiding any loss of rent through void periods.
Dealing with repairs and legal issues
- With their legal know-how, they can draw up a tenancy agreement for you. They can prepare an inventory and state of repair assessment of your property to protect it from damage.
- Depending on the level of input you agree, your letting agent can manage the day to day repairs and maintenance for you, helping keep your property investment in good condition.
- They can carry out inspections periodically and respond to reports of issues from tenants. If you aren’t local, being able to authorise your agent to carry out emergency repairs without bothering you at all could be a big advantage.
- Property managers will usually have their own contractors and tradespeople to call on if needed – so you won’t have to worry about finding a plumber to fix a burst pipe on Christmas Eve, for example.
- Estate Agents need to keep on top of the latest legal and health and safety requirements for landlords, so they will make sure your property complies with the law and good practice at all times.
- And, if you’re unfortunate enough to have problem tenants, an agent can deal with tricky issues, such as eviction, harassment or squatting, on your behalf.
The cons of putting your property in the hands of a letting agent
- The main downside of using an agent is that you will need to pay letting agent fees. These are usually average between 5% and 15% of the rental income, depending on the level of service you use.
- If you have plenty of spare time, live locally to the property, understand the duties of a landlord and don’t mind carrying out maintenance, you may feel you’re paying for things you could have done yourself.
- Fail to choose the right letting agent for you, and the working relationship might be as difficult to manage as a problem tenant.
How to decide
Think about how much time you want to devote to managing your property. Also, think about how much experience and knowledge you have regarding the practical and legal aspects of being a landlord.
As letting properties becomes ever more complex, the need to keep on top of the latest rules and regulations is growing. You should be able to ask your agent about anything – from gas safety certificates to spotting a fake passport or knowing where to find a good plumber.
Choosing a letting agent
Get personal recommendations from friends or colleagues. Then get in touch with agents working in your area. Talk to them and make sure you understand the services they are offering and their terms of business.
Be clear about their fees and what will be included in your package. Look for best value, not the cheapest rate – be wary of anyone offering you a bargain to secure your business.
If the agent is managing the tenancy for you, there are certain things they must do to comply with the law. These include safeguarding your tenant’s deposit in a government-backed scheme, so make sure you ask which scheme the are using.
By law, letting agents must also belong to a national approved letting scheme, which will resolve any disputes with tenants. The approved schemes are the Property Ombudsman Scheme, safeagents or the Property Redress Scheme(PRS).
It is also a good idea to choose an agency, which is a member of a professional body; ARLA Propertymark, the National Association of Estate Agents (NAEA) or the Royal Institution of Chartered Surveyors (RICS).