Traditionally, investors in the buy-to-let market have had only two choices when searching for tenants and maintaining properties. The choices facing landlords are to pay letting agents a large fee to do the work-or set about the task themselves.
Services provided by agents can prove invaluable and in some cases, essential for landlords who own a large portfolio of property. The type of service typically offered by landlords will be a let-only contract. Under this type of service, landlords usually; –
- Locate, interview and vet potential tenants
- Take care of relevant paperwork
- Secure deposits
- Collect and secure first months rent
This service can normally be secured for around 10% of overall tenant rent. Alternatively, agents can offer a full-management service, where they continue to be responsible for collecting rent and assist with day-to-day requirements. This is normally in return for 15% of rent.
Are letting agents worth their fee?
For landlords wishing to be more hands-on, or to simply save costs, other alternatives are available.
Online letting agencies like Upad allow landlords to promote their properties on websites such as Rightmove and Zoopla for as little as £99. Upad director James Davis, said that their services were a viable alternative to landlords concerned about paying over the odds for a letting agent. Davis said, ‘Landlords who use high street agents usually spend half of their profits on the agents’ costs. We put landlords in contact with tenants and they conduct their own viewings, which enables you to meet the people who will be living in your investment.’
Another consideration for landlords is to use an online estate agent. Agencies such as eMoov offer a service like that of a high street agent-arranging viewings and such like, for a fee of £395. eMoov’s director Russell Quirk said that, ‘We typically save property owners 66 per cent on traditional agents’ fees. With void periods, non-payment of rent and lack of capital appreciation, saving on fees must be a big consideration.’
As in many walks of life, people power is a strong form of negotiation. This method has been enforced by the Happy Tenant Company. The company has around £500 million worth of property in areas close to the M25 motorway, and uses this figure and group letting power to enter into negotiation with agents. On a property rented for around £300 per week, the landlord can expect to save around £2,400 on fees.
Founder of the Happy Tenant Company Jonathan Monjack, set up the company as he was, ‘fed up with paying high renewal fees for no extra work.’ He said that it was never his intention to go into the property business, but can now, ‘bring a lot of business to lettings agents and recommended contractors, so they offer discounted rates, which we pass on to landlords.’
The right agent
Despite a feeling amongst landlords that they pay money to agents for very little return, being a member of a reputable letting agency such as the UK Association of Letting Agents has genuine benefits. Members should be comfortable understanding the 70 plus pages of legislation that a landlord should comply with.
Ian Potter, managing director of the Association of Residential Lettings Agents (ARLA), urges landlords to ask advice from affiliated sources. Potter says that due to there being, ‘no restrictions on who becomes a lettings agent, so seeking advice from an agent affiliated to a professional organisation is highly recommended. They are trained, offer client money protection and there is a redress scheme in place if things go wrong.’
A rise in competition between landlords has seen fees fall as a result. Typically, let-only agent fees are now 6% of total rent, with full-management dropping to around 10% are now common. Sarah Rushbrook, founder and director of property management company Rushbrook and Rathbone, said that landlords should go alone, or at least go against fully managed agent services. Rushbrook said, ‘here are alternatives to a fully managed service which protect the landlord from legal and financial blunders but allow him or her to organise their own day to day maintenance.
“For most landlords who chose to go it alone, this would prove to be a safer option while still giving them control over maintenance expenses.’