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One of the most impressive features of the private rental sector is the sheer breadth and scale of the type of landlords that make up the British rental market. From active retirees to passive 20-year-olds. From educated doctors to industrious trades people. No two landlords are the same. As a result, there is a huge variation in how active and passive landlords can be when managing their properties. For some landlords, it is important to manage and control every aspect of their property empire. For others, it can be too time consuming or uneconomical to manage their properties ‘in-house’.
For those landlords who lack the time, will or geographic availability to self-manage their properties, there is the option to utilise the UK’s £9.1bn letting agent industry. Our recent Landlord Vision Survey 2021 indicates that over half (52%) of all landlords are currently using a letting agent to manage their properties. However, not all letting agents are the same, and finding the best letting agent and management arrangement for your properties can be full of trial and error.
For those landlords currently using letting agents or considering their use, we have put together a selection of advice and experience to help guide you on your way.
You Can Negotiate Letting Agent Fees
One of the easiest and quickest ways to get a better return on investment from your letting agent is to negotiate more heavily on fees. Typically, letting agent fees can vary between 7-15% depending on the type of service and standing of the agent. However, often an agent’s listed fees are open to negotiation – especially if you are a portfolio landlord.
If you have five or more properties in your portfolio, which can all be managed by the same agent, you will likely be in the top 25% of the letting agents’ clients and will reap the benefits of being so. You could quite easily negotiate one or two percentage points off your monthly management fees. Even if you have less than five properties, you can leverage your future plans to grow your portfolio or plans to remain invested in your property for years to come to negotiate a better deal.
Simply, the letting agent market is competitive. You can use your scale, negotiating skills and the rates of competing letting agents to win a better deal for yourself and your properties. The ability to pay slightly lower rates may save you £300-£500 per year whilst still affording you the same quality of service.
The Cheapest Letting Agent Fees Aren’t the Best
Much like most things in life, there is a difference between cheap letting agent fees and great value for money fees. This is especially the case if you are reliant on your letting agent to fully manage your properties. You get what you pay for and when you see letting agents with significantly lower monthly management fees than their competition, there is usually a reason for this. Letting agents which charge low headline monthly fees often make their profit through other services. The cheap headline fees may hide extortionate additional costs, such as high charges for extending tenancies or conducting checks. Equally, many letting agents earn a markup or arrangement fee from tradesmen when they are employed to rectify issues on your behalf. You may end up paying 5-10% more every time you have a maintenance issue with your property.
Whilst a letting agent may have low fees because they plan on earning the money back elsewhere, they may also advertise low fees because their service quality does not compare favourably. Landlords often rely on letting agents to fully manage their properties in cases where they are short on time or geographically distant from their properties. In these cases, it is important to ensure you work with the right letting agent. Simple things like having a pro-active agent that can propose solutions, that is consistently available on the phone or responds promptly to emails can be worth paying a higher rate for. If you are time short, there is no point wasting 2 hours a week trying to chase and contact a letting agent for the sake of £40 a month – it’s just not economical.
Your Letting Agent Works for You
Letting agents operate in the service industry. You are paying them a proportion of your monthly rent for them to offer the service of taking away the hassle of managing your properties. You are a customer, and they need to be constantly cognizant that they are trying to win or maintain your business. Therefore, they need to ensure that they have good availability, respond promptly, remain consistently organised and proactively make suggestions when dealing with you, their ultimate customer.
If your letting agent is rarely available to speak on the phone and takes days or weeks to respond to you, their primary customer, what are their interactions like with your tenants? If your letting agent forgets to follow up on actions after your last call or email and takes too long to action your requests, what are they missing that you don’t know about? Finally, if your letting agent – who is meant to be a professional in the rental industry – is not making suggestions and proactively managing your property, then they may either not value you as a customer or may not be very good at their job.
Whilst there is no hard and fast law, letting agents that are poor in their dealings with you are likely to be even more poor when interacting with your tenants. These agents will cost you far more in lost tenancies (higher churn-rates), higher maintenance and time than you will ever save in reduced fees. It is worth changing agent or escalating issues before it becomes too late.
Don’t Be Afraid to Change Letting Agents
Good letting agents don’t grow on trees and you need to ensure that, if you plan on changing letting agents, you are doing so for the right reasons. It is not worth changing agents if you are only doing so to save a marginal amount of money each month. However, if your agent has shown a consistent pattern of ripping you off, by constantly putting up fees or being consistently mediocre in their management, then there is no point waiting. It is best to act quickly and decisively before your below-standard agent costs you any more money.
You should be under no illusions that changing agent may incur some up-front costs and add an additional lump of work onto your plate. However, the cost and time are usually less than you might imagine and should not in any way be a reason for sticking with a poor agent.
If you are certain that changing agents is the right decision for you, then the first thing you need to do is to check their terms of business. Often letting agents will tie you into initial fixed terms or try to link their management of properties with a given tenancy to make it harder for you to leave. One of the most beneficial things you can do is to ensure you have found and picked the right agent to move your properties to. Firstly, you want to ensure that the effort of moving is worthwhile. Secondly, your new letting agents should be able to support and advise you in the transfer process. They should outline what is required from you and will be able to highlight if your current agent is being purposefully difficult or even outright breaking the law with any terms of business or penalties.
Fully Managed or Let-Only Letting Agents?
When opting for a letting agent, there is variation in the types of service they can provide. You could enlist a letting agent to fully manage your properties, so that they deal with all tenant interaction and maintain your compliance (gas certifications, dealing with tradesman, renewing tenancies), or you could engage an agent on a let-only arrangement.
What is a let-only service?
In a let-only arrangement the letting agent is responsible only for sourcing tenants and supporting the initial tenancy agreement. In this case, agents will list your property on all the relevant property portals, screen prospective tenants and arrange and conduct viewings. Depending on your arrangement, they may also support the creation of your initial tenancy agreement, preparing the documents, completing credit checks and arranging an inventory. For this, they will charge a pre-agreed upfront fee.
What is a fully managed service?
New landlords would probably be best advised opting for a fully managed service. The private rental sector is becoming an ever more burdensome and regulated market, with increasingly stringent checks and requirements. It can be worthwhile employing a professional to fully manage your property for a couple of years whilst you learn the ropes, before opting for a let-only agreement if it suits you.
Manging Your Own Properties
For more experienced landlords, it has probably never been easier to partially manage your properties or use letting agents on a let-only basis. Landlord Vision has the capability to help you manage your properties, communicate with tenants, remind you of compliance and generally help you to become more profitable for a fraction of the cost of a letting agent. Although that’s not to say that Landlord Vision is not still beneficial for landlords using a fully managed service. All the features remain just as relevant for landlords relying entirely on letting agents. Equally, even landlords that are geographically distant from their properties can still enlist quality local tradesman through websites like RatedPeople and utilise freelance support to conduct mid-tenancy checks, making it easier to move away from a fully managed service.
