View all articles
Should you self-manage or use a letting agent? This is a question that many landlords ask as they’re starting out.
Self-management means not using the services of a letting agent or property manager. The self-managing landlord does all the work themselves. There are some clear advantages to this strategy, particularly when it comes to costs.
Whether self-management works for you depends on subjective factors, which differ between landlords. For instance, the number of tenants and properties you have will determine the time it takes to manage them. Whether or not you have the time to self-manage your properties depends on your circumstances.
First, let’s look at what letting agents do and the pros and cons of using an agent. This will help you decide if an agent is right for you or if you should consider self-management.
What do Let Only/ Tenant Finder Letting Agent Services Include?
A let only or tenant finder service does exactly what it says on the tin. The letting agent finds you a tenant. A let only service often includes tenant screening, reference checks, and viewings. Some let only services may include tenancy agreement preparation and credit checks. Generally, the agent will manage everything until the tenancy is set up and the tenant moves in.
Let only fees are a per-service basis, so you’ll get an invoice each time you use the service. Some letting agents charge a percentage of the annual rent; others have a set one-off lump sum fee. It’s likely that letting agent fees have risen recently due to the tenant fees ban. Letting agents are no longer allowed to levy many of the pre-move-in fees they used to charge. If you used a let only service before March 2019, it’s unlikely to be the same price now.
Watch out for tenant referencing fees. Letting agents can no longer charge tenants for checking their references. In some cases, agent tenant referencing fees for landlords have increased to cover the deficit. Referencing checks are often a significant part of the cost of finding a new tenant. If a letting agent charges £75 per reference check, three attempts to find a suitable tenant will cost £225. Read the small print to find out if tenant referencing is an add-on. If it is, it may be cheaper to use a standalone tenant referencing service at a fraction of the price. For example, OpenRent charges £20 for a very comprehensive standalone tenant reference service.
Let only fees will differ from agent to agent. If you’re thinking of using a let only service, don’t settle for the first agent you find. Compare the costs of different agents and the services they provide for that cost. Make sure you read reviews for each agent. Speak to other landlords who are using the agent before you make your decision.
What do Fully Managed Letting Agent Services Include?
A fully managed service is far more comprehensive. Fully managed means the letting agent manages everything a landlord would. Letting agents won’t look for cost savings or grow your business, but they will do everything else. A fully managed service is more expensive, but it does mean less day-to-day involvement for you.
You pay for a fully managed service on a rolling monthly basis. Many letting agents will tie you into a 12-month contract. Expect to pay somewhere between 7% and 15% of the annual property rent for this service.
If you choose a fully managed service, you must again do your due diligence. Letting agent costs and services will differ so don’t settle for the first agent you come across.
What is the Difference Between Letting Agents and Property Managers?
There aren’t many differences between a property manager and a letting agent in the UK. The agent /manager distinction is more pertinent in America and Australia. Here we’ll look at those small differences because there are still some property managers in the UK.
Property managers don’t tend to deal with the buying and selling of properties like a letting agent does. Property managers focus more on managing properties on behalf of landlords. Letting agents offer different levels of service, but property managers usually don’t.
In 2019 the tenant fees ban introduced legislation to crack down on rogue letting agents. There are various qualifications and trade memberships a letting agent can undertake. Qualifications and professional memberships should give landlords confidence when selecting a trustworthy agent.
With property managers, there’s no such legislation. However, this doesn’t mean you can’t trust property managers, but it is down to you to do the appropriate due diligence. Anyone can set up and call themselves a property manager, so you would need to vet them in the way you would an employee. High street agents are more established, so are easier to do due diligence on.
Letting agents don’t help you to grow your portfolio, they are the middleman between you and your tenants. They do the day to day admin and keep you compliant. Property managers will sometimes help you to grow your portfolio. If you brief them, they may look for investment opportunities or ways to reduce costs. Remember it is up to you to check their qualifications. If a property manager is helping you to grow your business, you should check that they have experience. Request evidence that your property manager has grown someone else’s portfolio before letting them do this with yours.
The main difference between letting agents and property managers is likely to be their focus. When using a letting agent, yours isn’t the only property they’ll be managing. Managing is not the only task a letting agent will undertake. Agents also deal with buying and selling properties and keeping their offices running. Some agents also work with clearance companies and may have to spend time managing these. A property manager will only be managing properties. Property managers are also likely to manage fewer properties at one time than a letting agent.
Pros & Cons of Self-managing Your Property Business
So now you know what services letting agents and property managers can provide you with, it’s time to look at the option of self-management.
Self-management is never something you should throw yourself into without considering it properly. Before getting into self-management you need to have a good idea of what’s expected of you. Property management is a minefield. Tenants rely on you to provide a safe property and the government relies on you to follow all the rules of renting. There are serious penalties for not complying with government regulations and ignorance is no defence in the eyes of the law.
Every landlord is different and every property portfolio is different, so before you dive into self-managing your property business, we recommend considering the following common pros and cons.
Pros of Self-managing Your Property Business
You set and maintain the standards you want for your property business
There are plenty of stories out there of bad letting agents and property managers. The largest complaints are that they are slow to react, not communicative enough or they just do the bare minimum.
Where this is the case you can end up paying for a whole lot of nothing. Even using a letting agent or property manager doesn’t make it a completely passive investment. You’ll need to keep on top of the letting agent to make sure they’re doing what you’ve agreed. The agent’s managing style may be different to yours, so you might want to keep on top of that too.
If you’re managing your properties yourself, you know things are being dealt with to your standard.
You can grow your property portfolio
Property managers and letting agents don’t focus on the performance of your portfolio. They manage a whole host of properties at once. They aren’t there to grow your investment, they’re there to manage the day to day. Letting agents collect rent, keep the property full, and deal with tenants.
If you’re self-managing your property, you can always look for ways to lower business costs. You can always be looking for cheaper suppliers, keeping on top of maintenance, etc, and be aware of profits and room for growth.
If you already know the rules and the property market, you’re halfway there
Managing a property requires you to know the rules and regulations that apply to renting. It also helps to have a good understanding of the market you are operating in. If you’re a diligent landlord who keeps up with property news and rules, you might already know a lot about property management. Where this is the case it might make more sense for you to manage your own properties.
You can save money on your property management costs
If you currently own properties but aren’t self-managing, you must be paying someone else to do this on your behalf. Costs for full property management range from anywhere between 7-15% of your rent each month. As your rents rise, so do the management fees. This is a considerable sum and the more properties you have the more you’ll ultimately pay.
If you’re able to self-manage, the majority of that money goes back into your accounts. Even if you pay for software, get a few hours of tax advice a year and pay an accountant to do your tax return, it won’t cost as much as a full-time agent.
You can build good tenant relationships when self-manage your properties
When self-managing a property, you are (usually) the sole point of contact for your tenants. Over time you and your tenants should build a good working relationship, which is beneficial for all involved. If you’re a people person and you enjoy helping others, this can be a rewarding facet of the job.
Good tenant relationships have many benefits. If your tenants get on well with you, they’re more likely to take care of your property. If you have other properties to let, your tenants might help you spread the word. If you’ve taken care of your tenants, they’re more likely to stay long term.
It is easier to build a good relationship when you’re not having to do it via an agent. When you’ve got a good relationship with your tenants, you can trust them to help you manage the property. Of course, this swings both ways and not all tenants have halos.
You will develop transferable skills when managing a property portfolio
When self-managing your properties, you will develop new skills or hone existing ones. Here are just a few skills you can expect to become proficient in when self-managing:
- Research
- People management
- Project management
- Ability to learn new things quickly
- Adaptability
- Finance management
- Attention to detail
These skills don’t only lend themselves to property management, they are transferable. If you’re still in the workforce, these are skills you can add to your CV. These skills can widen the pool of jobs that match your skill level.
Cons of Self-managing Your Property Business
Property management isn’t passive
Once upon a time property was touted as a passive investment. You put your tenants in and collected rent and life was rosy. These days not so much. Property is no longer passive, even if you use a letting agent. While the majority of the work happens when you’ve got a tenant moving out or a new one moving in, there is still work to be done the rest of the time.
Managing Your rental properties takes time and effort
Leading on from the previous point, it takes time and effort to manage properties. The best you can hope for while self-managing is to get a decent tenant that pays their rent on time.
Even where this is the case there will be finances to look after, inspections to carry out, renewals to complete, maintenance to do, and that’s barely scratching the surface of the bare minimum. Managing your own properties is hard work and if you’re not using a letting agent, it’s work you have to do and your own time that you have to put in.
There are reams of red tape in the property business
This isn’t likely to change any time soon. If you’ve been in the sector for a while and you’ve been paying attention to all the rules and regulations as they’ve been introduced it will be easier.
If you’ve been hands off or not in the sector for long, it’s a lot to try and pick up all at once. Catching up or keeping on top of the red tape may require you to read legal documents and delve through government guidelines. If you’re not comfortable reading and understanding these kinds of documents, you may struggle to keep up without professional help.
Managing a rental property business is stressful
We touched on this point earlier, but it is worth repeating. Being a self-managing landlord is stressful. If a tenant has an emergency like a fire, escape of water, flood, etc, it’s you they’ll be calling.
If it’s 3am when the ceiling falls in, you’re getting a call at 3am. Unless your properties are in bad condition you can expect relatively few early morning calls, but it can also be stressful to deal with unsuitable tenants, behavioural issues, evictions, etc.
So now it’s time to answer whether or not you’re up to the task of self-managing your property business or whether you’d rather use a letting agent. If you’re still unsure, check out the articles below for more help and guidance about self-management.
