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Running a property letting business is hard work. Even if you only have one property to manage, there is a lot to think about, and when you have other responsibilities, it’s easy to lose track of what needs doing. This is where a letting agent comes in handy.
Letting agents offer a fully-managed service, which lets landlords forget about their rental property on a day-to-day basis. If you prefer a less hands-off approach, you can also use a letting agent to find and screen new tenants before taking over the everyday running of your property.
How Many Landlords Use a Letting Agent?
A 2015 survey of 2,000 landlords found that the majority (87%) used a letting agent to manage their property. Interestingly, there were regional differences in the data. For example, 100% of North-East landlords relied on letting agents, but only 79% of landlords in Northern Ireland did.
Of the landlords who didn’t use a letting agent, the primary reason given was cost, but 30% of landlords said they enjoyed managing their properties – if you are one of these cheerful individuals, please get in touch, as we’d love to hear why it makes you so happy!
In 2017, the number of landlords
using a letting agent rose by 7%. The National Landlords Association thought the sudden spike was a temporary blip, but the National Association of Letting Agents disagreed, saying:
“These findings show that an increasing proportion of landlords rely on agents at present, which is a testament to the professional work undertaken by the vast majority of agents in the sector. It’s an uncertain time for anyone who owns a buy-to-let property, so the steady hand of a reputable agent is exactly what many landlords are looking for right now.”
Whether you need a “steady hand” or you don’t have time to manage your portfolio without creating a few clones to share the load, here is a guide to what a letting agent does and some reasons for and against using a letting agent.
What Does a Letting Agent Do?
A good letting agent is worth their weight in gold. They can take care of the tricky parts of managing a buy to let property, such as making sure it meets health and safety legislation, screening tenants, preparing tenancy agreements, etc.
Depending on your budget, there are different levels of service available.
Let Only
A let only or tenant finder service does exactly what it says on the tin – the letting agent looks for a suitable tenant, screens them, checks references, and conducts viewings. They may also prepare a tenancy agreement, run credit checks, and manage everything until the tenancy is set up and the tenant has moved in.
Fully Managed Service
A fully managed service is far more comprehensive. Here, the letting agent does all of the above, plus everything else a landlord must do, such as organise property repairs and deal with tenant problems. Naturally, they charge more for this level of service, but it does mean you have very little to think about on a day-to-day basis.
How Much do Letting Agents Charge?
Letting agent fees vary. There is no set rate for a let-only and fully managed service, and it will largely depend on competition in the local area. Bigger chains of letting agents will have a standard set of fees for each service. However, if you use a smaller, independent letting agent, you might have some wiggle room for negotiation. If the letting agent wants your business, perhaps because you have a large portfolio, it’s reasonable to expect a discount on their service fee.
Fully Managed Services
Fully managed services tend to be on a rolling monthly basis, with some letting agents requiring that landlords sign up for a 12-month package. Expect to pay somewhere between 7% and 15% of the annual property rent.
Let-Only Fees
Let-only fees are a per-service basis, so you’ll be invoiced 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. Since letting agents can no longer charge tenants for things like preparing tenancy agreements and the administration of a new tenancy, it’s likely they will have put their fees up. If you have used a letting agent previously, don’t be too surprised if the fees for a let only service have increased in the interim.
In particular, watch out for tenant referencing fees. Letting agents can no longer charge tenants for checking their references, so the fees are being passed on to the landlord. Since this is often a significant part of the cost of finding a new tenant, check how much tenant reference checks fees are with your prospective letting agent. There are big differences between the main letting agents.
If a letting agent charges £75 per reference check and it takes you three attempts to find a suitable tenant for your property, that’s £225 for one tenant. 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 comprehensive standalone tenant reference service that includes checking CCJs, right to rent, the electoral roll, employer’s references, etc.
Reasons to Use a Letting Agent
There are a few reasons why using a letting agent makes sense. Read on to see which boxes you tick.
Time
Most landlords use a letting agent because they don’t have time to do the job themselves. Unless you are a professional landlord, it’s likely that you have a full-time job plus a host of other responsibilities and onerous time commitments. Finding new tenants, answering the phone at midnight when a tenant has dropped their key down a drain and organising an emergency plumber when the toilet backs up on Christmas morning is probably not on your to-do list.
Letting agents are the first point of contact for tenants and you shouldn’t have to do much once you engage a letting agent to manage your properties. At least in theory…
Experience
Is this your first buy to let property? Are you an ‘accidental landlord’? If so, using a letting agent might be a smart move. There is a lot of red tape to think about, from checking a tenant’s immigration status to smoke alarms and deposit protection. If you make a mistake, it could cost you dearly. It is a letting agent’s job to know all there is to know about the rules that govern the Private Rental Sector.
There is no reason why you can’t jump right in and learn the ropes, but if you don’t have confidence in your ability to manage a rental property or you would prefer someone else with more experience to deal with difficult tenants, hand over the reins to an experienced letting agent.
Reasons Not to Use a Letting Agent
If you have time and plenty of experience, it’s fairly pointless paying someone else to do a job that you could easily do yourself.
The other reason why you may prefer not to use a letting agent is down to cost. The costs associated with a letting agent are tax deductible, of course, but when your rental yields are tight, it could tip you too far in the wrong direction.
Do the maths and work out how much your rental yield is if you add on the expense of a letting agent. Then you can make an informed decision.
There are some comprehensive property management programmes out there like Landlord Vision that can help enormously when it comes to self-management.
Choosing the Right Letting Agent
Speak to other landlords for recommendations. Read online reviews and do some research. Make sure that any letting agent you consider is registered with one of the main trade bodies. These include the Association of Renting and Letting Agents (ARLA) and the UK Association of Letting Agents (UKALA).
Ask two or three letting agents for quotes. Read the small print to check exactly what the agent is offering for their fee. Compare like with like.
Don’t assume the cheapest letting agent is the right one. Cheap isn’t necessarily cheerful. If their fees are much cheaper than the competition, they are clearly cutting costs somewhere, and if that cost-cutting exercise means they aren’t performing appropriate checks on your tenants, it will come back to haunt you.
High Street Vs. Online Letting Agents
There has been a rise of online property websites like Rightmove and Zoopla. It’s a whole new world out there and landlords are no longer restricted to using their local high street letting agent.
For landlords comfortable with online services, using an online letting agent could save you a lot of money. There is a number to choose from, including Openrent, Upad, and IATA. Their core services always include marketing on the main property portals, which makes sure your property reaches a lot of prospective tenants. Read the T&Cs for each online agent to get a better idea of what services they offer.
Keep an Eye on Your Letting Agent
Once you have a contract set up with a letting agent, monitor their work. No matter how nice and personable they are, don’t assume they are doing a fantastic job. Hopefully, they are, but don’t take it for granted! Some disreputable letting agents will charge for work not completed or fob you off with all kinds of excuses when things go wrong. This is where a little research pays dividends; if you spot a lot of bad reviews online from disgruntled landlords, run a mile.
Letting agents perform a useful job and many landlords rely on them to keep their investment safe. Ultimately, however, it is a personal decision, so weigh up the pros and cons before you decide one way or another.
Just remember, even if you do decide that a letting agent is the right move now, it doesn’t mean you are locked in forever. As your confidence and experience grow, you can easily take over the reins at some point. Or switch from a fully managed package to a tenant finder service, depending on your needs at that time.
