Are letting agents worth the money?
Buy-to-let investors have traditionally had two choices when it comes to finding tenants and managing properties – pay a letting agent a sizeable fee or do it themselves.
Lettings agents will typically offer a “let-only” service, where they will find, interview and vet tenants, do the paperwork and take the deposit and first month’s rent for a fee of around 10 per cent of the rent. Then there is a “full management”service, which can cost 15 per cent or more. Here, the agent will continue to collect rent and deal with the day-to-day running of the property.
An agent’s services can be essential for landlords who have properties far away or a large portfolio to manage. But for those seeking less hassle and less cost there are other choices.
Online lettings agencies such as Upad, whose services start at £99 (plus VAT), allow landlords to advertise their properties on lettings websites such as Rightmove, Zoopla and Prime Location. “Landlords who use high street agents usually spend half of their profits on the agents’ costs,” says Upad director James Davis.
“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.”
Online estate agencies such as eMoov offer a similar service to a high street lettings agent, taking photos, drawing floorplans and arranging viewings for a flat fee of £395 (excluding VAT).
“We typically save property owners 66 per cent on traditional agents’ fees,” says eMoov’s director, Russell Quirk. “With void periods, non-payment of rent and lack of capital appreciation, saving on fees must be a big consideration.”
And there’s the Happy Tenant Company, which – by virtue of having landlords with a combined £500 million worth of property within the M25 on its books – uses group buying power to negotiate discounts with lettings agents.
The service costs from £750 (plus VAT) a year and on a property that rents out for £300 a week, the Happy Tenant Company calculates a landlord will save £2,390 on fees over two years.
Its founder, media lawyer Jonathan Monjack, says: “Like many landlords, I was fed up with paying high renewal fees for no extra work just because it’s the industry norm. But I didn’t want to do the property management myself as I didn’t have the time or experience. We bring a lot of business to lettings agents and recommended contractors, so they offer discounted rates, which we pass on to landlords.”
Landlords generally feel they pay lettings agents a lot to do little. But a reputable lettings agent, who is a member of a registered body such as the Association of Residential Lettings Agents (ARLA) or the UK Association of Lettings Agents (UKALA), has its benefits.
Staff should be able to guide you through the 70 pieces of legislation a landlord must comply with and the complexities of the local lettings market, along with practical issues such as an out-of-hours service for emergencies.
“There are 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,” says Ian Potter, managing director of ARLA.
An agent can help make your property more marketable. Aston Chase, for example, is turning away landlords whose properties are not in tip-top condition.
“Demand for one- to three-bedroom apartments has decreased and properties in secondary locations with poorer decorative finishes are struggling to attract tenants who can now consider more luxurious options at lower prices,” says the estate agency’s Adam Phillips.
Amanda Bastin, 45, has managed her Ladbroke Grove investment property in west London for two years, but is now passing it to a lettings agency.
“I thought it would be easy to manage as I’m a lettings agent myself and I live nearby. But getting the property ready for a tenancy, including organising inventory clerks and changing utilities, is very time-consuming,”says Bastin.
“When items break, you need to be there to let in repair people. It’s massively stressful –and I know what I’m doing.”
Competition among agents has seen fees fall — six per cent for let-only and 10 per cent for full management are common now, according to Sarah Rushbrook, founding director of property management company Rushbrook & Rathbone. She says: “There 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.”