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Is It Worth Using a Letting Agent?
Of course, it is possible to rent without using a letting agency, however a landlord’s reasoning for doing so can usually be put down to convenience and practicality. It goes without saying that by cutting out this third party and charging into the rental game head first will offer a buy to let property owner far more independence and control over their investment. But, this comes at the cost of significant time dedicated to managing a portfolio, communicating with tenants and ensuring everything is being done by the books.
If a landlord chooses to serve up their rental opportunities through a letting agent, the majority of the day to day responsibilities and burdens are taken on by the agent; but as you can expect this comes at a sometimes lofty premium. Simply put, a letting agent will manage the rental property on behalf of the landlord, taking on rent collection, organisation of repair work, dealing with tenants ect.
Ultimately, there is no universal answer to if you should use, or need, a letting agent when renting out your property. However, for many landlords they are an essential lifeline, something that allows them to maintain their investment, provide quality accommodation and amenities, all with as much of a hands off approach as they desire. It is also an undeniable matter of practicality for landlord with multiple properties and extensive pools of occupants of oversee, especially if the landlord does not live near the properties they are renting out.
It also goes without saying that for the majority of landlords, regardless of how many properties they let out, managing their rentals can be a full time job and more. With tenants issues needing to be attended to around the clock, a landslide of regulations and legislation to keep up to date with, and the potential nightmare of trying to evict problem tenants, if this isn’t your cup of tea a letting agent will be unquestionably valuable.
Responsibilities of a Letting Agent?
Whilst letting agents will alleviate some of the responsibilities of overseeing a rental property from the landlord, the degree of service that a property owner receives from an agent depends on the level of service they purchase. Whilst the exact nature ad intricacies of letting agent services will naturally vary between providers, typically there are only three levels of service offered; “let only”, “rent collection” and “full management”.
The first, and perhaps most basic, level of service offered by letting agents is referred to as “let only”. This is typically more suitable for landlords that are experienced with multiple rental periods behind them and simply want help getting potential tenants to the door. This will still leave the landlord collecting the agreed rental amounts from the tenants, addressing any issues regarding repairs or replacing the contents of the property and negotiating disputes with tenants, should they arise. Essentially, the responsibility and duty of the letting agent regarding the rental property ends when the tenant moves into the let and the rental period begins. Under this let only service the letting agents will assist the landlords in marketing the property through online channels in an effort to attract suitable tenants. The agency will also handle any in person viewings of the property instead of the landlord, saving them countless lengthy commutes that ultimately don’t result in a tenancy. Furthermore, the letting agency will collect any holding deposit and tenancy deposits from the tenants, whilst also conducting referencing checks; inspecting each potential tenants credit suitability and rental history before progressing with the tenancy.
It is important to note that the services comprising a let only package will also differ between online agents, and the traditional high street, brick and mortar letting agents. Some may offer professional photography, floor plan or even 3D virtual viewing tours as expensive additions whereas at PropertyLoop we recognise the significance of highlighting the character of each rental opportunity, and offer these at no additional cost!
Other elements of the rental process such as helping the landlord and tenant to establish a comprehensive property inventory at the tenancies outset, and curating bespoke tenancy agreements can also be included in the let only service.
Of course, one of the most significant aspects of letting out a rental property is collecting rent from tenants. Providing that a landlord opts for this package, the letting agent will take any due rent from the properties occupants, alongside pursuing any outstanding rental arrears. Some property owners that include this third party in the process actually streamlines the collection process, making it more efficient and in turn, their income more predictable. It goes without saying that even when an occupant does not accumulate excessive amounts of rental arrears, chasing rent from multiple tenants across different properties can become an arduous task for landlords.
Whilst, as can be expected the full management letting agent services come at an additional cost, they encompass the renting process in its totality, providing landlords with a comprehensive alternative to independent property management. A full management service is fully “hands off” for landlords, leaving the letting agent to see through he tenancy from start to finish, seeing them; market the property, reference tenants, create a tenancy agreement, communicate with tenants regarding issues and repairs, collect rent, chase arrears and perhaps most importantly for new landlords, ensuring the tenancy complies with current government legislation.
The rental landscape can become drastically altered at the whim of government legislation, with recent years seeing waves of regulations and measures to make for a fairer rental experience for all parties involved. Failing to provide tenants with certain correspondence and documentation, such as energy performance certificates, gas and electrical safety certificates and the “how to rent” guide, before they move into a rental property will mean that the landlord will face greater difficulty if they try and pursue possession of their property through a section 21 order. Additionally, as many of the regulations that are applied to landlords concern the habitability of the rental property and the safety of the tenants, if the landlord is found to be in violation of these measures the reproductions can be severe. If the tenant finds the property to be in a poor state of repair, or remedial work is being ignored they are able to pursue legal action, with the council being able to issue fines of up to £30,000 per violation. In certain cases, such breaches of the regulations can be treated as a criminal proceeding and therefore result in the landlord facing a term in prison, banning order and exorbitant fines.
Should You Self-Manage?
Of course! However, it is critical to understand the responsibility you will be undertaking. The expertise and experience of certain letting agents cannot be dismissed, especially when it comes to showcasing your property. It is important to remember that lettings agents are ultimately industry experts that help connect countless landlords and tenants through rental opportunities.
With this being said it is no secret that landlords suffer high upfront costs to establishing their rental, and in trying economic times are susceptible to their tenant’s financial security also. With this in mind regular fees of up to 20% can be detrimental to new landlords, working to trim already thinning profit margins.
When evaluating if self-managing your property portfolio is right for you assigning a value to the time you would typically attribute to sustaining your properties and its tenancies is essential. Luckily, as the charges tend to take a cut of your rent, it is not too hard to work out how much value you are getting through a letting agent. If they are charging 10% and your tenants pay £500 a month, that’s £50; if you believe that the time you would have otherwise dedicated to communicating with tenants, arranging repairs and navigating disputes, is more than this amount then it’s well worth the cost.
Similarly to staying ahead of the curve with the latest legislative moves and legal measures, being realistic about your initial competency and confidence is key in deciding if you should use a letting agent. This is not to say that all new comers will find the rental nut difficult to crack, simply, why place yourself in unnecessary stress. If you feel you may struggle finding tenants, but will excel in catering to their needs and offering a fantastic rental experience, then let only is ideal. It is not unheard of for new and accidental landlords to begin their rental tenure with the professional guidance of an online lettings agency, with their confidence growing alongside their experience, giving them a better position to evaluate landlords best practice and conduct.
However, some aspect of letting out a buy to let property can be sink or swim moments for landlords to say the least; and with the nature of a landlord’s role being so all encompassing, it can be all too easy for something to go unnoticed. As mentioned the penalties for such neglect are ruthless, with ignorance to existing landlord responsibilities not being an adequate defence.
How Much Do Letting Agents Cost?
Typically letting agents will calculate their cost in two ways, with both being informed by the amount of rent the landlord charges for the property. One way in which letting agents fees are determined sees them multiply the weekly rental charge for the property, whilst it is far more common to see a percentage of the rent being taken over the course of the entire tenancy period. Traditionally these charges amount to around 10% to 20% of a landlord’s rental income, with additional fees being issued for repairs, deposit protection, tenant referencing, right to rent checks , and certain marketing elements.
If the landlord has opted for the let only services, then it is not uncommon for the letting agent to charge a fixed fee in exchange for a marketing campaign over a set period. Whilst this alternative is sometimes cheaper and therefore fairly popular, it doesn’t guarantee a tenant. Therefore if you are trying to find occupants for a vacant rental property for an extended period of time, these fees can quickly break the bank.
Can You Haggle With Letting Agents?
With structural repairs, replacing furnishings, referencing costs and a host of other fees for landlords to incur, naturally property owners will want to keep the costs of using a letting agent to a minimum. This is not to say there isn’t obvious value in turning to an online property agent to find you the ideal tenant, and guide you through the rental period; but rather it’s best to assess your individual circumstance, regardless small savings can become invaluable later down the line.
The type of service that the landlord chooses from a letting agent largely informs the fees that they should expect to pay, with the more comprehensive “full management” package being available for the highest premium. With this in mind it is vital to assess which elements of a letting agent service you need, and if it is more cost efficient to take the reins yourself.
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