This month, I’d like to look at the question that most landlords will ask themselves when they purchase their first buy-to-let (BTL) property – should they manage it themselves or employ the services of a letting agent?
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If we consider that BTL is seen as a long-term investment by most landlords and not a way of earning a monthly income, then it figures that many of these same landlords also have full-time careers, in addition to their responsibilities as a landlord. In these circumstances, using a letting agent can be an effective way of managing both your time and your BTL property portfolio.
DIY danger
If you choose to manage your rental property yourself, you will quickly find yourself marketing your property, finding and referencing suitable tenants, collecting rent, maintaining the property, dealing with day-to-day problems and, potentially, chasing arrears. On top of this there is also the business of making sure you are up-to-date on tenant and landlord law. Many new landlords just aren’t ready for this volume of work and, what’s more, many people’s lifestyles will not allow for this level of commitment. More often than not this inexperience results in extended void periods where properties are left empty, bringing in no rental return.
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In these circumstances it can be beneficial to employ the services of a letting agent, at least until you ‘learn the ropes’. So, what can you expect from an agent and what will it cost?
Although the rate generally varies from area to area, you can usually expect to pay between 10 and 15 per cent of your monthly rental income for full property management. You can, of course, get lower rates if all you want the agent to do is market your property and find a suitable tenant. Research undertaken by www.lettingagent.com indicates that, on average, a landlord will pay £1,788 a year to a letting agent to fully manage their property. For this you can expect them to take care of all the previously mentioned duties and, in most cases, help you manage the legal aspects of tenancy and letting. A good letting agent will also provide advice on any alterations needed to the property to comply with new or existing regulation; this is particularly useful when it comes to the notoriously difficult Houses in Multiple Occupation market.
Finding an agent
Finding a good quality letting agent is every bit as important as finding a reliable tenant, so I have put together a few simple guidelines that should help point you in the right direction:
- First and foremost you should choose an agent that is a member of a recognised professional organisation such as the Association of Residential Letting Agents or the National Association of Estate Agents. Such organisations have detailed codes of practice in place which, in turn, means a professional and efficient service. Staff also undertake training directly from the individual organisation. You can search for registered agents at www.arla.co.uk or www.naea.co.uk.
- Never underestimate a personal recommendation; seek the advice of an experienced landlord, they will no doubt have first-hand knowledge of several agents in the area.
- Look at several agents in your area and draw up a shortlist of those that offer similar properties to yours. This indicates they have experience of marketing and letting properties in the market you are trying to enter.
- Have a clear idea about the type of tenant you want living in your property, for example, married couple, young professional, etc. Stipulate this to your prospective agents, as well as whether you are looking for a long or short-term tenant.
- The range of services administered by a letting agent can vary between agencies. Contact several agencies to see what services they offer and match these to your expectations and needs. Get a list of what is included in your base fee and what are considered as extras.
- Invite your shortlist of letting agents to view your property and ask them about the current rental value. Ask them how they came to this valuation; a good agent should be able to provide you with recent examples they have let that are similar to your property. Afterwards be realistic about your rental demands – do not always take the highest valuation as it may mean your property stays empty for longer.
- Always get a copy of the agent’s terms and conditions.
- Take time before signing with an agent to negotiate fees, or additional services within that fee. You may also wish to negotiate on the agent’s standard renewal fee, just in case your tenant signs up for a second term in the property. Some agents will also offer discounts for managing portfolios; if you plan to expand your property portfolio this is something worth mentioning.
