Between the 1980s and 2017 we saw a huge increase in the number of private rental households in the UK with the figure now standing at circa 4.5 million (a near 4 fold increase). This has created not only a huge boom in the buy to let industry but also the letting agents sector. Many investors are happy to take a long-term approach with their investments and place the day-to-day running with professional letting agents. So, how do you pick an appropriate letting agent for your situation?
1. Location, location, location
While many of the larger letting agents manage properties covering the length and breadth of the UK, does this really work for everybody? As a private landlord would it not be better to have a property letting agent with a strong presence in your area? Even though there is a raft of information available on the Internet there must surely be some benefits in approaching local letting agents who know the lay of the local land. As will cover later in this article, it is also worth noting the level of services available with a proposed letting agent.
2. Service level is important
It is safe to say that not all private landlords will require day-to-day assistance with their property management. As a consequence, the letting agents industry has come up with three basic levels of service which are:-
• Tenant find
As this term suggests, the letting agent for this type of service will find an appropriate tenant and the rest is down to the private landlord.
• Tenant find plus rent collection
Rent collection can be a tricky element of property management therefore many private landlords will pass on this role to their letting agents. They will also find tenants with this service option.
• Full on management
While there is an obvious cost to full on management of your private accommodation, this covers everything from finding tenants to collecting rent to maintenance and any other issues.
If you have little or no experience of the buy to let industry then it may be more appropriate to go for full on management until you “find your feet”.
3. Legal paperwork
Those who have any experience of the UK buy to let industry will be well aware of the ever growing number of regulations covering the sector. A confident letting agent should be able to look after all of the relevant paperwork on your behalf. This will take in everything from references to credit checks, checking employment details to confirming potential tenants have the right to live in the UK. Many people fail to focus on the more formal paperwork and will often pay the price further down the line with fines and potential legal action.
4. Client protection
When you consider that letting agents will likely collect rent for numerous private landlords they could be in receipt of significant amounts of money each month. It is therefore very important to ensure that your letting agency is reputable and able to demonstrate their membership of various protection schemes. This ensures that in the event of fraud, not very likely, both landlords and tenants would be reimbursed for losses. One very important thing to check, ensure that client funds are held in a separate account from the letting agent business bank accounts – the two should never mix.
5. Compliant with deposit laws
In years gone by, the relatively early days of private rental accommodation, some tenant struggled to retrieve their deposits when they left a property. As a consequence there are now numerous government approved tenancy deposit schemes into which tenant deposits are paid and held separately from both the landlord and the letting agent. As and when the tenant moves out of the property the letting agent will carry out a review of any damages, funds due and can make the appropriate deductions. At this point the balance of the deposit will be paid out to the tenant. It is vital that your letting agent is part of such a scheme.
6. Safety, safety, safety
If you are relatively new to the private letting industry it may be an idea to take out a full letting agent management contract in the short to medium term. There are now numerous safety checks which must be carried out on a regular basis by approved personnel. Failure to carry out these checks could see landlords breaking the law with potentially huge fines or imprisonment. When you consider some of these checks relate to gas and electric there is also potential danger to life if they are not carried out. A full management contract with a letting agent will ensure that all of the statutory checks are carried out and also avoid the wrath of the law.
7. Repair and maintenance
Whether or not you are looking for a full repair and maintenance contract with a letting agent, it is certainly worthwhile checking what each agent has to offer. It may actually be cost-effective to go down this route because agents often have third parties they use regularly, sometimes in house personnel, which could end up being cheaper in the long run. However, it is also worthwhile checking out the individual cost of repair and maintenance visits to see what kind of additional cost is added by the agent. Remember, it is in the best interest of letting agents to encourage long-term client relationships – not rip clients off in the short term!
8. Maintenance and repair float
The idea of taking out a full management contract is that you simply pass over management to a letting agent and let them do the rest. Rather than coming backwards and forwards on a regular basis for relatively small amounts of money to cover small repairs, many agents will request a maintenance repair float. This will see the landlord putting aside a relatively small amount of money as a float to cover ongoing repairs. All of these repairs would still need to be accounted for and any larger repairs, more costly repairs, treated separately after authorisation by the landlord. While the idea of handing over money to a third party may alarm some people, it will be done in a controlled manner with a relatively small amount of funding.
9. Reporting to the landlord
The idea that a letting agent will have carte blanche over all aspects of your private rental property is a common misconception. Letting agents will still report all aspects of their management to the landlord on a regular basis. It is also their role to alert landlords to potential issues with regards to unruly tenants, funding problems or excessive damage to the property. The degree of reporting and detail involved will likely vary from letting agent to letting agent. Don’t forget, the whole idea of a letting agency business is to build a long-term client relationship. This not only increases revenue streams but also reduces fixed business running costs as a percentage of income.
We will keep this one relatively short and sweet because it is very important. If your letting agent is lacking in marketing skills then your property will likely be empty between tenants. Remember, each day, each week and each month it is empty is lost revenue that you will never make back!
There are numerous aspects to consider with regards to letting agents many of which are relatively obvious while others perhaps not so. This is an industry which has attracted deserved criticism in the past but the industry we see today is very different. Nurturing a long-term relationship with your letting agent could be extremely beneficial going forward especially if you are looking to add additional properties. Better the devil you know!