Letting agents – for and against
Should I use a letting agent?
The perennial debate amongst landlords is should I use a letting agent?
I thought I’d re-enter the debate by putting forward some of the pros and cons of using a letting agent in your rental business. Landlords and letting agents, feel free to agree or disagree and post your experiences below.
The argument FOR using a letting agent:
1. Using a letting agent frees up a landlord to develop their property business by giving them more time to buy, develop and build up their portfolio. This way a landlord can expand their portfolio more quickly and more effectively without becoming sidelined with day to day management issues
2. Letting agents in theory should be skilled in managing rental properties. They should know the vital aspects of landlord and tenant law, which means that they can avoid some of the management problems where a landlord is unfamiliar with the Housing Act that can lead to problems in the future.
3. A letting agent will often have a number of contacts in the letting world: trades people, plumbers, gardeners that they can call on and get a problem with a landlords buy-to-let problem fixed quickly and efficiently.
4. A letting agent has access to more routes to market. Letting agents should be able to get your property to market more quickly and more effectively than relying on your own efforts. They should be able to market the property on the key marketing websites like Rightmove and they should know how to frame a well compiled rental advertisement.
5. Filter out rubbish tenants. One service that a half decent letting agent should be able to do is to filter out rubbish tenants. Part of this is achieved by the fact that many letting agents will charge your prospective tenants a fee for registering and then another one for the referencing. This means that the tenant is serious about letting your property and going ahead with the tenancy. Too often tenants found through free sites such as Gumtree are financially unstable and are not committed to investing in the tenancy. This can results in plenty of time wasting and frustration for the landlord.
The argument AGAINST using a letting agent:
1. They are costly. Using a letting agent particularly in London and especially if you go for an ‘upmarket’ agent such as Foxtons, can see 17% plus vat disappear. That is almost a fifth of a landlord’s gross rent. This will easily knock off a couple of percent of your gross yield.
Their argument will be that they get a higher rent because of the quality of tenants they attract. However, it’s unlikely that the uplift in rent will compensate you for the cost.
2. How much time will they save. The big argument funnily enough advanced by letting agents is that they will save the landlord a huge amount of time with a full management service. The letting agent collects the rent; deals with tenant questions and maintenance issues as well as setting up the tenancy in the first place. However, most experienced landlords know that once a tenancy has been set up correctly and the tenancy agreement and property inventory have been done, and the tenant hand over completed, then day to day management and collecting rent is automatic and routine. Some would argue that the ongoing management charge made by your letting agent is ‘money for old rope’!
3. How knowledgeable are letting agents? Unfortunately, many letting agents know far less than they should about tenancy law and procedures. You are supposedly be paying for expert advice but in truth can end up with ‘a half baked, cobbled together approach’ that has little credence in law. In fact, as they say, a little knowledge can be dangerous and this certainly applies to many letting agents who set themselves up without any professional qualifications or sufficient professional experience.
4. Do I really need a letting agent to market my property? Let’s face it this is the age of the Internet. Landlords can now market their property on the likes of Rightmove for a few quid. That’s all a letting agent will do and it costs a fraction of the cost to do it yourself. Who needs fancy particulars and I much rather conduct the viewing myself and meet prospective tenants face to face myself.
5. I know my business better. However professional a letting agent appears to be let’s be clear. They will care less about your rental business and know less about how it runs and works than you do. You can’t rely on letting agents to manage the property as well as you can. Have a look at my recent letting dilemma.
The letting agent debate
The points I have raised will no doubt will intensify the debate as to whether letting agents are really good value for money. A key factor that can’t be resolved is that not all letting agents are the same. A good letting agent can be worth their weight in gold.
However, what a landlord should always remember is that the letting agent does not own the rental business. They do not understand your rental business, as well as you do, and the outcomes of their decisions will not impact so directly on their business as it will on yours.
Ultimately, remember you are responsible for your own rental business, so don’t rely on others to run and drive it forward in the same way you can.
Do you have any thoughts or observations on this article? Post them below.