These are turbulent times for both landlords and agents: Covid-19 has thrown an unprecedented curve-ball into what was already an increasingly complex environment in the UK lettings market, making more landlords consider full management.
The ever increasing workload and legal complexity of letting out property as a DIY landlord, along with a narrowing of profit margins, is encouraging landlords to either think about selling up, or else off-load the pressure of managing onto someone else – a professional letting management service.
Looking at the positives; tenant demand continues apace, with most lettings being achieved very quickly. With some landlords taking the decision to sell-up, this will only serve to exacerbate the shortage of rental accommodation and it will therefore sustain continued tenant demand and increase market rents. In fact from a contrarian investment viewpoint, when things a looking their most gloomy, and investors are selling-up, now could be the optimum time to be thinking about investing in property rentals bargains for a long-term result.
Most of the new legislation, in my view, such as the suggested abolition of section 21, will make little difference to the way the market works, or to the average tenant’s experience, if anything it could make it worse; it will simply create more work and expertise to make it work. For example landlords and agents will be far more stringent with their selection processes. At the end of the day, rental accommodation is still desperately needed, landlords are still needed to supply it, and there’s still a great opportunity for buy-to-let.
Choosing a letting agent
Engaging an experienced and competent letting agency can make the landlord’s life much easier, but the opposite applies if you engage a bad agent. Once you’ve signed a full management contract with an agent (as opposed to a let-only contract) you could be stuck with them for the duration of the tenant’s stay, so a lot of care is needed when selecting your agent.
You should do careful research before choosing an agency that is well-established and with a track-record of successfully managing private rented accommodation. Ask around locally, request to speak to existing long-term clients to make sure they are happy with the service, check online reviews and make sure they are members of at lease one of the main professional associations.
These associations should be preferably ARLA Propertymark, the National Approved Lettings Scheme’ (NALS), the ‘Ombudsman Services’ scheme, the UK Association of Letting Agents (UKALA) and the National Residential Landlords Association (NRLA). The must by also have in place client money protection (CMP) insurance and a Property Redress Scheme. Look for evidence of these on the company paperwork and websites and its a good idea to check current membership with the scheme providers.
Make sure you are happy with the terms of their contract before signing, check for dubious clauses and if necessary have a solicitor look over it; don’t be afraid to negotiate on management fees, though driving down the fees too low could be counter productive – you get what you pay for.
What are the advantage of using a good agent?
A good letting agent should market your property proactively, they often already have enqiurers on their books, and they will quickly find you the right tenants for the property. They will make sure your property meets all the current letting and safety regulations, and they will handle all the necessary checks and letting documentation to make sure you are covered, should things go wrong with the tenancy.
For a standard full management fee of around 15% of the rental income, which could be lower depending on your negotiations and the number of properties you sign up with, and your importance to the agency, rent will be collected on your behalf, and all communications with the tenant/s taken care of – in fact as a landlord you may never meet the tenants if you don’t want to.
The agent will be geared up to deal with the day-to-day management issues, you will have a set spending limit so they don’t have to bother you with minor emergency repair issues, and they will have a regular programme of inspections in the calendar.
This type of arrangement with 24/7 cover is going to be particularly useful if you live a long distance from your properties, if you work away from home a lot of if you go on holiday – invariably problems with tenancies always occur at the least opportune times, so in this way you are covered for every eventuality.
As from June last year letting agents are unable to charge admin fees to tenants, so things like credit checks and referencing and inventory checks must either be absorbed into the standard fee they charge their landlord clients, or an additional fee on top. It’s a good idea to make sure how the agent is going to deal with this and perhaps compare their charging structure with other competing agents, bearing in mind cheapest is not always best.
You want an agent that’s proactive in the way they market their properties, so a quick anonymous test using a telephone equity might be a prudent move before making a decision on an agent, and make sure they are using a range of strategies to proactively market, particularly their on-line presence. You might check their property listings on a property portal like Rightmove or Zoopla to see how they present properties to market, and how successfully they rented out many properties in your area recently.
There are many benefits to using a full management agency and the trade-off between paying the fees and getting your life back can be more than worth it. However, there are some pretty poor agents out there as well as the really professional ones, so you do need to exercise great care; carry out through due diligence before signing a contract.
And remember, it’s not always the big national chains that give the best service, though most of them are very professional, the small local independent with a good reputation can often give you the personal attention and professionalism you desire.