It’s every amateur landlord’s conundrum: whether to hire a letting agent to manage your rental property or go it alone. Agents offer varying degrees of help, and the right level for you, if you choose to go down this route, will depend on how involved you want to be in the day-to-day running of the property.
Letting agents typically offer three levels of service. The cheapest level involves the agent simply finding a tenant and carrying out administrative checks and tasks to set up the tenancy. The cost for this may be negotiable, but can be anything up to a month’s rent, according to consumer group Which. Be aware that there may be additional costs for services such as acquiring a gas safety certificate. The next level up is generally known as the “rent collect” service, whereby the letting agent will also collect the rent and chase late payments. Prices for this vary, but Which suggests you should expect to pay 5% of the monthly rent amount.
The most comprehensive letting agent service is “full management”. In theory, this offers landlords a completely hands-off solution, with the letting agent doing everything from finding a tenant and moving them in, to collecting rent and dealing with any issues or maintenance that crop up during the tenancy. As you might expect, this level of service doesn’t come cheap. You should expect to pay between 8% and 15%, depending on where your property is in the country. Again, make sure to ask about any costs that aren’t included in the percentage fee, such as charges for taking an inventory and registering a deposit.
It’s also important to check how a letting agent will arrange maintenance on your property. Some will use their own “approved” contractors, which may be more expensive than tradespeople you choose yourself (though you should be able to ask for an alternative quote where you think a proposed cost is too high).
When choosing a letting agent, it’s a good idea to decide based on word-of-mouth recommendations as well as cost. You should also check that the agent is a member of a professional standards body such as the Association of Residential Letting Agents, the UK Association of Accredited Letting Agents, or the National Approved Letting Scheme. To be a member of one of these schemes (which is not mandatory), the agent will have to meet minimum standards, and will have “client money protection” in place, which should cover your losses if the agent goes bust.
The situation for landlords in Wales is a little more complicated than in England. The (Wales) Housing Act 2014, which came into force last year, requires all landlords to register with “Rent Smart Wales”. Self-managing landlords must complete a landlord-training scheme, be deemed “a fit and proper person” and apply for a licence. However, landlords can avoid the need for a licence by using a licensed letting agent instead.
Overall, the major downside to letting agents is the cost – with full management costing as much as 15% of the monthly rent, paying an agent will cut into your profits at a time when the new tax regime is already affecting landlords’ finances. The big advantage is fairly obvious: it means less work for you. It can also be beneficial to use an agent if it’s your first foray into the rental sector, as the agent should have plenty of experience to fall back on. When it comes to deciding what level of service you want from a letting agent, the best question to ask yourself is probably how keen you would be to pick up the phone in the middle of the night to a tenant whose pipes have sprung a leak.