Blog: No letting agent? What could go wrong?
In his latest blog Paul Shamplina, Head of Property for Hamilton Fraser and Founder of Landlord Action, shares his views on letting agents, after new data revealed more than half landlords now opt to self-manage.
It’s one of the first decisions a person has to make once they become a landlord. Do I use a letting agent to source, secure and possibly manage my tenancy, or do I take that role on myself?
In a recent poll of 2,200 landlords carried out by Hamilton Fraser Total Landlord Insurance, I was surprised to learn that nearly half of the landlords (48%) who responded do not use a letting agent. In addition, when asked if they were more or less likely to use a letting agent in the next 12 months, 57% voted less likely.
It is no secret that landlords’ margins have been squeezed by government policy in recent years.
Many are feeling the financial pressure, particularly in the current climate so a landlord’s decision to self-manage will, of course, be governed by their personal circumstances.
However, I just wanted to highlight a few important factors which may encourage some landlords to re-evaluate what is important to them and whether some extra help could ensure their buy-to-let business is still thriving 12 months from now.
Prevention is always better than cure, so before I look at some of the main advantages of appointing a letting agent to ensure nothing goes wrong during your tenancy, I wanted to acknowledge the changing world around us and the value that letting agents can offer landlords from the beginning.
If you have been fortunate enough to have your property let consecutively for years, you may not have your finger on the pulse in terms of the rapidly changing rental market in some areas, but changing it is.
Only this month, it has been reported that private rents in some parts of London have tumbled by up to 20% as tenants take advantage of our new virtual way of working and quit the capital for the suburbs. In addition, the number of international students has plummeted and many companies have put relocation plans on hold.
Letting agents understand your local market, changing demands and will have access to a wide network of pre-referenced tenants. They can ensure your property remains visible and help ensure void periods are as short as possible to minimise financial loss.
Compliance and accuracy
I cannot stress this point enough. There are many fantastic landlords out there and being a member of the NRLA demonstrates your professionalism and provides reassurance you are well supported.
However, keeping up with more than 170 pieces of landlord legislation is not easy, even for the most seasoned landlords. Many are unaware that local authorities have the power to fine landlords up to £30,000 for every breach.
Meanwhile, not only have tenants’ expectations of the service their landlord provides increased, they are more protected than ever before by the law, meaning one innocent mistake could cost you dear.
From the outset, getting the right type of tenancy agreement in place is vital in protecting the tenant, yourself and your property.
From a landlord’s perspective, without an up-to-date, accurate and legal tenancy agreement in writing, gaining possession via a court (should it be necessary) can be much more difficult.
Here is where using a letting agent to help ensure you have a well-constructed, professionally written tenancy agreement can be worth its weight in gold, and often prevent unnecessary disputes from arising.
At Landlord Action, when instructed by a landlord with a problem tenant, it is not uncommon for us to review the tenancy agreement only to find it is not robust enough and would not stand up in court.
The reason for this, is that many landlords have been using the same tenancy agreement for years and years and have not taken into account changes to legislation. With the court systems under increasing pressure, judges will look at poorly written tenancy agreements as an excuse to adjourn cases.
That is just the start. Other aspects you must take on board as a self-managing landlord include tenant referencing, Right to Rent checks, protecting the tenant’s deposit in a government approved scheme and compliance with the Deregulation Act 2015, which includes the requirement to serve tenants with a valid Gas Safety Certificate, Energy Performance Certificate and How to Rent guide. Which leads me nicely onto my next point.
Time vs cost
When landlords, responding to the Hamilton Fraser Total Landlord Insurance poll, were asked for what reason they already use a letting agent or were likely to in the next 12 months, the greatest response (37.5%) was a ‘lack of time’.
Other responses included more COVID-19 measures (27%), distance from property (19%) and increased PRS legislation (18.5%).
If you are working part-time, retired or have been able to take the step up to become a full-time landlord, then I can understand the desire to save money and manage the process yourself.
However, many landlords have full time jobs and make the mistake of not putting a value on their time and assuming the cost of using a managing agent is too high.
The average rent across the UK is now £985 per calendar month. If the average letting agent fee for a fully managed service is 10%, that is the equivalent of £3.28 per day. If you are using an agent to find your tenant, the difference between let only and fully managed is minimal over 12 months.
The ultimate goal for any landlord should be tenant satisfaction, which leads to a tenant who is more likely to look after your property and renew at the end of their term.
That is already a cost saving of having to find a new tenant, carry out an inventory, tenancy agreement and all the other associated costs. In addition, if you make a bad choice in the tenant you take on, fail to carry out thorough referencing and end up having to go to court to evict your tenant, the cost can run into thousands. It can be a false economy.
With that said, as someone who sits on the advisory council of the Property Redress Scheme, I’m all too aware of how distressing it can be when a poor letting agent has been instructed and that 25% of complaints relate to poor communication and management service.
However, if you have had a poor experience with a letting agent in the past, try not to let that tarnish the reputation of the good guys. If you feel you would benefit from some extra help, there are some extremely reputable letting agents who will go above and beyond to give their landlords a hands-off, peace of mind service.
To re-cap, the most common problems that landlords run into when self-managing, are:
- Prolonged void periods
- Fines for non-compliance
- Increased likelihood of taking on a problem tenant
- Having a possession case thrown out at court
In summary, as you will be all too aware, ‘landlording’ has changed significantly over the last 10 to 15 years.
Along with the obvious legislative changes, the demographic of the tenant has evolved and the relationship between landlord and tenant is very much that of a supplier and customer.
If you don’t fancy a phone call at 3am to fix a leaking pipe, or don’t have the time to carry out property inspections and chase rent, it could be worth considering appointing some help.
The investment may be well worth the money and time you get back, particularly as landlords are now required to give tenant six months’ notice. That means finding, vetting and keeping the right tenant for you is more important than ever before.
Whether you choose to self-manage or use an agent, the ultimate goal is to find and keep hold of reliable tenants, but always put a price on your time.