How To Pick A Good Letting Agent
Good properties can become awful investments if you get difficult or unhappy tenants in them, so you don’t want to leave sourcing and managing your tenants up to just anyone. You need to carefully consider who you give this responsibility to so that you can relax knowing you have a great team working on your behalf. But what should you look out for to identify a good, reliable letting agent?
Depending on where you are, there are very low levels of regulations for anyone to be able to call themselves a letting agent. Since October 2014, all letting agents in England have had to join one of 2 government approved redress schemes; The Property Ombudsman or Property Redress Scheme. This is a step in the right direction, but the requirements to join are very basic and so long as you are registered that is more or less all that is required. There are a few other regulatory bodies with more stringent standards which letting agents can join, such as the Association of Residential Letting Agents (ARLA), but they aren’t mandatory. All of this means that the quality of service provided by letting agents varies hugely, so the best thing to do to protect yourself and your property is to do your own due diligence on any potential property management company.
I always recommend visiting letting agents in person to get a feel for their way of working and general atmosphere. If the phones are constantly ringing and no one comes to say hello when you are physically in their office, then how are they going to find the time to deal with any issues your tenants may have? However, if you can sit down and have a good chat with them about the services they offer and they come across as approachable and honest, then you know you are on the right track.
These are my top 5 questions I ask any letting agents before I even consider hiring them:
Firstly, are they registered with The Property Ombudsman or Property Redress Scheme?
If not, rule them out straight away!
Are they affiliated to any other regulatory body, such as ARLA?
These bodies provide protection for you and your tenants’ money, so most good agents are registered and have been fully qualified by one of these bodies.
What is their referencing process?
Do they go back just one landlord or multiple? Sometimes the landlord a tenant is currently living with could be inclined to give a more favourable reference to help a problem tenant move on, so going back 2 or even 3 landlords is far better for a more realistic picture of a tenant’s character.
What is their eviction process?
A letting agent who tells you they never have to deal with evictions because they find such great tenants is more than likely lying. It doesn’t matter how great your letting agent is, how lovely your property is or how amazing the area, you could still come across the odd unsavoury tenant and both you and your letting agent need to be prepared to deal with them. A letting agent should be able to confidently guide you through the whole process, from chasing up late rent payments promptly, to issuing Section 21 and/or Section 8 notices, right up to applying for court action. They can’t usually go to court on your behalf if it comes to it, but they should have plenty of experience in setting you up to win your case.
Test their response times.
This isn’t so much a question, but a sneaky way to see if they live up to their claims. Ask them to email you something simple like their terms of service and see how long it takes them to get back to you. You need a letting agent who can respond quickly to both you and your future tenants.
Getting Value for Money
Good letting agents don’t come cheap. Especially now that they can’t charge tenants huge fees at the start of a tenancy. You need to factor in the cost of a letting agent as part of your calculations when sizing up a potential investment deal. Anywhere between about 8-15% plus VAT per month is normal. Sure, you can find a letting agent who might only charge 6% plus VAT per month for a fully managed service, but if their fees are too low then they might not be able to afford the staff and time to spend on your property if and when a problem does come up.
The other big red flag when a fully managed service has low monthly fees is that they will normally contain a hidden fee instead. This fee is often called something like a “Tenancy Set-Up Fee”. The set-up fee is charged every time a new tenancy agreement is signed. If, for example, your letting agent finds a tenant and signs them up for 6 months, you have to pay the set-up fee. This is usually anywhere from £150 to £300. Doesn’t sound so bad, but what if that tenant leaves after their initial 6 months and then the letting agent finds a new tenant and you get charged the new set-up fee all over again. It’s easy to see how this can build up quickly. Personally, I always aim for NO “Tenancy Set Up Fee”, even if this means a slightly higher monthly rate. It usually works out far cheaper in the long run and it also aligns the interests of you and your letting agent to get a tenant into your property who will stay as long as possible.
Another scarcely known and rarely utilised fact is that almost all letting agents’ fees are fully negotiable. Yep, even the bigger franchises. When you first enquire with a letting agent about their letting services, they normally provide you with a whole bundle of information stating all of their fees as cold hard facts. But as is so often true in life; you don’t ask, you don’t get. It is well worth taking the time to ask if they are prepared to negotiate on their fees. Even if they won’t completely waive the set-up fee, they might discount it or reduce the monthly rate or both if you are lucky. Just asking the question could save you hundreds in fees over a couple of years.
Become a Priority Customer
Having said all of that, you always want to be a priority customer to your letting agent. You want them to want you as a client and to prioritise your properties as far as possible.
Part of this comes from keeping in regular contact with them to keep you at the front of their mind. You want to be memorable enough that they know who you are as soon as you call up. When you first have a property up for let with a new agent, a weekly check in call is normally a good idea so you can check progress on viewings and feedback whilst also subtly reminding them that you and your property exist.
On top of this, they also need to be making a fair amount of money from you. Don’t try to negotiate too hard to start with, leave that for when you have a few properties with them and you have become a more valuable client which they desperately want to keep hold of. You’d be surprised how many times a letting agent will hear someone talk about how many properties they will soon have in their portfolio which they will need fully managed and then those properties never quite materialise. You might know you are serious and will soon have lots of properties to give them to manage, but they might struggle to believe you to start with. The good news is it will only take 2 or 3 properties before they start to see you mean business and then you can re-open the discussion on pricing with the huge advantage of already being a valuable customer who they don’t want to lose.
As I mention in my blog Why Letting Agents are an Investor’s Best Friend, Letting Agents can and should be a huge asset to your property investment business. If you are prepared to put in a bit of extra effort shopping about at the start, you are much more likely to find a great Letting Agent who can maximise your business whilst simultaneously making your life as a landlord far easier. All you need to do is get out there and find the best one for you!