Why Letting Agents Are An Investor’s Best Friend
I often get asked whether I recommend self-managing properties or getting an agent to manage them for you. My answer is always the same – if you want your property investment business to be as passive as possible, you need good letting agents to take care of the day-to-day of your properties. That means getting your properties fully managed by a reliable letting agent.
Why Use a Letting Agent?
Quite honestly, I want to be able to spend my time where I want, with who I want, doing what I want. I don’t want to spend my time answering phone calls from tenants at 10pm at night on a Sunday evening because a tap has broken and there is water spurting up the walls (a genuine call I made during my university days which my poor landlord had to deal with on the night!). It comes down to leverage and spending your working time doing the tasks which will expand your business and lead to you creating a greater income.
I understand that hiring a letting agent is a big expense when you are letting out a property. Their fees can range anywhere from about 8-15% of your rental income, plus VAT. But to me, there are so many positives which can and should come from paying this to a good letting agent.
My top 5 reasons you should hire a letting agent are:
Freeing your TIME
If you haven’t read “Life Leverage” by Rob Moore, it is a great read which goes into much more depth on how you should work out the value of your own time and outsource any tasks which you can get someone to do for less. As a property investor, you need to focus your time on finding great investment properties, doing the sums and negotiating to get the best deal possible. If you get bogged down in dealing with individual tenants’ problems you aren’t going to have the time, let alone the enthusiasm or energy to go out there and find the next deal.
It seems like buy-to-let regulations change every other day at the moment. In only the past few years we’ve seen new regulations around deposit protection schemes, GDPR for holding tenants’ details, banning of tenant fees and now discussions over scrapping Section 21 notices. I would highly recommend joining an organisation such as the National Landlords Association (NLA) to make sure you are kept informed of things which will affect you as a landlord. But you should also be able to rely on your letting agent to keep you up to date and make sure that all of your tenancy agreements, deposit processes, evictions etc. are all in line with the current standard.
I have moved three times in the past five years of being a landlord and I am probably not done moving about yet! My lifestyle just wouldn’t be possible if I needed to pop up to the North West every week to inspect properties, check up on issues and chase any late rent payments. Additionally, whilst I have nothing against the North West at all, I don’t have any plans to move up that way anytime soon. I chose my investment area based purely on numbers. My plans are much more likely to send me abroad in the near future and I love having that freedom and knowing my properties are being looked after by a trustworthy letting agent.
From changes in rental prices to proposed new selective licence areas, if you have a good working relationship with your letting agent, they will want you to succeed and will make sure they keep you informed of any changes in the area which might affect your property.
All landlords set out hoping it won’t happen, but it definitely pays to prepare as if you will come across the odd difficulty. Out of my 20+ letting units over the past 5 years, I have only ever had 3 “problem” tenants and only one of these resulted in me missing out on any rental income. Looking back now, each situation was resolved relatively stress-free and surprisingly quickly. I believe this was mainly due to a good working relationship with my letting agent. Not only were they on the ball chasing up late payments as soon as they occurred, in each case, my letting agent was able to provide guidance from their own experiences. This helped immeasurably to prevent panic from setting in, allowing me to keep a cool head and plan out my course of action. On top of this, the letting agents physically delivered notices to the properties (so that I didn’t need to be there in person) and maintained contact with the tenants wherever possible, acting as a neutral buffer to try and keep the dialogue open so that the situation could be resolved as quickly as possible.
I mentioned earlier that I choose to get my properties fully managed instead of the tenant find service which most agents offer. There are a few reasons for this. To start with, almost all of the reasons to have a letting agent which I have just discussed aren’t necessarily true if your letting agent just finds you a tenant and then leaves you on your own!
But on top of that, if a letting agent is only getting paid when they find you a tenant, then there is a slight conflict of interests. The letting agent would make the most money if they found you a reasonable tenant, but then that tenant left after 6 months or a year and they could find you another tenant all over again.
Whilst I am sure many letting agents work hard to find you a good long-term tenant regardless of whether you choose to go down the fully managed route or not, I am certain that some might be very aware of the financial opportunity of finding you multiple short-term tenants instead. Personally, I like to be certain that everyone is aiming for the same goal – a good, reliable, rent paying tenant who will treat my property as their home and stay for years.
If you can negotiate your way onto a fully managed contract with a letting agent where you only pay a monthly rate and there is no fee for tenant find or set-up, perfect! Then the letting agent only gets paid when a tenant is in the property paying rent, exactly like you do. This is the ideal situation to ensure everyone’s interests are completely aligned.
I hope you are some way to being convinced that hiring a letting agent can be well worth the money. The trouble is, if you end up working with a bad letting agent, you can easily miss out on any or all of the benefits and still have to pay the fees. Take a read of my blog How to Pick a Good Letting Agent to get some of my top tips to make sure your letting agent is worth every penny!