What is buy-to-let insurance?
Understanding how a lettings agency work is an important step on your journey to leasing a property, and it is equally important for your tenants to comprehend what additional costs there are when taking out a tenancy agreement with you.
A letting agency can be a great help if you don’t have the time or experience to manage your let property alone. Agency fees can certainly be off-putting to tenants but it can also root out time-wasters and help you to find a reliable tenant who can make their monthly rent payments on time. The other good thing is that letting agents usually operate on a ‘no let, no fee’ basis, so it’s in everyone’s best interests to secure a reliable tenant.
What are letting agency fees?
Traditionally, letting agencies will charge you a percentage of the rent (usually 10%-15%) or a one-off fee. There are of course some who will add on charges for admin tasks such as creating an inventory or managing an empty property. Renewing or repeat fees are another feature to watch out for; this is when the letting agent takes a commission when the tenant renews their agreement with you.
Agencies will also offer different levels of service, so you should take care about choosing the right letting agency to meet your needs. A letting-only service is often the cheapest and would include advertising the property on your behalf, as well as arranging viewings, checking references and drafting the tenancy agreement. Other agencies will offer a letting service which includes rent collection on an ongoing basis.
A full management service is perhaps best suited to commercial landlords with a large property portfolio. As well as being responsible for all of the same tasks as a letting service the agency will manage all of the day-to-day tasks of keeping the property and interacting with tenants, including maintenance and repairs.
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How to choose a letting agency
Word of mouth marketing is worth its weight in gold, so if you are on the hunt for a letting agency start by asking for a few recommendations from other landlords or friends. You can usually find out a lot with a quick search online!
You should also look for a professional outfit. Letting agents that are registered with the Association of Residential Letting Agents (ARLA) or by The Property Ombudsman are subject to best practice regulations; they must comply with UK law and protect client money which is always reassuring to know.
Read the small print
Just like you would advise your tenants to read the full terms of the tenancy agreement, you should pay particular attention to the contract with your letting agency. You should define the level of authority that they have when dealing with tenants, and in particular when making repairs or changes to your property. You should also make sure that whoever it taking responsibility for gas and electricity safety checks is recorded in the contract. Not only is this important for your property and its tenants, but this can impact your ability to source appropriate landlords insurance.
Finally, find out how long you are locked into the contract for. The notice period can vary quite dramatically between agencies, some up to 6 months, so make sure that you are confident in their ability to market and manage your property before you sign on the dotted line!
Saving money on your letting agency
It is becoming more and more commonplace for landlords to turn to the internet to source help. You can also do the same when it comes to selecting a letting agency, and because they are not based on the high street, you can also make a saving in fees as they have less overheads.
Tenants can benefit too
What’s more, most online letting agencies don’t charge your tenants a lot either. When you are already paying a fortune on your security deposit, the first month’s rent upfront, council tax, bills, service charges for communal areas and moving costs, a traditional letting agency with fees for credit checks, references and “administration” can break the bank. Most online agencies will only charge for reference checks.
Want to get an idea of how much moving into a new home can cost?
The housing and homelessness charity, Shelter, has a useful calculator which can estimate how much it will cost a tenant to start renting.