Self-Managing Landlord VS Managing Agent
1st January 2018
Being a landlord can be really rewarding but it can be rather daunting and sometimes, an absolute headache. However, if done properly, you can avoid most of the common pitfalls of being a landlord.
Being a self-managing landlord is certainly for you if you enjoy meeting new people, especially your prospective tenants who you will interview to find out if they’re a good fit for your property before you begin the preparation of inventories, tenancy agreements and tenant background checks. You’ll also enjoy the hands-on approach of inspecting your own property and getting stuck in to make minor repairs. However, you’ll also need to ensure you’re up to date with legislation and not be afraid to evict the tenant should the need arise.
Being a self-managing landlord requires a lot of confidence in yourself and a grasp on time and money management, it will also be beneficial if you’re skilled at DIY or know who to call should a repair arise.
On the other hand, you have landlords who see their properties as an investment for which, they want to see an income without all the hassle of doing the above. For these individuals, a letting agent is the way forward. The downside of using a letting agent, of course, is their fees. You will find yourself paying upwards of 10% of the monthly rental income per month minus any further deductions for maintenance and repairs. However, in return you will find yourself with the peace of mind that everything is taken care of for you, although you will receive slightly less per month compared to self-managing the property. This is especially convenient for landlords who live quite a distance from the area or are looking to move away from the area or for those who simply don’t want the hassle of dealing with finding tenants, performing background checks and maintaining a good relationship with the tenant and most importantly, actually collecting rent. You can also rest assured that the agent you use is up to date on legislation as well as the local property market. If you find yourself in a position where an agent isn’t providing this then there may be cause for concern.
But what if you’re a new landlord? What if you really have no idea what you’re doing or how to find tenants? Well, typically, most agents will have a service suitable for your needs. The most common services are Let Only and Full Managed, however, it is common for agencies to tailor their service to suit the landlord, this can also include add-on products (such as rent guarantee insurance) whether by sale (if regulated) or by referral.
The let only service typically includes:
- Marketing the property
- Taking enquiries
- Finding Tenants
- Performing a range of background checks
- Carrying out reference checks
- Drawing up tenancy agreements
- Creating inventory
- Checking the tenant in.
As the name suggests, beyond this point, you’re on your own. They find you your tenant, charge you the fee (sometimes, they will deduct this from tenant fees however, with the tenant fee bill, this may come at an upfront cost to landlords) The fees for the service are usually a one-off fee or a percentage of annual rent. Some letting agents may charge fees for drawing up an inventory and some may offer slightly different services.
On the other hand, you have the full-managed service, this is usually the most favourable option for letting agencies as it provides a repeat income for their business. The benefits to the landlord come in the way of convenience, you don’t have to do an awful lot (though it is important to understand your statutory obligations as a landlord) and lower initial costs than the Let Only service. It should include all the services of the Let Online service alongside everything you would expect to do as a self-managing landlord. These can include:
- Collecting and forwarding of rent
- Chasing up rent arrears
- Inspecting the property
- Regularly updating you
- Taking care of legal obligations
- Arranging gas safety inspections and keeping copies of certificates
- Arranging repairs and maintenance
- Responding to tenant requests and maintaining a relationship with the tenant to ensure they are happy and to prevent problems before they arise
- Keeping tenants informed of rent increases
- Orchestrating evictions
- Arranging checkouts
- Dealing with tenant disputes
It is important to ensure you know exactly what is included in your chosen agencies’ full management service as it can vary drastically to the above. Fees for full management usually incur a one-off fee + a percentage of the monthly rent (before deductions). You may also find disbursements taken from your rental income to cover the costs of repairs and maintenance though any good agent will keep you informed of where your money is going and why.
As the owner of your property, you need to make the right choice. I suppose it comes down to two factors; how much you value your time and how much satisfaction and enjoyment you will gain from managing your own property. If you feel you don’t have time or the motivation to maintain a good relationship with tenants, make repairs promptly, etc. then a managing agent might be the right choice for you. One thing you certainly don’t want is to find yourself using an agent who does a really poor job meaning you have to spend time doing their job instead or fighting with them than you would if you were to manage the property yourself.
If you do choose to manage your property yourself, here are five tips on how to keep within the law:
- Ensure and EPC is in place before you advertise the property for rent. You must now show prospective tenants an energy performance certificate for your property so they can see how much they can expect to spend on utilities. They last for ten years and are relatively inexpensive.
- Get a Gas Safe certified engineer to carry out a gas safety check every 12 months, ensure you and the tenant both have a certificate, you must keep yours on file for two years. New tenants will require their certificate when they move in.
- Although you don’t necessarily have to install fire safety equipment or carry out periodic inspections of electric wiring, it doesn’t mean you shouldn’t. As a landlord, you have an obligation to ensure your properties are safe. You should at the very least install a smoke alarm on every storey and have the mains and supplied applied tested (if you provide any appliances that aren’t connected to the mains, will need to be tested by a qualified PAT (portable appliance test) technician however, any appliances in the property that weren’t supplied by the landlord aren’t your responsibility unless a fault arises as a result of a fault in the mains).
- Always register the deposit in a government approved deposit protection scheme, for peace of mind, a custodial one. Be prepared to deal with disputes with them as an intermediary.
- Always ensure furniture supplied in furnished properties complies with the latest fire regulations, the easiest way to do this will usually be by checking the label.
Hopefully, by keeping this in mind, you’ll be rightly informed as to whether or not to manage your own property rental or instruct a letting agent to act on your behalf but if you do need any help, do not hesitate to get in touch.