A good agent can mean the difference between finding great tenants or deadbeats
When you’re involved in buy to let investing, every penny that you spend or save can mean the difference between making a profit or a loss. So a common question that many landlords ask is “do I need a letting agent?” given that they typically charge 8% or so of the annual rental (usually one month’s rent) for finding you a tenant.
The cost is a considerable one, especially since many letting agents charge a similar (or slightly reduced) fee when the tenants renew. A half a day’s work by an agent can result in a landlord paying out for years and years.
Before deciding whether to employ a letting agent or not you should be aware of the pros and cons of letting agents.
What does a letting agent do?
The main role of a letting agent is to find you suitable tenants for your property. Typically letting agents will have a high street presence in the area, usually near to a tube station or bus stop since tenants often start their search for a new home by visiting the first letting agent they see.
A letting agency will also often have their own web site and will advertise a property on national websites such as rightmove.co.uk or pirmelocation.com. This broadens the range of potential tenants that you can compared with placing adverts of your own or by posting on websites such as gumtree.com or craiglist.co.uk.
The agent will also do a preliminary screening of tenants for you and will exclude those who clearly cannot afford the property or seem unsuitable. Their experience can also be really helpful as they may pick up potential problems that wouldn’t occur to a new landlord.
The next job that the agent should do is take references and do a credit check on the tenants. This is usually done through an agency such as Homelet, which will independently check for County Court Judgements (CCJs) against the tenants at their previous address as well as look for any other black marks on their credit record. They should also call the listed employer to check that the tenant is indeed employed where they say they are and at their stated income.
Once this is done the agent should also be able to offer you rental guarantee insurance (and other sorts of landlord’s insurance such as legal cost insurance). Just remember that these insurance policies are not all equal and that some of the cheapest (usually the ones that are thrown in for “free” by letting agents) will only provided quite limited cover. Do your homework on this.
Leases and deposits
Most letting agents also take care of the basic paperwork for you. They will have a standard assured shorthold tenancy agreement that they will ask you and the tenant to sign and they will often arrange to collect the deposit and put it into one of the deposit protection schemes such as mydeposits.co.uk or the Tenancy Deposit Scheme which can be found at www.thedisputeservice.co.uk.
Inventory
The agent should also ensure that they have a proper inventory taken at the start of the tenancy. This is essential as it will form a key part of the evidence you need if you later have a dispute with tenants in the event that they have damaged the property or furnishings.
How to choose a letting agent
If you decide to use a letting agent you should be sure you put time and research into choosing the right one. The first thing you should do is to check with they are registered with ARLA (the association of residential letting agents). This is because ARLA has a code of conduct and a dispute resolution service that you can complain to if you feel your agent has done something wrong or treated you unfairly.
You should also take time to check the reputation of the agent in the area. An agent with a bad reputation among tenants won’t be able to attract the best of them. The last thing you should be sure of is to meet with them and satisfy yourself that they aren’t just going to try to sign up the first tenant who comes along. Some agents are just chasing their commission and may be under huge pressure to meet targets so will not turn down unsuitable tenants. What you want is an agent who will see your relationship as a long-term partnership.
Can I do it myself
The steps I’ve outlined above are all well within the ability of the average person. There is no reason for you not to place your own listings online and to screen tenants yourself. The selection you will get will probably be more limited and you may not be able to command as high a rent, but this may well outweigh the costs of paying some 8% or so to an agent.
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