Are agents' fees worth it?

[Katy C]

Probably an indelicate topic so close to the launch of Yellow Lettings, but I'd still be interested in other landlords' thoughts.

I only have 2 properties and another one on the way, and my first is let to a friend, so I did not bother with an agent as a go-between. For my second I am paying an agent 10% for what has so far been to find a tenant, get references and organise the contract, which I feel I could probably manage myself (not sure about credit checks).

For my third property, I am weighing up the pros and cons of using an agent, and my main concern is what I would do if a tenant defaulted on rent and we had to go through legal proceedings. I would like to know how difficult it is to sort out this kind of problem and how much help would an agent be anyway?

[Rob D]

Probably an indelicate topic so close to the launch of Yellow Lettings, but I'd still be interested in other landlords' thoughts.

 

All the more reason to be talking about it! I've moved this topic into the General Discussion forum where it will get more attention.

 

I was talking to a friend yesterday who's paying 17% (!) to have his house with three sharers fully managed, and the agent is still charging him an extra £50 + VAT for inspections.

 

Clearly this doesn't represent value for money. But if you're paying a more standard percentage for a service that actually does what it's supposed to do, it comes down (as Richard says) to how much you have the time and the willingness to deal with everything yourself.

[nick stott]

Does this mean therefore that agents should charge a fixed fee rather than a percentage?

I've always thought agents (both sales & Lettings) charging a percentage seems perverse as the work doesn't increase with the value of the property (if anything, it decreases).

We tried doing a fixed fee years ago (on the sales side) but the general public just didn't get it! That was before the explosion of online agents though so maybe it'd be different these days.

I know an agent in Manchester who is a management agent ONLY. He outsources all of the tenant finding and passes on the cost to the landlord. He charges a fixed fee of £50 per tenancy. I like his model. Seems clean and simple, and leaves him to what he's good at.

Back to the original point (!), an agents real value comes, not in taking admin tasks off you (a VA can do that for a hell of a lot less) but in being a local expert, industry expert, and professional rather than someone with just a J.O.B.

[nick stott]

P.s. You could listen to Rob Dix's latest Property Geek podcast interview with a handsome young chap who eloquently and succinctly gives hints and tips on choosing a good agent... ;-)

http://www.propertygeek.net/podcast-nick-stott/

[Andy Norman]

Related topic

http://thepropertyhub.net/forum/topic/214-almost-got-the-keys-to-my-first-btl-to-use-an-agent-or-not-that-is-the-question/

[Katy C]

Thanks Andy, I had missed this thread. It highlights more of the pros and cons of using a letting agent, and what to beware of if not. Since I intend to be the kind of landlord who will speak to tenants regularly and make sure they are happy, I'm really not sure what extra value an agent would be.

Katy

[Tim Wragby]

Katy,

 

Richard above has made some very good points but here are some more to add to your thoughts:

 

Self confidence is a big player - It depends how confident you are with your competence and how much you want to invest in keeping yourself abreast with the

changes and developments within letting - which is changing all the time.  For the experienced landlord it can be straightforward 

if you have well trained tenants who play by the book and stay put. When a tenancy goes smoothly it is easy to feel you are wasting

your money on an agent but it is the unseen work that may be assisting that continuing good tenancy.

 

Time is another factor             - How much do you want to devote to your investment, Most letting agents fees are 2 - 3 hours of a tradesman's time charges or even

less.  For this an agent will:

Market property and sift through applicants - process and reference tenant applicants

Ensure tenancy is set up professionally and legally

Collect, process and bank the rent,

Provide statements for tax purposes.

Provide 24 hr answering service for maintenance.  

Maintain profession awareness of field and advise changes to legislation accordingly.

Inspect property and advise maintenance issues as they develop to reduce long term cost to investment

Manage the end of a tenancy

Provide advice and support if things do go awry.  If a court case is involved it is the landlord who has to do it, but the agent can provide the support to try and ensure the case goes to plan

 

Separation from Tenants        - Having a 3rd party between you and your tenants can be useful.  

You are fortunate if the tenancy to you friend continues to go well as renting to family and friends has, in my experience, a far higher incidence of running into problems than standard tenancies because the tenant can feel they can take liberties that a stranger is less likely to make - late or non-payment of rent, damaging or leaving property in poor condition and it is difficult to confront the problem.  If you have to be firm with a tenant it is easier to do it via an agent unless you are a particularly confident. I do not like being an agent with family members as tenants and friends come a close second in case I become piggy in the middle - but at the end of the day it is part of the job.

Location of Properties           -  If you buy properties close to where you live it is fairly straight forward to keep in touch with goings on at the rented property. In

your calculations of cost analysis bear in mind travel time and fuel costs.  I have observed both landlords and regional based agents struggle to properly manage properties from a distance as they do not know the local scene, struggle to properly source/manage maintenance tradesmen and if using centrally based tradesmen who travel from afar their work quality is either indifferent or expensive because of the costs of travel in time and fuel.

 

That said, agents as a profession have not covered themselves with glory and some are not worth the money they are charging.  It is very much a case of doing your homework on finding an agent you can trust.  I would recommend starting with a short contract to test the waters and make sure you are not tied into any significant length of time.  If you are locked in with long periods or high fees look elsewhere - a good and confident agent keeps their landlords by their product not by their binding contract.  If an agent is cheap there will be short cuts or hidden costs - if they are expensive you can get better value elsewhere

 

If you do go alone from the beginning - good luck and network for support - like this excellent site.  It would probably be worth looking at joining the National Landlords Association (NLA) or Residential Landlords Assoc (RLA) as it gives you access to additional support  and advice.