When renting out an apartment or house in the UK, there are a few essential considerations you’ll want to keep in mind for a hassle-free experience. The services letting agencies offer and the fees they charge landlords are two of the most crucial factors you’ll need to keep an eye on when choosing a company that’s right for you. So, how much do rental agencies charge?
Rental agencies typically charge 7-15% of the total monthly rent for their services. They charge up to a month’s rent for tenant-find services and 5-10% for rent collection. The most expensive service is full management, which can cost you up to 20%.
In this article, I’ll take you through how much rental agencies charge in the United Kingdom. Spoiler alert: it varies! So keep reading to find out how to hunt a good bargain when deciding if you want to use a property management company for your property.
The Services Rental Agencies Offer and Their Fees
Letting agencies are companies that manage the rental process for landlords and tenants. They can offer a wide range of property management services, making the renting process easier for both parties.
Here’s a rundown of the services letting agents in the UK offer and their typical charges, according to estimates by Simply Business, a firm registered in the UK:
Tenant-Find Service: Up to a Month’s Rent
If you’ve been a landlord for several years, chances are you know the hassle that comes with finding good tenants. It’s time-consuming and, not to mention, pretty stressful. This is where a tenant-find service comes in.
A letting agent will do all the legwork for you, from advertising the property to screening prospective tenants and drawing up the tenancy agreement. This service typically costs landlords one-off fees of up to a month’s rent. For example, if the rent on your property is £1,000 per month, expect to pay a fee of £1,000 annually.
Rent Collection: 5-10% of the Monthly Rent
The purpose of property investment is to secure a regular income and so rent collection is one of the most common services offered by letting agents in the UK. This service usually entails the agent sending you a monthly statement of rent collected and the fees charged.
The typical fee for rent collection is 5-10% of the total monthly rent. Therefore, if your property rents for £1,000 per month, you can expect to pay anywhere from £50-£100 in letting agent fees monthly.
Full Management: 7-20% of the Monthly Rent
A full management service is the most comprehensive service offered by letting agents. It usually includes rent collection, repairs, and legal services.
The typical fee for full management is 7-20% of the total monthly rent. So, if your property rents for £1,000 per month, you can expect to pay £70-£200 in agency fees monthly
Note: Although this is the most expensive service, it’s also the most convenient option, especially if you live far from your rental property or don’t have the time to manage it yourself.
For example, if your tenant moves out and you need to find a new one, the letting agent will take care of it for you. Besides, they will also deal with any repair issues during the contract period.
Factors Determining How Much Rental Agencies Charge
If you ask an agency for their quotations for managing two properties, one in London and another in Berkshire, chances are that they won’t be the same. Still, if you asked the same agency for quotations for managing a four-bedroom apartment and a studio apartment, you’re likely to spend more in the latter case. So, what causes this variation?
Here are the primary factors that determine how much rental agencies charge:
The Type of Service Offered
As I’ve mentioned, the type of service you choose will significantly impact the fees charged by the rental agency. For example, a full management service will typically cost more than a rent collection service.
This is to be expected, as in this case, they not only have to collect rent but also find new tenants and deal with repairs and other potential issues.
The Location of the Property
As this blog post by an experienced landlord points out, the location of your rental property will also affect how much you’ll pay in agency fees. If your property is located in a sought-after area, you can expect to pay higher fees than if it were in a less desirable neighbourhood.
For example, the letting agency fees in cities like London, Manchester, and Birmingham are generally higher than in smaller towns and villages. This is due to the higher demand for rental properties in big cities.
Here’s a table summary of the typical tenant-find and full management fees letting agencies charge in selected cities in the UK:
|City||Average Tenant-Find Fee Per Annum (p.a.)||Average Full Management Fee Per Annum (p.a.)|
|London||4% – 10% (£480 – £1,000 p.a.)||4% – 14.4% (£480 – £1,680 p.a.)|
|Birmingham||4% – 12% (£480 – £1,440 p.a.)||7% – 12% (£840 – £1,440 p.a.)|
|Manchester||4% – 10% (£480 – £1,200 p.a.)||8% – 12% (£840 – £1,440 p.a.)|
|Leeds||4% – 80% of the 1st month’s rent (£480 – £800 p.a.)||7% – 12% (£840 – £1,440 p.a.)|
|Liverpool||4% – 10% (£480 – £1,200 p.a.)||8% – 15% (£1382- £2,592 p.a.)|
Note: These estimates are based on a £1,000 monthly rent (£12,000 p.a.)
The Size of the Property
The size of your rental property is another factor that will determine how much you’ll pay in agency fees. For example, a one-bedroom flat will typically cost less to manage than a four-bedroom house.
Generally, smaller properties are usually easier to manage than larger ones. They require less work in terms of repairs, maintenance, and cleaning.
The Number of Tenants
The number of tenants you have will also affect the fees charged by the letting agency. Generally, properties with more tenants are more difficult to manage than those with fewer tenants. More tenants means more people to deal with and more potential issues that may occur.
The Length of the Tenancy
The length of the tenancy is another factor determining the fees charged by the letting agency. Generally, longer tenancies are more desirable for both landlords and tenants.
They offer stability and predictability, making it easier for the letting agent to manage the property. As a result, the agency may charge a lower fee for longer tenancies.
The Condition of the Property
The condition of your rental property will also affect the fees charged by the letting agency. If your property is in good condition, you can expect to pay lower fees than if it’s in poor condition.
Letting agents don’t want to spend a lot of time and money repairing and cleaning your property. Therefore, they may charge you a higher fee to manage it.
Ways To Find a Good Bargain when Choosing Letting Agents
Although rental agencies make the renting process easier for landlords, they can be expensive. This is especially true if you need to use their full management service.
However, there are ways to find a good bargain when choosing a letting agent. Here are some tips:
Think About the Services You Need
The first step is to think about the services you need. If you’re a seasoned landlord and are confident in your ability to find suitable tenants, you may not need a tenant-find service.
In this case, you can save money by opting for a rent collection service instead. This will typically cost you 5-10% of the monthly rent, rather than the one-off fee of up to a month’s rent.
Negotiate With Letting Agents
Once you’ve decided which services you need, it’s time to negotiate with letting agents. It’s important to remember that letting agencies are businesses, so they’re open to negotiation.
For example, if you’re happy to find your tenants, you may be able to get a discount on the rent collection service.
Similarly, if you’re willing to sign a longer contract, you may be able to get a lower fee. Therefore, it’s worth haggling with letting agents to get the best deal possible.
Check Out Online Letting Agents
If you’re looking for a bargain, it’s worth checking out online letting agents. These companies typically charge lower fees than traditional agencies because they have lower overheads.
For example, an online letting agent may only charge a one-off fee of £50 to find a tenant, whereas a traditional letting agent may charge up to £1,000.
However, it’s important to remember that you may not get the same level of service with an online agent. For this reason, be sure to read their terms and conditions carefully before signing up.
Check Reviews Before Choosing a Letting Agent
Finally, it’s essential to check reviews before choosing a letting agent. There are several websites where you can read reviews from other landlords, such as Google and Trustpilot.
Reading reviews will give you an idea of the service quality you can expect from different letting agents. This will help you make an informed decision about which agent is best for you and your property.
The Pros and Cons of Using a Rental Agency
Now that you know how much rental agencies charge, it’s time to weigh up the pros and cons of using one. Doing so can be crucial, especially if you’re new to the world of renting and need to decide whether hiring an agent is the best choice for you.
Here are some of the main pros and cons of using a rental agency:
- They can save you time and effort: If you use a full management service, the letting agent will take care of everything for you. This includes finding tenants, collecting rent, and dealing with repairs. Therefore, you can sit back and relax, knowing your property is in good hands.
- They can help you find good tenants: Letting agents have access to many databases and resources. This means they can carry out extensive background checks on potential tenants to ensure they’re a good fit for your property.
- They can help you navigate the legal process: The law can be confusing if you’re unfamiliar with the rental market. Luckily, letting agents are experts in this area and can advise you on the best way to protect your interests.
- They can be expensive: As I’ve mentioned, rental agencies can be costly, especially if you need their full management service.
- They may not be trustworthy: Unfortunately, a few rogue agents aren’t trustworthy. This is why it’s essential to do your research before choosing an agent and to read reviews from other landlords.
- They may not be reliable: Letting agents can be unreliable, especially if they’re overstretched or have a lot of clients. This means you may not always get the service you’ve signed up for.
So, there you have it – the pros and cons of using a rental agency. Now, it’s up to you to decide whether using one is the right decision for you.
Tips for Managing a Rental Property Without an Agent
Suppose you’ve decided not to use a rental agency. In that case, there are a few essential guidelines to follow to avoid any issues from arising. For example, getting reliable tenants is every landlord’s dream, thanks to their tendency to pay outstanding rent punctually.
In that regard, here are seven tips to get you started:
Use an Online Letting Platform
Several online platforms allow you to advertise your property and find tenants without using an agent. These platforms are typically cheaper than using a traditional agency, and they’re an excellent way to get your property in front of a broad audience.
Examples of online letting platforms include Airbnb, Rentify, and Zoopla.
Contact Potential Tenants Directly
If you know someone looking for a property to rent, get in touch with them directly.
Additionally, consider advertising your property on classifieds websites like Gumtree and Craigslist. This will help you reach a wider audience of potential tenants.
Here’s an excellent primer on how to find tenants for your property:
Screen Tenants Carefully
It’s important to screen any potential tenants interested in your property carefully. This includes running a credit check and verifying their employment status.
In addition, be sure to ask for references from previous landlords. This will help you understand whether or not the tenant is likely to be reliable.
Put Together a Solid Tenancy Agreement
A well-written tenancy agreement is essential for protecting your interests as a landlord. Ensure you include all relevant terms and conditions, lease duration, monthly rent, and what comprises the rental price.
If you’re unsure where to start, you can find example lease agreements online. Alternatively, hire a lawyer to help you create a custom lease agreement.
Stay Up to Date on Rental Laws
As a landlord, it’s crucial to stay up to date on the latest rental laws in your area. This will help you avoid any potential legal issues down the road.
Note: You can find information about rental laws on websites like Nolo and the Residential Tenancies Board.
Establish a Maintenance Fund
As a landlord, it’s crucial to have a maintenance fund to cover any unexpected repairs. This can help you avoid getting into financial trouble should something go wrong with your property.
To establish a maintenance fund, set aside a portion of your monthly rental income to cover any potential repairs. This will help ensure you’re prepared for anything that may come up.
Landlord insurance is critical for anyone who owns rental property. It can protect against potential risks, such as property damage, theft, and liability claims.
You can find landlord insurance through most major insurers. Therefore, be sure to shop around and compare rates before deciding.
For more information on why getting a good coverage plan can be crucial as a landlord, I recommend reading Rental Property Insurance (available on Amazon.com). The book explains everything you need to know about insuring your investment property without overspending or under insuring it, making it an essential read for any landlord. You can also get in touch with our insurance expert, Jon Mason.
In a nutshell, the fees rental agencies charge vary significantly depending on the type of service offered, the property’s location, the type of property, the size of the property, and the number of tenants. Additionally, the length of the tenancy and the condition of the property can also affect how much you’ll pay.
Nonetheless, it’s essential to do your research before choosing a rental agency, be careful not to be drawn into paying for additional services you don’t really need. Finally, read reviews, ask any local landlords you know for recommendations, and compare prices to find the best deal.