Whether you are a landlord looking for a tenant or, trying to spend less time managing your property by having someone else look after it for you-it seems impossible to avoid paying hefty fees for finding tenants and managing a property.
Paying for a service is one thing, however, what complicates the issue even further is that in some cases landlords can lose months of valuable rental income to pay for it. There are, of course, some fantastic alternatives for property management in London that don’t charge fees for their services. But why do landlords feel the need to pay for tenant management services anyway?
According to specialist letting agents Flex Living, there are some services landlords think that agencies include in their fees that time and time again, they just don’t or, are not worth the cost to the landlord. Let’s look through their thoughts and explore the many misconceptions behind what landlords believe is worth paying fees for.
How Do Agency Fees Work?
Typically, agency fees are paid as either a one-off cost (annually or monthly depending on the service you’re using) or recurring as a monthly payment. The fee you pay is meant to include a certain degree of management covering multiple property-related issues that a landlord would have to deal with if they were running the property by themselves.
Agency fees can cover a variety of cost factors, from property maintenance and upkeep to tenant-finding services as well as the fees an agency will extract from the landlord for the privilege of using their service. Whilst their services are often presumed to cover dealing with all tenant and property issues, from chasing rent to changing light bulbs and moving people in and out, the reality is quite different. Many agency fees can be quite high, eating into landlords’ investment opportunities. It’s important for landlords to carefully consider the cost and benefits of using an agency, and to make sure they are getting value for the fees they are paying. Some landlords may find that it’s worth the investment to have the peace of mind and convenience of having an agency handle all the day-to-day tasks and responsibilities of managing their properties.
Without a doubt, one of the highest costs to consider when letting out property is always agency fees. The average property management or lettings agency charges as much as 14% (+ VAT) of the rent in fees for managing your property. For a property that costs £1000 per month to rent, that could be as much as £1680 per year, just for letting someone else run it for you!
In nearly all cases where landlords sign up for the services of property management agencies, the fees landlords end up paying do not translate into full-time property management. Whether this is because the agency justifies their involvement as handling bookings at the property or other tenant-finding services, what a landlord can expect usually from an agency using this justification, is for their phone to keep ringing every time there is even a minor issue!
Additionally, paying for property management does not always do anything to reduce your risk of spending big on expensive property maintenance. Many letting agents will use eye-poppingly expensive third-party contractors which can end up costing the landlord a staggering amount for issues as small as changing light bulbs! On top of this, you will rarely find management companies working out of hours to deal with issues so if the agency is shut, expect your phone to be ringing for any problems your tenant finds at the property!
On the subject of tenants, when it comes to finding them, many agencies and management companies will charge you at least a month’s worth of rent for securing your tenants each year, although this does nothing to help reduce void periods. The agency is only there to charge you for the tenant they find to move in, not to offset their fees for tenant finding or management if the property is still empty before they find anyone!
How do agencies get away with charging fees for their services? The reality is that all of the above will cost landlords two things. Time and money. They may have one but not the other, which is often what leads to landlords deciding whether or not to use an agency or management company in the first place.
Do you, as a landlord, really want to spend all your time sifting through a prospective tenant’s background to make sure they’re worthy of moving into a property? An agency may well tell you this is what they do but trust us, the proof is often in the pudding and it is no surprise whatsoever, that many issues with tenants can happen as a result of agencies not doing their due diligence but, still charging for it.
Are there Any Alternatives To Paying Agency Fees?
There are more than enough options to find a tenant. You could use a property agency to list your property with, try finding someone by making the most of social media and word of mouth, or rely on the perfect tenant just pitching up outside your door!
Using the software from platforms like Open Rent is a good place to start with checks and you can also use the National Landlords Association to perform all necessary references and background checks, with anything from previous landlords, to a current employer. On top of this, you should ask for any relevant personal information to fill out the picture for both your would-be tenant, as well as how the let may pan out.
When it comes to property management and maintenance, again, this very much depends on how much time you have as a landlord to deal with issues like maintenance or problems with your tenants. Managing a property is a full-time job and that’s just one property. If you’re a landlord with several or more properties then you will quickly find yourself overwhelmed by the number of issues you have to deal with!
Whilst this will undoubtedly, save a lot of money for you when it comes to fees and maybe for tenant searches and maintenance, can you afford to spend your time managing your property properly and meet all the needs of your tenants? Many landlords can’t but luckily, there are solutions available without the need to pay expensive management fees.
Fee-Free Property Management Alternative For Landlords
Alternatives to agency fees do exist outside of traditional letting without using companies as we talked about earlier in the article for HMOs or holiday lets. Corporate letting is one brilliant alternative for landlords which doesn’t involve the management fees of other letting models, whilst providing a high-quality tenant from a company that landlords can partner up with, to house their employees.
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