Why And How Landlords Should Find Tenants Without A Letting Agent
Written by The Landlord on 11 Aug 2011
Over the last few years I’ve written crazy amounts of blog posts about how landlords, even the most novice, can successfully find a tenant without using letting agents for the purpose of saving £1000′s on fees. I’ve dedicated an entire section on this blog to Marketing & Finding Tenants. But now, I want to comprehensively discuss “why” landlords should consider taking matters into their own hands.
Why should landlords should consider going it alone
A common misconception is that letting agents provide us with a skill set which can’t quickly and easily be duplicated by the average person/landlord. We assume that they have an advantage over us by having all the trade tools and resources. In reality, that’s just a smokescreen perception. All agents provide us with is a service which we don’t know enough about to confidently duplicate. But when you break it down, it’s not really that difficult or time-consuming to learn the essentials, which will enable us to find and manage tenants for ourselves.
As long as you stuck to the golden rules of buying a BTL, which simply consists of buying a suitable property in a suitable area, there is no reason why a letting agent should be vital in your Landlording crusade.
I think the main edge agents have over regular folks is “local knowledge”, but I genuinely believe that’s not as powerful or useful as once before, especially in the modern world, where the Internet has become such a dominant provider in daily life. Most agents rely on widely available internet services to find tenants. They use tools we can all tap into; we just need to be shown where and how. Consequently, “local knowledge” has become redundant in a sense, especially when the enquiries are flooding in via the means of online marketing.
I’ve seen high-street agents charge between 8%-15% of the rental return for their services, depending on the type of service. The most basic service agents’ offer is typically a “tenant-only” service, which is where an agent will find a tenant and leave the management role up to the landlord. On top of that, most “novice” landlords will buy the legally required extras from the agent (e.g. Energy Performance Certificates (EPC’s) and Gas Safety Certificates) simply due to ease and ignorance. Using letting agents for those extra services is not the cheapest option because they subcontract other companies to provide them, and most agents add their own premium to make money from the referrals. So it’s easy to see how and where the costs add up.
Let me show you how the figures stack up with a real example:
Let’s assume an agent has found me a tenant willing to sign a 12 month agreement. The rent is £1000 per month. Based on the lower end 8% fee, an agent would charge £960 as a fixed annual fee for their service. On top of the regular service charge, most agents charge a renewal fee, which means I would need to pay an additional annual fee if I wish to keep the same tenant after the 12 months expires. As you can see, the cost can easily escalate, and it usually does.
Over the past 3 years I’ve not used an agent once, and my cost for finding tenants has been £0 – £100.
So, it’s your call, you can either spend £1000 on an agent, or learn how to do it yourself and spend £0 – £100. It’s a no-brainer for me. Remember, a buy-to-let investment is a business, so it’s about keeping costs down.
Of course, my example only took into consideration the “tenant finding” aspect. There’s more money to be saved when independently looking for companies to provide you with an EPC and Gas Safety Certificate, as opposed to going through an agent to acquire those legal documents.
Agents can get it wrong, and they often do!
One very important point to remember is that just because agents charge a fee to find tenants, it doesn’t mean the prospective they find will be any better than then one you can find yourself. I’ve had an agent charge me £750 only to find me a tenant that fell into 2 months worth of arrears almost immediately. I eventually had to evict her, which was an added cost.
If you think you’ll always get a better quality of tenant from an agent, you’ve been grossly mislead. Most agents do standard reference checking on their applications. Clearly, the referencing isn’t bullet-proof, regardless of how it’s done.
My point is, going It alone can be just as risky as using a letting agent in respects of the return in tenant quality.
Tenancy Agreements and Landlord legal responsibilities
A lot of landlords get scared away of going it alone because of the complications behind Tenancy Agreements and other landlord legal obligations. Again, this is a common misconception, because it really isn’t that complicated.
You don’t need a specialise solicitor/lawyer to draw up any contracts. There are hundreds of reputable Tenancy Agreement vendors online. All you need to do is download one and fill in the missing spaces. Most of it is self-explanatory. Same applies with Tenant Guarantor Forms.
I do stress though, it’s important you get the correct documents from reputable sources.
Regarding the other legalities, here’s a list of Landlord Obligations / Regulations.
Resources which may help landlords find tenants
As mentioned, I have written a whole heap of resources which covers this topic in depth. But I quickly want to mention a few of the most relevant/useless which I think you should definitely check out…
- Complete Guide For Landlords That Don’t Want To Use Letting Agents- this guide covers all the steps a landlord should typically take if they want to go it alone. I highly recommend this resource. Everything is listed in order, all you need to is stick to the path.
- A Guide to finding tenants – a long list of ways to find tenants quickly and cheaply, including how to Market your rental on Rightmove (by far the best way to find tenants, in my opinion. It’s also how most agents find the majority of their tenants).
- eBook – Death Of The Agent – Ultimate Guide On Finding Tenants Without An Agent – I wrote this eBook last year and it’s been updated several times with fresh content to keep up with the changes. It’s the most comprehensive guide I can offer you on how to find tenants and handle all the legal issues. Everything I discussed in this blog post is explained in more detail. I’m not just saying it for my own benefit, but it’s definitely worth purchasing (£3.99). Don’t blame me if it sucks, though.
Hold on though, letting agents maybe perfect for you!
I’d just like to clarify that letting agents aren’t perfect for everyone, but at the same time, they might just be perfect for someone.
Letting agents have their uses, which I won’t and can’t deny. For example, if you’re the type of landlord that doesn’t want to deal with the chore of finding or managing your own property, then letting agents are perfect (if you don’t mind paying the premium).
But I warn you, while you may feel like you’re taking a back seat position when employing the services of a letting agent; reality can often have an entirely different agenda for you.
Letting agents will take care of the day-to-day management, but remember, if your tenant turns rogue and defaults on rent, the responsibility and stress will always fall back onto the landlord’s lap. That is unavoidable.
I’m not trying to take anything away from letting agents here. They know their industry and they know how to find tenants. They’re trained at their jobs and know the shortcuts. However, I just want to make it clear that there are other options.
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10 Comments - join the conversation...
Novice landlords should always use a letting agent - but ask lots of questions, get copy's of everything and learn.
You mention suppliers are cheaper direct - this is not always the case. I get letters from suppliers with low prices to get our business this can be passed on to clients. A good agent can pass on savings as well as make a little. (especially if its managed by us, we want to keep landlord/tenant sweet for repeat business).
If an "agent gets it wrong" (or rather the tenant mislead them) then a good agent wont charge you for re-letting within tenancy term. Anyone can get a bad tenant landlord or agent.
As for renewal fee - we only charge a tiny fee for time it takes to re-sign the tenant. What high street agents charge seems unreasonable.
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Letting Agents cost more than being independent landlord due to overheads but EVERYTHING they pay for costs less than it would for an independent landlord - even credit checks - so its not a BIG difference. Also fees are tax deductible.
Some overcharge and some charge nothing and provide a crap service - good luck finding a good agent.
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I have tried gumtree once around 5 years ago for a 3 bed house near Shepherds Bush in west London - rent £550 per week (which I know will sound a lot to those of you outside London, but it was absolutely the correct rent based on what we previously received and what we have received since.)
I put it on gumtree for a bit less to make it even more attractive - £500 a week as all the agents here charge 10% and that is not negotiable (and believe me I have tried!) Had lovely photos etc.
All the applicants through gumtree were time wasters - mainly sharers rather than families etc. who basically couldn't afford it.
Now I may have been unlucky, but my gut instinct tells me that when people are paying over £350pw for a 1 bed flat, £500pw for a 2 bed and over £600 for a 3 bed in the fashionable parts of London, they want & expect to deal with high street agents.
Although afterwards, they always complain to me about feeling ripped off by the agents (and I tell them I do too....so go figure!) At the moment I have great tenants in every property I own, all found through agents. Would I have found them using Upad or the like? That's what I'm trying to figure out as any saving is money in my pocket!
So it would be great to hear from anyone who is in a similar position to me who is doing it themselves.
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http://yourletting.biz/advertise-property.html
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I regularly look on Rightmove etc. to get an idea of what else is on the market in the areas that I own properties, and there are only properties to let through agents. I've never seen one through an agent I don't recognise.
I'd love to hear from a Landlord saying they own properties at the kind of price levels I mentioned, letting me know the area and their experience of using those services.
(By the way - I also own a few properties outside of London where I grew up and have successfully used private advertising in the past and intend to use these online agencies when they are up to let again.)
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All i used to advertise was Zoopla (UPAD offers Zoopla and RightMove I think). I have also rented out Bedsits at £70PW, 1 bed flats at £360pcm and 3 bed semi at £550pcm.
In other words from top properties to housing benefit type properties online letting agents work. The only property I have not been able to rent at zoopla is a 4bed mansion at 4,500pcm. (no supprise)
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I initially started this website because I wanted to document my every step from property idiot to property landlord,
in hope that people would find my site and help me along the way. I literally didn't have a clue about being a landlord
when I started this website.
The advantage with us is when you have a few properties we can keep an eye on gas safety's etc, making sure rents are on time and making sure work is carried out on properties. As well as this there's the amount of websites we post across for letting a property and the credit checks we can perform for quite a minimal amount.
As for rates, our unique selling point (and something I feel keeps us alive) is the fact that we are just 7% which you would be hard pushed to find anywhere.
As always though another great article from The Landlord (I mean that sincerly)
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