So, I’m not a fan of ‘fully managed’ BTL letting services.
Actually, that’s not fair, more accurately, it’s not that I’m not a fan, I just think it’s a service that’s mostly mis-sold or misunderstood, and often symptomatic of frivolous spending.
Yup, of course, fully-managed letting services do have their place, and they’re the perfect solution for some landlords, but do YOU truly understand the service enough to know if they will provide you with actual value? Let’s discuss…
I don’t usually mind being rubbed the wrong way, but I’m still bitter after disintegrating my pennies almost decade ago, when I paid through the ass for a fully managed letting service that I didn’t need. Yes, still bitter. I’m not blaming the agents… for selling me junk, I’m just saying I blindly purchased an unnecessary and expensive piece-of-shit because I was too much of an idiot to know any better.
But I’m certain I’m not the only landlord guilty of said idiocy! I’m convinced many landlords have purchased, some of whom are currently still throwing money at, a fully managed service they don’t actually need or use. If I’m right, that means there’s a butt-tonne of unnecessary spending going on. And for those of you that haven’t dropped the cash on one yet, but are currently ‘in the market’, there’s a good chance you don’t really understand what’s inside the package you’re eyeing up…
The natural ‘thing to do’ for new landlords
- 1) Buy property
- 2) Use letting agent to find and manage tenant/property
- 3) Sit back, relax, and watch the cheese roll in.
Ahhh, sweet ignorance.
Whether letting agents realise it or not, “consumer ignorance” is probably their most valuable commodity. An ignorant punter to an agent is like a lame zebra to a pack of malnourished lions!
Most novice landlords don’t even realise there are other sensible options available besides from going fully-managed from the offset. I didn’t, and that’s because using a managed service seemed like the biological make-up of being a new and average landlord, and perhaps that’s why so many of us needlessly opt into the service. Consumer ignorance.
No one’s to blame, but I do think there is a massive misunderstanding of what a ‘fully-managed service’ actually is, and that’s why I want to better define it (based on my experience).
What should you expect from a fully managed letting service?
The “perceived” idea of a fully managed service is that you’re paying an agent to take care of the entire running of your BTL, so you have very limited involvement, if any at all. Unfortunately, the reality is usually somewhat different, but I’ll get to that shortly. First, let’s take a look at what a typical fully-managed package should provide you:
- Referencing of prospective tenants
- Prepare all tenancy agreements and documents
- Register tenancy deposit
- Rent collection
- Regular property inspections
- Maintenance handling & co-ordination
- Notice processing
- Final inspection & deposit dispute handling
That seems like a lot, and I guess it is. But I think it all seems more elaborate and time-consuming than it actually is. The majority of that list is ticked off at the beginning of the tenancy.
The reality of fully-managed services from my experience
Firstly, let’s go straight for the kill… fully managed services are crazy expensive; 8-15% of my annual rent + other notoriously bogus fees (which are often tucked away discretely in the small print, and only come to light at the worst possible time) in exchange for a service which is overwhelmingly unused, and when it is, often served at sub-par standard. Yup, fuck that!
I’ve already crunched the [debatable] numbers and taken a closer look at how much the average letting agent charges… it ain’t pretty. According to my feeble calculations, for a BTL that achieves £750PCM, you’re looking at around £1.8k per annum. Truly eye-watering. That could feed a family of 50 for 500 years and some.
Secondly (and perhaps more crucial than the whole price issue), a fully managed service doesn’t actually resolve or alleviate any of my workload (and I think this is what many landlords overlook), or at least, not proportionality to the price-tag. So, if my life doesn’t get noticeably better/easier after purchasing a product which is meant to do exactly those things, then side-stepping the offer, like a date that won’t put-out after footing the bill for a steak dinner, becomes an obvious no-brainer. Right?
Don’t get me wrong, we all purchase products and services to make our lives easier because they fulfil tasks that are utterly beneath us. For example, I could rather easily pluck away at my own monobrow with my own delicate hands instead of splashing out on Mable, my beautician. Sure, the finish wouldn’t be as precise, but I could do a reasonable enough job to ‘pass’. I’m not talking about those scenarios. What I’m talking about is paying for a service that wouldn’t actually make any noticeable difference to our lives if it ceased to exist. That’s just a complete waste of money.
How managed services usually work in real-life (which usually doesn’t match up to expectations)
Repairs & Maintenance
Many landlords are a bit mental with their unrealistic expectations with ‘fully managed’ services, because they think they’re buying hand-over of responsibility and ‘complete silence’.
I’m not even blaming agents for basing their sales-pitch around that nugget of bullshit, because it defies common sense, so no one should even expect it, even if they’re sold it.
Even though you’re paying for a managed service, there’s ALWAYS going to be an element of management required, or at least ‘decision making’ … unless you’re happy coasting along and relying on the whim of an agent, which could result in throwing 20k on repairing a leaking tap via their recommended suppliers.
The average sane landlord won’t give complete control to agents to orchestrate repairs and maintenance issues, because we want to ensure the issues are legitimate and the quotes aren’t laughable before giving the nod.
Sadly, many landlords initially give their agent ‘complete control’, but that soon changes after they get a whiff of how much is deducted from the rent to cover basic repair work… and then begins the frantic search for the dumb-asshole who green-lighted that crap. Well, IT WAS YOU!!
Needless to say, after that sting, landlords generally start to pay attention and demand the ability to moderate and approve all maintenance issues. Eventually what ends up happening is that the landlord realises that the whole ‘fully managed’ gig doesn’t really equate to ‘silence’.
Good tenants don’t need managing
Most high-street agents will argue that you should use their “tenant-find” service because they’re trained experts at referencing and finding awesome tenants, and you’re not. At best, you’re an untrained dick-weasel.
“Leave it to the experts, dick-weasel”
So, if the agents are experts at finding good tenants (and you’re not), then why would we need to splash out on a fully managed service?
So my point is, by definition a “good tenant” is someone that pays rent on time, takes care of your property, and is generally courteous and respectful. Why would I need to pay someone to manage someone so utterly delightful?
They either find you a shit tenant that needs managing, or they find you a good one that doesn’t. Which one is it?
Rent Collection service
Continuing from my previous point; if you’re benefiting from the perks of having a good tenant, ‘rent collection‘ is usually what your ‘fully managed service’ boils down to, so you’re really just paying a stupid amount for a ‘money transfer’ service. Yup, it’s real hard to find value in that.
Hindsight is a bitch. I’m still reluctant to accept that I was actually paying someone a disgusting amount to do that. But fair play to the agent, they legally ripped me a new asshole while laughing to the bank.
But what happens in the worst case scenario, when the tenant falls into arrears? The agent will chase up the tenant, maybe a couple of times. But that’s about ALL the agent can do; they won’t be able to ‘force’ the tenant to pay if they don’t want to. Not anymore than you can, anyways.
Responsibility always leads back to one person
It doesn’t matter how much money you throw at a premium service, any problem of significance will navigate its way back onto your hairy little shoulders. Your agent will not be held accountable or lose sleep over your clumsy tenant, or the fact that you haven’t complied with the latest legislation. It’s all on you.
Again, this comes back to lack of common sense and a warped reality of what landlords expect from a fully managed service. Agents don’t stop or prevent problems, they mostly just act as the middle-man and negotiate in resolving problems. They don’t have access to greater powers, because we’re all wielded by the same landlord laws.
Moreover, I’m sure many landlords will be surprised by how little letting agents are legally responsible for whens hit hits the fan. In short, the landlord is generally liable for everything done by the agent.
Paying premium prices for a service that isn’t really premium
Whenever I’ve gone a little nuts about agent prices in the past, a common defence I’m offered is the emphasise on how much time they spend on resolving problems for their clients (the landlords). For example, to arrange a repair, there’s a lot of back-and-forth between the tenant, the landlord and suppliers. That all eats into time, which needs to be accounted for.
I get it, and I agree. Everyone should get paid for their precious time.
I’m not disputing the amount of time an agent may (or may not) spend on managing a property, my issue is with the ROI (i.e. what I’m actually paying for).
When I pay an electrician to fix my sack of broken vibrators, I’m paying for his time and skill. But when I’m paying an agent to orchestrate a repair, I’m not actually paying a premium for a skill, I’m paying premium prices for someone to ‘relay messages’. A cock-eyed donkey could do that for a stack of hay.
To get true value, I’d either have to own a piece-of-garbage property which is constantly in disrepair and/or a shit-for-brains tenant that is overly demanding and a general pain in the ass. In any case, a fully managed service won’t resolve either of those problems, but you’ll at least get your moneys worth from the service. Of course, the true solution would be to refurb the property and/or get rid of the problem tenant. In the mean time, most agents aren’t ‘actively’ managing your property 24/7… because it typically ‘just works’ on autopilot. Most of the labour is done at the beginning of a tenancy, and most rudimentary ‘tenant-find’ packages covers that stretch of the relay.
When you should NOT use a fully managed service
Just because it feels like the ‘natural thing to do’
As discussed, you don’t need to use a fully-managed service, so don’t just blindly opt for it because it seems like the natural step.
When the objective is to maximise profits
Turning a profit in today’s climate is hard enough, and it’s only getting more difficult as our running costs are continuing to rocket. So if you want to stand a fighting chance, one of the best ways of achieving it is by running the show yourself, because one of the most crippling running costs are agent management fees.
The whole ‘ditching the agent’ step may seem overwhelming, but that’s only what they want you to believe. FIGHT IT! Or at least, look into the other options. A good starting point would be to dive into my guide for new landlords.
When you have good tenants
Yup, I firmly believe that most landlords are shitting money down the drain if they’re paying for a managed service while harbouring decent tenants.
If you’re generally rational, organised & have common sense
I think a lot of novice landlords over-complicate the role of a landlord. It really isn’t that complicated, especially now more than ever, when information is so ridiculously easy to access.
If you’re rational, organised & have a shred of common sense… you don’t need someone to manage the ship.
When you require ongoing support & guidance
I’m guessing a bunch of landlords use managed services for the ongoing support and guidance, which includes keeping up with all the legalities. Being kept in the loop is important, and every sensible landlord will want to keep their finger on the pulse of the ever-changing landlord law.
However, I personally don’t think agents are the best outlet for keeping up-to-date. Not only is their information often lousy, but they also have this annoying habit of transforming every newly introduced legislation into a needless money-making opportunity.
If you’re looking for ongoing support, guidance and the need-to-know news, I recommend signing up to a reputable landlord association instead. Not only are they a hell of a lot cheaper, but they’re also able to provide much more reliable and accurate support.
Don’t shoot the messenger, I’m just sayin’
Dealing with problem tenants, evictions and other legal issues
As said, I think there’s a common misconception when it comes to understanding the actual role of a letting agent, and I’m saying that in defence of all agents, even the one’s in their Uncle’s oversized suit and greasy slicked-back hair.
While they can offer a certain degree of support when dealing with tenants that need evicting, it’s important to note that they are not solicitors, nor are they [usually] qualified to give legal advice, and their managed service won’t typically include anything more than ‘middle-man’ correspondence and serving an eviction notice (which you can easily do yourself). So when landlords opt into a managed service because of the added perk of non-existent ‘specialist legal support’, they also may as well turn up to a knife fight with a banana.
My point is, don’t sign on the dotted line if you’re looking for ongoing legal support from your agent in case shit hits the fan. They aren’t the best people to turn to in those situations, because most of the times they don’t even understand the law themselves. Their job is to manage your rental, not enforce the law. I’m often reminded of that when I look through the tenancy agreement contracts they use- they’re usually riddled with clauses which aren’t even enforceable because they contradict statutory law. A couple of classics are unfair ‘late payment fees’ and ludicrously early end of tenancy notification periods they require from tenants.
At best, it’s embarrassing.
In conclusion, if you’re dealing with problem tenants and eviction looks like it’s on the cards, whether you’re using a manged service or not, your best bet is to talk directly to a professional eviction company. They will know have a better understanding of the law and subsequently know how to deal with the situation most efficiently.
FYI, readers’ of this blog have access to free landlord legal advice to help assist with problem tenants and evictions, more information over here on how to drain that resource!
When you think you can’t turn back for support…
I really like this point…
You can find a tenant and manage your property independently, and then if due to unforeseen circumstances (whatever they may be), you can easily find a local agent to assist and take over.
However, if you use an agent from the offset to manage your property, and then realise you’re paying them for nothing, it’s not so easy to shake ’em loose. It’s kind of irreversible.
Not only will you need to see out the contract terms (which is perfectly reasonable), but most agents will consider the tenant their ‘client’, so if you want to continue holding onto your tenant after cutting ties with the management service (which is typically always the case), you’re going to face an eternity of painful tenancy renewal fees and other potential legal complications.
You think your mother in-laws face is bumpy, just wait until you get pulled through that storm.
It’s really easy for an agent to take your money and provide you with support, but it’s incredibly difficult to get them to let go after that.
When you should use a fully managed service
It may seem like I’ve rendered a fully managed service as a total bullshit, but that’s not true.
So this is where I even out the argument, and make it clear that while it is a service a vast amount of landlords are paying for unnecessarily (which is the actual point of this blog post), it is still a service that will always be rightfully needed, and serves a genuine purpose…
This makes total sense, and for obvious reasons.
If you’re an overseas landlord or unable to access your property relatively easy due to geography, a fully-managed service is cool.
Assuming ‘managing’ isn’t the full-time occupation, a landlord with in a certain range of properties are well optimised for a fully managed service. But, I must emphasise, it makes most sense with in the confinement of a specific range, because at some point, a growing portfolio may require its own employee(s) to handle the entire management. Here’s more on landlords managing their own portfolios, and whether it’s the right option for you!
Zero communication with tenants
Some landlords literally want ZERO communication with the tenant; they would rather shove their head in a blender, which also means they’re prepared to pay the big bucks to ensure it doesn’t have to be happen.
I so get it.
Dealing with people can be soul-destroying. People are idiots.
100% no hassle
For those landlords that want absolutely no hassle, fully-managed may provide that peace. But let me be specific, because this could cause confusion, as earlier I said maintenance issues will always boomerang back round to the landlord, as will the responsibility.
What I’m talking about here is granting the agent permission to make all the decisions and just ‘get on with it’ without the need to relay messages or tapping you on the shoulder for to day-to-day issues (minus emergency cases).
I must stress though, ‘hassle-free bliss’ is a luxury, so it often costs a small fortune.
Finding an agent that goes out of their way to find competitive rates for labour, and doesn’t add their own chunk on top, will be a challenge. I’ve heard they exist, so if you manage to unearth one, hold onto them for dear life (many of these awesome agents read this blog :) ).
Short-lets & Holiday-lets (Airbnb)
Airbnb has made short-let tenancies (i.e. holiday-lets and tenancies under 6 months) ridiculously popular… and profitable! Apparently, short-lets achieve on average 30%+ more revenue than your regular ol’ long-term tenancies.
However, one of the major differences between long-term and short-term tenancies is the amount of extra work required to manage the latter, purely because you have to deal with a constant flow of new occupants. Which of course, means more marketing, more cleaning, more maintenance, and generally more pissing headaches.
Yeah, no thanks! I’d rather throw money at that soul-sucking venture!
Not all of your typical high-street letting agents will provide a fully managed service for short-lets, but some will, so you may have to shop around for a solution. There are specialist Airbnb management companies that ONLY deal with short-lets, and they take care of everything, from finding occupants to complete housekeeping. The only problem is that they currently only service a limited amount [of the most popular] cities, like London, Manchester, and Edinburgh, so pretty much useless for the majority of landlords that don’t have prime real estate in the most lucrative and expensive UK cities.
No time or ambition to conduct routine & regular inspections
If you’re not going to conduct regular inspections (for whatever reason), then paying through the nose for the managed service could give you a positive ROI. It’s worth the investment, in other words.
Inspections are crucial, because they’re the best way to spot any early problems e.g. leaks, messy tenants, and illegal activities, like Pablo Escobar style cannabis farming.
That said, make sure your agent DOES conduct inspections routinely (e.g. every quarter)! Many have been known to simply not bother.
Nothing against agents (at least, in this blog post) or fully managed services
I just want to re-clarify, I’m not going after agents or demonising fully-managed letting services. I’m just saying, many landlords opt for the premium fully-managed service needlessly, and it’s such a waste of time and money. But when purchased and utilised under the right circumstances, it’s all good.
However, if you’re sitting there now, paying through your big, fat nose for a fully-managed service, but only benefiting from a rent collection service, then you can probably realise that you’re not really getting a whole lot of bang for your buck.
Cheaper Management alternatives…
I feel this blog post would be incomplete without mentioning some honourable and modern day alternatives to the traditional high-street agent and their fully-managed services.
While it could be argued that the ever-growing list of online letting agents were initially targeting self-managing landlords that just wanted a cost-effective and easy way of finding tenants by listing their property on Rightmove (for prices high-street agents simply can’t compete with), that’s definitely no longer the case. Online agents now offer managed services at equally desirable rates (which, yet again, the high-street simply can’t compete with).
Here are a few very different offerings that standout by Letting A Property, Howsy, and 99Home, which operate on a month-by-month basis, all of which are online agents that I have no qualms with recommending.
I’m not going to pick my favourites, but Howsy’s price point deserves some attention- it’s pretty unbelievable (with or without the exclusive discount they tossed our way)!
|Letting Agent||Contract||Notes / Includes||Price|
Month by month
|Notes / Includes|
Solution for Fully Management Service!
Will market your property on Rightmove, Zoopla + more.
Pricing & Discount explained
*£65 for properties in London.
*Sign up to get 2 months FREE property management when you pay the first year upfront - just mention you came from Property Investment Project.
£45pm*Inc VATPrice shown is before discount!
|Visit Website*First 2 Months FREE using link above!|
Month by month
|Notes / Includes|
Ultimate Solution for Management, Rent Collection & Home Emergency Cover!
Will market your property on Rightmove, Zoopla + more.
*Exclusive £40 discount code: 99PIP40
£39 + £79pm*Inc VATNormal price: £79 + £79pm
|Visit Website£40 Discount Code: 99PIP40|
Letting A Property||
Month by month
|Notes / Includes|
"Rent on Time" Package: solution for Rent Collection & Guaranteed Rent, Home Emergency Cover and Legal Cover!
*Landlord pays £209 only when tenant has been found and referenced.
£209 + from £59pm*Inc VATNormal price: £249 + from £59pm
|Visit Website£40 Discount Voucher|
Please note, I try my best to keep the information of each agent accurate and up-to-date, but you should read the T&C’s from the agents’ website for the most up-to-date information.
So, over to you, butt-munch! Feel free to share your thoughts and experiences with managed services; do you use a managed service, and how is it working out for you? Are you one of those landlords that are paying for an unused service?
Love & Peace xoxo