Bit late, but happy New Year everyone! I hope you all got shit-faced and participated in at least one stupid activity that you’ll regret for the rest of your life. I know I did, and that’s why I’m probably dripping with gonorrhea right now. All over my keyboard and shit.
A few days ago I was mooching around a couple of landlord forums, soaking up the trials and tribulations of my fellow comrades when I came across a thread where an upcoming landlord asked the question, “Should new landlords use a letting agent?” I’m sure it’s a question that gets pondered upon frequently by new landlords. I was tempted to reply to the lost soul and offer my advice, I even started typing, but I figured I’d hijack the question and answer it on my blog because I’d rather archive my precious wisdom on my own turf, as opposed to that poncy forum.
Before I chew into the crux of the matter, I should clarify that the user was referring to using a letting agent for managing his property. I’m pretty sure 99% of landlords use a letting agent, whether it be an online letting agent or a high street letting agent, to at least find tenants by generating leads. It’s the premium management service that is on trial today.
I’m sure everyone has their own take on the issue, but here’s mine…
Firstly, let’s give the question some perspective. If any landlord is pondering the idea of managing their own property, then there’s obvious desire, but also hesitation. The former is usually stemmed from the opportunity of saving money, while the latter is generally stemmed from inexperience (that’s important to the relevance of my advise). Straight off the bat, the landlord is prepared to manage his own property, as opposed to a landlord that categorically demands minimal involvement with letting their property, and is willing to pay the premium fees for that to happen.
With the emergence of online letting agents offering tenant-find services at puny costs, it’s become easier and more compelling than ever to go it alone. There used to be a time when the price-mark between a “tenant find” service and a “fully managed service” was relatively marginal (2-5%), so it often made sense to pay a little extra for the full package. But times have changed, online letting agents have ripped apart the price differential by a substantial amount, so now opting for the managed package will cost significantly more. However, despite that, I would still advice shiny new landlords to use a high street letting agent to manage their property/tenancy to start with if they’re unsure about which route to take. To some of my regular readers this may seem conflicting, because my philosophy on life has typically involved the demise of high street letting agents and their bullshit smuggy tactics, and I’m pretty sure I’ve written several feisty blog posts on why everyone should avoid letting agents like a bucket of anal warts. Strangely enough, if you had asked me a few years ago, I would have advised the landlord to fuck letting agents right off, and go it alone. But I stand here today with a different mindset, and I’m not even sure what changed. Perhaps I’m just wiser.
While I’ve had very few positive things to say about letting agents in recent times, I need to clarify that my opinions were formed from the perspective of a relatively experienced landlord, and I think that’s a crucial factor. I actually believe letting agents are suitable for three types of landlords 1) the inexperienced 2) those that want minimal involvement 3) overseas landlords. Every other landlord should be focusing on managing their own properties, because the figures don’t stack-up as well when using a high street letting agent and it really isn’t that difficult to do, especially if you find good tenants.
If you have zero experience as a landlord and you’re unsure which direction to take, then I would definitely advise using a letting agent, at least for the first year anyways. But let me explain a little more…
Learning from letting agents
The reality is, at least for most regular landlords, being a landlord isn’t as simple as collecting rent and taking advantage of some poor donkey that can’t get onto the property ladder to pay off the mortgage. Don’t be fooled by the pretty picture I paint of my lifestyle, it’s all smoke screens and mirrors, manipulated to mask the true bullshit nature of my poor and isolated existence. At this point, I’d just like to say, having you guys around.. well, you know. Just thanks.
Behind the glamour, there’s a lot of industry red-tape, so-much-so that it all takes is a small case of inexperience to force a landlord’s assets to reduce into vapour. Landlords have a lot of legal responsibilities, which new landlords may not acknowledge or address… and usually don’t, not entirely anyways. A letting agent
will should (see what I did there?) ensure all your legal requirements are met e.g. securing the tenants deposit, acquiring an EPC and Gas Safety Certificate.
Aside from the legal jargon, there are other obvious formalities that come with being a landlord, like dealing with maintenance and repairs. It’s extremely rare (at least from my experience) for a tenancy to endure a year without requiring any maintenance. In fact, I’d be very worried if a tenant didn’t report anything during that time. When a problem occurs, a letting agent will contact the landlord and report the issue, and confirm what the next steps should be in order to resolve the problem. Going through small experiences like that will slowly make a landlord aware of how it all works (and how expensive it is to use the agents preferred suppliers. Just saying).
My point is, working with a letting agent is extremely useful and practical for gaining crucial knowledge and experience with in the industry, and it doesn’t even matter if you have a good or bad experience, because you’ll learn something either way. The premium rate you pay during that first year for a managed service from a letting agent will quickly be compensated for if you eventually decide to go it alone. You don’t really appreciate how extortionate and replaceable high street agents are until you gain a certain level of experience, and you can only really gain that experience by understanding the industry, and a lot of that is well learnt when working with an agent.
I’m the biggest fan of landlords managing their own properties, because I truly do believe it’s easy, and there’s so much money to be saved (mainly because letting agents are overpriced, in my opinion), but that initial knowledge gaining phase is best harnessed when sitting in the back seat. That’s an investment.
Finding a good letting agent
My main gripe with letting agents is that worthwhile ones are few and far between, but they’re definitely about (they’re all regular readers). But most of them shaft you left, right and centre, and they ruin it for everyone. Be under no illusion, finding a decent letting agent will be a challenge, and even when you find one, don’t be alarmed if you cry yourself to sleep due to their antics. Perhaps if good agents weren’t so scarce I’d be more willing to use their services more often, but it’s so hit and miss, it’s like playing Russian Roulette, and I mean that in the literal sense, because you may just end up blowing your brains out if you find yourself locking horns with an absolute dip-shit agency. It’s far less painful.
So while my advice is for new landlords to use a letting agent for the first year, the key is to find a reputable agent that won’t take advantage of your inexperience with their “quirky” pricing strategies and their blatant negligence and disregard of the law. For further reading, here’s a useful guide on how to find a good letting agent.
Something that landlords should be particularly wary of when choosing their letting agent is the contract agreement between landlord and agent- they’re often riddled with nasty clauses, designed to extract every penny out of the punter. For example, some agents won’t let the landlord keep the tenants if they decide to depart from their services. It’s a pretty outrageous clause, because the landlord initially paid for them to find the tenants. Read every clause carefully and ensure they’re not keeping you locked into their unsavory web of deceit.
After the first year
Most tenancies are fixed for 12 months, and after that year I would expect a landlord to have gained some limited experience, even while having little hands-on experience. You’ll also notice a few other things:
- 1) you will have aged considerably quicker since you started dealing with tenants and agents. Get used to that. I’ve got grey hairs and wrinkles flying out of my arsehole, and I’m 12 years old.
- 2) you will have learned about the industry, even if you didn’t intend to. You won’t be an expert, you may not even be competent, but you’ll be much better equipped than you were when you first asked the question of whether you should use a letting agent or not
- 3) You’ll be in a better position to answer the following: “do you still want to manage your own property?” You may just realise you want minimal involvement and prepared to pay a letting agent to manage your property. Or you may even have a nightmare experience with an agent which will scar you for life and forever stereotype the bastards.
I just want to quickly refocus on the whole concept of finding a decent letting agent, because there’s one particular aspect with in that subject which is particular relevant during this stage. If you decide you’re ready for the challenge and you want to be the big-dick by managing your own property, there maybe issues keeping the existing tenants and prying them out of the letting agents grubby mitts (assuming you want to keep them). Some letting agents have the audacity to consider the tenants as their own even though you paid to source them. Essentially, some agents tie a “Tenancy renewal fee” into their contracts, so for each time you sign a new contract with the tenants they’re entitled to charge a fee, despite the fact you have wiped your hands with their services. In my opinion, good agents WILL NOT enforce this clause or any other that will make it difficult for a landlord to keep their tenants even after their services are no longer required. I advise landlords not to use agents that enforces those vulgar clauses. They’re shitty policies created to earn a quick-buck for doing nothing. Before using an agent, it’s best to ask what their policy/fees are in the scenario that you decide to abandon ship and tell them to stuff their shitty services.
For more information on this, hop over to the Tenancy Renewal Fees blog post.
The good tenant factor
When managing your own property, the success of the experience will largely depend on how good your tenant is, and in turn, how well you treat them. But the point is, there’s probably going to be a time when you land yourself a genuine dog-shit tenant, and when that happens for the first time it’s going to hurt. It’s going to hurt so bad. You’ll feel new levels of frustration and rage, and you’ll start to question your career choice, the legal system, and the integrity of your morals (because you will want to murder someone in the most sadistic way imaginable).
You probably won’t know what to do, you’ll panic, and you’ll probably regret managing your own property. But let me alleviate you from that irrational thought process- letting agents only take care of the day-to-day management, if your tenant turns rogue and defaults on rent for example, the responsibility and stress will always fall back onto your lap, whether you manage your own property it or not. The agents won’t lose a moments sleep over it. Ultimately, a good tenant is much more valuable than a good agent- you generally don’t need the latter if you have the former. No agent will care about your property and your best interest as much as you! It’s crucial to remember that.
Despite everything I’ve just said, if you want to go it alone and you feel confident from the get-go, I won’t discourage you!! In fact, DO IT! There’s plenty of resources and support on this website to assist :)
Over to you guys. What do you think? How would you answer the question?