Finding tenants yourself!
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. The best way to get started is by sniffing through the following…
- A Guide to finding tenants – a long list of ways to find tenants quickly and cheaply, including how to Market your rental on Rightmove via an Online Letting Agent; by far the best way to find tenants, in my opinion. It’s also how most agents find the majority of their tenants. In fact, if you’re simply here to find out how to find tenants quickly without an agent, go over to the online letting agent guide.
- If you want a 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.
And now, I want to comprehensively discuss “why” landlords should consider taking matters into their own hands (in case you’re not convinced).
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
Many 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.
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.