Do you have a second property you would like to let out? It may seem like an easy way to make money, but letting out a property can be a complicated business. You might feel tempted to cut out the middleman and let the property out privately.
Not having to pay agents’ fees will maximise profits, but unless you have a lot of experience in letting out properties, are willing to do some leg work and are aware of the laws and regulations involved, it isn’t advisable to go it alone.
Whether you are a professional landlord owning several properties, or a newcomer to the ‘buy-to-let’ market, it is well worth the effort to get some professional help from a letting agent.
What is a letting agent? What do they do?
A letting agent’s job is to find suitable tenants for a property on behalf of its owner. The agent begins the process by visiting the property to determine its potential rental income. This valuation is usually done for free.
Once you and the agent have agreed on the rent, the agent will advertise the property. This could mean anything from a photo of the house with relevant details in the agent’s shop window, to an ad in the local (or sometimes national) press or a property website.
The agent will usually show the property to prospective tenants and inform you of any interest shown or offers made on the property. They can act as a go-between during negotiations before a tenancy agreement is signed. The prospective tenant might offer a lower rent or ask for extra furniture to be provided.
Once you and the prospective tenant have come to an agreement, the agent will provide a tenancy agreement, a legal contract, for both parties to sign. All of this can usually be done through the agent by phone or post, so there is no need to actually visit the property or meet the tenants (although you might want to).
The services listed above are offered by most letting agents. Many also offer extra services, some of which might be included in their basic fees. Some agents offer a tenant vetting service, which could include taking up references or a credit check on prospective tenants, carried out in-house or by a sub-contracted company.
Thorough tenant vetting is important – the last thing you want to worry about is whether the complete strangers you have rented to will be able to pay next month’s rent. Often, this service is either included in the basic letting fee or paid for by the prospective tenant.
Some agents also offer an inventory check service. This is a full list of the condition and contents of the property drawn up during an inspection at the beginning and end of the tenancy, in the presence of the tenant. This should help solve any disputes if you find the tenant has ripped your curtains or stained the sofa and is refusing to pay compensation. Some agents will offer this service for free, others ask the tenant and landlord to share the cost.
Most agents also offer to collect the rent and deposit on behalf of the landlord and arrange to renew a tenancy when the original period expires. They can also arrange for the property to be cleaned before the tenant moves in and at the end of the tenancy.
Many offer a management service, which involves general maintenance and organising necessary repairs over the period of the tenancy. This is useful if you live away from the property or don’t have the time or inclination to deal with plumbers, electricians and other tradespeople.
Finding a good agent
If you’ve never used a letting agent before, the task of finding a decent one can seem extremely daunting. Metropolitan and suburban areas in particular are awash with agents all competing for your business.
As with most things, word-of-mouth is the best way to find a reputable agent. Start in the area local to your property and ask other landlords if they can recommend a good agent. It’s also a good idea to drive around the area, keeping an eye out for advertising boards outside properties that read ‘To Let’, or better still ‘Let By’. Make a note of the agents with the most boards.
Browse the web. Most established agents will have their own websites, and many are linked to nationwide sites dedicated to the property market.
The Association of Residential Letting Agents ARLA has a database of member agents, searchable by area. Using an ARLA agent is highly recommended. Although anyone can set up as a letting agent without any qualifications or experience, ARLA ensures that its members have basic industry qualifications.
It also requires them to comply with a stringent code of practice. All members are bonded, so that if a member does fold, owing money to clients, those clients can claim their money back. Members are also required to have professional indemnity insurance and procedures for dealing with complaints.
Many letting agents work alongside estate agents, who deal with property sales, based in the same office. While it can seem reassuring to go with a large agency, particularly if they are part of a recognised brand, some agents suggest clients receive a better service from specialist letting agents.
Some estate agents only have one desk dedicated to lettings and see it as a side business, preferring to concentrate on sales. Estate agents deal who mainly in property sales are used to short-term relationships with their clients, who they will probably never see again once the sale is completed.
They might not have the experience to offer quality, long-term, customer care needed in lettings.
What you should look for when choosing an agent
The most important thing is to shop around and ask lots of questions. Make sure you are clear on their charging structure, what is included in the fees and what isn’t. Most agents charge a percentage of the monthly rent as the lettings fee – 10% for the first year is standard. Sometimes this will include a fee for collecting the rent, but often rent collection is charged on top, as is the case with management fees (around 5% of the monthly rent).
Ask the agent how often they let out properties in your area. Go for an agent that has a lot of experience letting out your type of property in your area. Ask if they have an extensive client list – both landlords and tenants. Perhaps they can put you in touch with a landlord who has used their services.
You should also ask what type of tenants they typically let to. If you are marketing your property as a four-bed, luxury, family home and want it to be well cared for, you don’t want the agent showing the property to party-loving students.
They should have a history of letting to reliable, trustworthy people on a long-term basis. You want your tenants to pay their rent on time on a regular basis and stay in the property as long as possible.
You should also ask how the agent vets tenants. Some will do a full credit check, others simply ask for copies of bank statements or personal references.
Ask the agent how they intend to market the property. Small agents with limited resources might simply put a sign up outside the property and a small ad in their shop window. Bigger companies might charge a slightly higher rate, but they will have the resources to advertise in the press, which will reach more people.
Ask if the agent can provide rent guarantee and legal expenses cover. This type of insurance ensures you will be compensated if a tenant defaults on their rent and will also cover expenses for legal action you take to evict them. Some agents offer this cover for free.
Above all, a good agent is trustworthy. They should be happy to answer all your questions and be upfront about their fees, services and procedures. All the paperwork should be transparent and easy to understand. For standard lets, they should use a model of the Assured Shorthold Tenancy agreement, or something based on it.
This agreement is flexible and straightforward and is recommended by ARLA. Any terms of the agreement that are not standard should be explained clearly.
Remember, there is no need to stick to just one agent. If you feel there is more than one that could fulfil your requirements, use them all. In general, you should not have to pay any fees until the property has been let, but check this with each agent.
What happens next?
Once you have found an agent you are happy with, they should get the ball rolling quickly. They should keep you informed of any developments and interest shown in the property. You can ask to meet prospective tenants so you can get a better idea of who you are renting to.
If you have asked the agent to manage the property, they should keep you informed of any problems or work that needs to be done. Unless you have agreed otherwise, they should always ask for your approval before any work is carried out. If work is likely to be expensive, ask the agent to get quotes from at least two different tradespeople.
What to do if you have a complaint
If you are unhappy with the service provided by the agent, discuss it with them first. It is in the letting agent’s interest to keep you happy as they want to keep your business. They should be willing to listen to your concerns and resolve the issue if possible. A good agent will have a defined, complaints procedure.
If this doesn’t help, and they are a member of ARLA, or the National Association of Estate Agents, you can approach the relevant organisation with your complaint. They should be able to offer a mediation service, and have been known to revoke membership from members who have clearly broken their strict guidelines on professional conduct.
Failing all else, you can always seek legal advice from your solicitor.
Questions to ask an agent
- How long have you been letting properties?
- Do you belong to a professional association?
- How often do you let properties in my area?
- How quickly can you let my property?
- Do you have a list of tenants waiting for properties?
- How will you advertise my property?
- What type of tenants do you usually let to?
- How do you vet tenants?
- What are your fees? What is included and what isn’t?
- What will you do if the tenant stops paying the rent?