Letting Agents, Luxury or Necessity?

This month I want to visit the role of letting agents and to establish whether they are a luxury to assist your business, or an indispensable part of your business. A recent report from the UK Association of Letting Agents (UKALA) stated that 47% of landlords would forego the services of their letting agents if their profits began to fall.

This is an interesting concept, particularly given the profit implications as a result of Clause 24 (the so-called Tenant Tax). It is suggested that almost 400,000 landlords could be pushed into a higher tax bracket as a result of the changes, and therefore a decline in their profitability could seem inevitable.

Interestingly over a quarter of those surveyed that use their agent for a full management service would go it alone if their profits started to fall. I can only assume that their agent is one who does not perform the function to its fullest extent – as if they did, the landlord would cut anything from his running costs before releasing their agent.

In my view, a professional letting agent is truly worthy of their fees and should be an integral part of a landlord’s property business. The problem is that many letting agents are simply not up to the job.

Indeed, I wonder whether the survey results would have been very different if those who had responded utilised the services of one of the very best firms out there.

The initial role which the agent will take away from you is the time-consuming chore of arranging and attending viewings with prospective tenants, and going through the referencing process. Their service, however, is much more than that.

The professional letting agent should have a complete understanding of landlord and tenant law, from creating to ending a tenancy and everything in between. Furthermore, they should be well versed in legislation surrounding HMOs: Selective Licensing, as well as the legislative requirements surrounding gas, electricity, and legionnaire’s disease, to name but a few. Reading of the 1985 Landlord and Tenant Act and the 2004 Housing Act should be just the beginning.

The issue I find is that many agents haven’t even read the legislation, let alone understood it and developed an ability to interpret it in real-life situations. Nor have many had any formal training in dealing with contentious issues, debt recovery, or enforcement matters.

Until the industry exudes best practice, then landlords in increasing numbers may look towards self-managing or utilising one of the many low cost online options that are becoming available.
On the other hand, if you already engage one of these property management superstars, then you should think twice before you dispense with their services. A great agent will doubtless save you more than you pay them in terms of obtaining the correct rent level, encouraging longevity of a tenancy, managing expectations, and collecting rent. In addition, they will be fully up to date in respect of the ever changing legislation.

If they are performing this service superbly, then your time is certainly better spent on other aspects of your business.

If you are using an average (or even hopeless) agent, then by all means dispense with their service … but before you consider self-management, consider finding an expert out there.

The difference will blow your mind.

Having owned and run both a prop-erty management firm and tenant eviction company, I know what I am talking about here. In my view, there should be more agents who qualify with ARLA, and there should be an advanced ARLA qualification, which would be the gold standard for agents and proprietors of lettings businesses.

If agents prove their knowledge and prove their worth then I am sure that landlords would seek to retain them and remunerate them sensibly. Instead, many seem to have a “pile them high, sell them cheap” approach and a race to the bottom with fees.

Property professionals are not afraid of paying for service. It is just sad that such a service is seemingly not universally available. Self-management is doubtless a chore. You are unlikely to be resourced to attend to those midnight maintenance requests, liaise with housing benefit officers, collect of rent and arrears, and even less likely to enjoy the challenges that such a role brings.

Notwithstanding, the acid test should be: if you could do a better job than your agent at managing your portfolio, then you have selected the wrong agent. This is not a decision whether you should manage the property yourself, but rather which agent you should engage to do it for you.

You decided to be an entrepreneur and develop a property portfolio, liaise and network with other landlords, and grow your own business. These goals are inconsistent with managing your own portfolio; and presumably if you had wanted to be a letting agent then you would be one by now.

Play to your own skillset: use an agent… but use a really good agent.