Letting agent fees
Got a property to rent out but unsure how much letting agents charge to manage a property? Read on to find out about letting agent fees for landlords.
With renting on the rise, there’s never been a better time to rent out your property. According to a recent government survey, the percentage of people privately renting has risen by 7% in the past 10 years, which is great news for landlords.
Following on from our step-by-step guide on how to become a landlord, it’s important to understand the type of service you might require from a letting agent. As a landlord dealing with agents, it’s important to know the ins-and-outs of letting agent fees.
Here, we’ll explain what letting agent fees are, help you estimate the costs involved in using an agent and even provide some quotes via the above form.
In this article, we’ll cover:
1. What are letting agent fees?
Letting agent fees are payments made by both landlords and tenants to a letting agent for the services they provide. Services include: sourcing tenants, maintaining the property and the renewal of tenancy contracts.
Using an agent can take the stress out of renting out a property. Letting agents have an understanding of the policies surrounding tenancy agreements, providing peace of mind in regards to the law.
However, it’s important to be agent-savvy. Keep reading for more information about the different types of letting agent services available, so you can decide on what best-suits your budget and requirements.
2. How much do letting agents charge?
When using a letting agent, you will usually choose one of three plans.
The following table explains the associated fees for letting a property with an agent:
Full management10-15% of monthly rent
All above services, plus:
✓ Full management of property, including all maintenance and repairs
(Any maintenance costs will usually be deducted from the rent that you receive)
✓ Agent will act as a point of contact for tenants
Note: Always read the small print! Letting agent fees are often higher and can vary more widely in London, so don’t forget to confirm how much a contract will cost.Think about which plan would best-suit you as a landlord. For example, a tenant-find only plan means that you will have contact with your tenants and get to know them. This can be reassuring if the property used to be your home and holds sentimental value.Opting for a tenant-find and rent collection service avoids the awkwardness of chasing missed payments. Full management suits those landlords who don't live within the vicinity ofto their property, and cannot easily travel for maintenance.Are letting agents essential?There's no obligation to use a letting agent at all (and no agent means no fees). Aside from the cost, using an agent can also create an element of distance between you and your tenants.
Emily Murdoch explains why she much prefers managing the relationship with her tenants directly:
“I find dealing with tenants myself results in a much more positive human
exchange. This transcends the pure business model and is more holistic
and emotionally healthy for all concerned.”
However, bear in mind that while it may seem more cost-effective to manage tenants yourself, being a landlord can be a demanding role. For some, it even constitutes a full-time job. Being unable to find tenants, or struggling to collect rent, could cost you just as much, if not more, than using an agent.
Letting agency fees case study:
Independent landlord Henry Ward uses a full management service for the property he rents out in Stourport. Full management suits Ward well as he lives in Liverpool and – as he only rents out one property – he uses a small, local letting agency.
Ward charges his tenants £780 per month, of which the letting agency take a 10% cut (£780 x 10% = £78).
So, once this figure plus VAT has been taken by the letting agent, Ward receives £686.40 each month. Any maintenance contracted by the agent upon the property is further deducted from this figure.
3. Top tips for landlordsIt’s really important to choose the right agent for you and your property. So, here are a few things to keep in mind when selecting your letting agent.Think about the size and scope of an agency
- Smaller, local agencies have an intimate knowledge of the housing market in a certain area, and will be able to reach the property quickly if necessary. Larger, national agencies have a wider scope, and can be a better option for landlords looking to rent out multiple properties in various locations.
Look at how they advertise their properties
- Note if the agency you have in mind advertises online, offline, or both. Which websites and/or publications do they use? Professional photographs of the property can really help attract good tenants;, find out if these will be taken by the agency, and, if not, provide them yourself.
See what others think
- Make sure a potential letting agency has a good reputation with other landlords and tenants (online reviews are a good way to do this). If an agency has a positive image within the industry, this will improve the chances of a tenant wanting to rent through them.
Watch your contract
- Typically, a letting agency will require a two-month notice period. However, some contracts have a six-month notice stipulation, so always read the small print to make sure you know exactly what you’re signing up to.
4. How to check if an agency is credibleIf the agency you choose is registered with The Property Ombudsman, this will mean that its understanding of letting best practice and tenancy law is up to date, making the agency more credible.Also, you may want to ensure that the agency you choose is a member of further professional organisations in the housing market. For example, look out for memberships to the Royal Institute of Chartered Surveyors (RICS), the National Approved Letting Scheme (NALS), or the Association of Residential Letting Agents (ARLA).Membership to a recognised, authoritative body shows credibility, as the agency will be expected to comply with the laws surrounding tenancy deposit protection and rent as well as hold professional indemnity insurance.What's next?Now you know whether or not you’ll choose to use a letting agent, and which plan you’ll opt for if you do, the next step is to start letting out your property. Use the form at the top of this page to get some letting agency quotes.
|Tennant-find only||3 or 4 week’s rent or 6-8% of the entire tenancy contract||✓ Finding tenants
✓ Deposit collection
✓ Reference checks
✓ Tenancy agreement
✓ Inventory management
|Tenant-find and rent collection||8-12% of monthly rent||All of the above, plus:
✓ Collecting rent