High street agents take up to 15% of your rent to manage your property. That can easily be over £1,000 a year, per property. So even if you don’t want to manage the property yourself, you need to ask yourself whether this is good value — and seriously consider the alternatives.
Some landlords will always want their property to be ‘fully managed’ by a letting agent. They may live abroad, or want to pay someone else to make sure they comply with laws and regulations.
But when you look closely at what ‘full management’ is, it gets pretty hard to justify that 15% you are paying every month. Even worse, you are often paying additional fees for basic services like referencing and contracts.
What Is Included in a ‘Fully Managed’ Service?
‘Full management’ can mean any mix of property services provided after a property is let. We’re putting it in scare quotes because, as we’ll see, the ‘full’ list leaves off a lot of essentials.
A long list of services in a glossy brochure can sound impressive, but turn out to be a bad deal when you drill down into the details. Services are often poorly defined and hard to check — especially if you live away from the property.
For example, managing agents say they will sort out repairs, but it’s not like the cost for a plumber is included in your 15% fee. You have to pay the repair costs on top of your monthly fee, and you have no real way of knowing if they choose the best value tradespeople to do the job.
In fact, the agent may add a commission on to any work they order. That means they have an incentive to use more expensive contractors that cost you more money.
Managing agents should compare quotes and choose the best tradespeople, but at the end of the day they are not the ones paying. And if you are living remotely with the agent managing all communication with the tenants, you will have no way of checking that the work is done properly.
It Simply Doesn’t Add up
If a fully managed service was a good deal, then your 15%-per-month fee would add up to the cost of all the services provided, plus a reasonable profit margin for the agent.
But it doesn’t. Not even close.
The average rent in the UK is just under £1,000 according to the HomeLet rental tracker. If you are paying 15% for your managed service, you are paying £1,800 a year.
For that price, the letting agent will arrange for things like your gas safety certificate. It costs around £45 and you must purchase it every year. But the agent won’t pay that £45 from your annual fee! They will bill you for the additional cost.
That means the amount you have paid is now £1,845, despite the first £1,800 of that sum being paid for a full management service.
Repeat this exercise with Energy Performance Certificates (£70), Portable Appliance Tests (£50) and Electrical Installation Condition Reports (£120), and you may begin to seriously wonder what that initial £1,800 is actually meant to be paying for.
Even worse, you will be expected to pay large fees if you need a new tenant or want to amend your contract. You may typically pay £100 for an amendment. If you are changing a tenant, then pay an extra £80 for referencing.
Remember – all of this is on top of the £1,800 you are paying every year. So what exactly is that £1,800 a year actually paying for?
Are you basically just paying for a very expensive PA to call tradespeople?
Charging You for Things You Can Get Free
Many of the things provided in a full management package can actually be provided for free — and we would know, because we do provide them for free.
Rent collection is a great example. Letting agents will happily list ‘rent collection’ as part of their monthly fee. But if this really just means setting up a standing order, then this is something that needs to be done once and is then left to run. Why pay for it every month?
Tenancy renewal fees can be outrageous, but a renewal is usually just changing the dates on a contract and collecting the new signatures. Simple really.
Locked into a Bad Deal
If you pay an agent to find your tenant, and then also allow them to manage the tenancy, then you may be locked into using that agent for a long time, with steep fees for breaking the contract early.
Some contracts will require you to keep paying for as long as the tenants they found remain in the property. If you want to change tenants, then you are likely to be charged large referencing fees to get the new tenants vetted, and an additional ‘contract amendment’ fee.
Be careful that you are not locked into a bad deal when looking at a fully managed service.
Time to Ditch Your Managing Agent?
You could be losing as much as two months’ worth of rental income to your fully managed service and it’s hidden additional fees every year. And you’re probably not getting much out of it in return.
The alternative is to ditch the ongoing monthly fees for simple, one-off payments.
OpenRent can find your tenants and create the tenancy for just £69. We’ll handle many of your new-tenancy responsibilities and make it easy to stay compliant.
Never pay for anything you don’t need again. Time to reclaim those two months of rental income that are rightfully yours!