Should I Use a Full Property Management Service?

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 £49. 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! 


Join OpenRent today.

11 Replies to “Should I Use a Full Property Management Service?”

  1. I wholeheartedly agree with your statements in principle regarding agency management for landlords able to commit their own time and effort to managing their properties.

    But you do not mention the pre-letting viewings, which can be very time consuming, and which you charge not a small sum for, which I appreciate is necessary wherein you are not necessarily represented in the area.

    Also the checking in and out at each end of the tenancy, including inventory and condition checks. Together with the regular property inspections during the tenancy term. Also potential claims for bonds, disputes and support with legal resources against bad tenants.

    Then there is the inspection and organisation of repairs and renewals, not an insignificant task.

    For me as an overseas landlord, there is little choice but to engage a full management contract to look after my properties and tenants.

    When I was resident in UK I managed my properties and was delighted with your advertising service and broad access to the usual online portals. I have certainly considered self managing whilst overseas with your services to back it up, but do not feel they are comprehensive enough or competitive, considering I have a 7% management fee arrangement.

    I applaude Openrent for the services you provide and would recommend you highly to other landlords for the marketing and contract services you excel at and at a very fair price. But you have a long way to go before the full management service is practical and cost effective for absentee landlords.

    As long as you can accept a management company will unlikely provide the service you can maintain by self managing, they can be an asset to maintaining your letting business, providing you find a good one, if you cannot commit the time and effort yourself.

    1. My estate agent will do the viewings, whether it is find a tenant only, or some kind of management contract. If I hire OpenRent to find a tenant, and I am an absentee landlord how are viewings carried out?
      Also, Tenant Checks which I consider absolutely essential and required by my Rent & Legal Guarantee Insurance?

      1. Hi Anna,

        It seems mad to me to pay 15% of your income for the whole tenancy, which could last years, just because you don’t want to use a standalone viewings service. You can easily arrange viewings using our viewings partner, Viewber. If that’s all you want a managed service for, then you will save thousands over the course of a year or two.

        We offer tenant referencing at £20 per tenant, and if they pass, you have access to our insurance policy, which costs just £89 for a year and is a market-leading product. We let over 100,000 properties per year and use that volume to negotiate fantastic deals for our landlords.

        Sam

        1. Thank you ffor prompt reply Sam.
          My local estate agent has a find -a-tenant only service, including viewings and tenant checks for a very reasonable fee.

          If OpenRent carry out a thorough tenant referencing service, backed up by insurance that sounds like a good plan.

          I live nearby my properties at the moment, and as you say do not find it difficult to manage them myself.

          It is the initial setup – especially viewings – which I prefer to handover to an agent. So whether I will be better off using Find Tenant Only with local estate agent or OpenRent together with Viewber will depend on how Viewber charge for viewings. Do you have info on this?

          1. Hi Anna, Sure, just click here to see the pricing. You can book individual viewings, group viewings or ‘open houses’ if you want it to be cheaper. It is a one-off upfront cost. Even if a tenant find service is around 7% and you need five Viewber viewings, you would still have make your money back on savings after just two or three months, and then have no additional fees to pay for the rest of your tenancy, which could last years.

  2. POTENTIAL COMPLAINT TO ASA;
    I am concerned by this extremely misleading article stating libellous and frankly false statements in relation to letting agents and FM fees. I have been director of my own company for 15 years until I sold my lettings business last year so am well aware of the facts. You imply agents charge an average of 15% which is simply untrue in this market place. More alarmingly you advise that when an agent carries out a GSR or other mandatory test they actually CHARGE for it (why wouldn’t they?) and this the FM fee becomes £xxx This is simply a false statement amongst many others. The FM fee remains exactly the same and the LL pays for his own GSR which is correct. The FM fee is fir managing and arranging said tests etc not for paying for them. How could any agent function this way??
    Your service suits me as I am an expert in the industry however I find your comments very worrying for the majority who have no clue on the ever changing lettings legislation and red tape.
    Your comments regarding these fees is misleading and false. If you do not amend or remove them within 14 days I will take my complaint to the ASA.
    You provide a decent enough service for the little you do however you show your weakness with lame such articles.
    I suggest you employ more qualified personnel to write your newsletters!

    1. Hi Sarah,

      Of course I admit we have a horse in this race so to speak — we want landlords to ask whether full management, or FM as you call it, is good value. We don’t think it is.

      I don’t mean to imply that agents charge an average of 15% for management. If there is a specific part of the post that you think claims that, please quote it and I will look at changing it. Our biggest single competitor in our biggest market (London), is Foxtons. They charge 20.4%. So I don’t think it’s unfair to say that “High street agents take up to 15% of your rent”.

      I’m happy to clarify the point you raise about additional services and monthly fees. This is exactly the practice I am calling out. Agents charge huge annual sums for ‘full management’, but then add further charges for things that are actually essential to managing a property. This is precisely my point. Why can an agent get away with charging a monthly fee for ‘FULL management’ and then charge an additional £50 for something that is legally obligatory (i.e. essential for all) when managing a property? For landlords this fee is (1) not at all obvious and (2) very bad value.

      I did not mean that the monthly % rises, I meant that the total amount of money that the landlord pays as part of managing the property has now increased, despite the monthly fee claiming to be for FULL management.

      Thanks for pointing this out. I will clear the wording up on this to make sure it’s clear to other readers.

      Sam

  3. Thank you very much for your blog and general advice.
    It is the first time I used OpenRent instead of a letting agent to procure a tenant. Everything went quick and well, I even got a higher rent, with no lower offer, which I got regularly from the letting agent. I am very satisfied with the ease of use and level of detail and assistance of the OpenRent online service. Thank you for the additional information that comes up on your website and blog.
    Keep it going this way!

  4. I often ‘manage’ properties for domestic landlords and don’t charge a monthly fee. I charge for my time only. I never understood why people pay letting agents monthly, to do what exactly? Especially when I realised you still have to pay all the licences and repairs on top of the monthly charge anyway. Makes no sense at all. Either do it yourself or hire a Virtual Assistant in your area who will only charge you as and when their services are needed. Open Rent is an excellent service and clearly also gives excellent advice!

  5. I can’t agree more but yes this article does stretch a point in places perhaps but sadly from my own 80 years equivalent experience as a Landlord it’s all too true.
    I have been so frustrated over the years at the poor service we’ve received, most recently from one of the big names, and I’m fed up with being let down and feeling ripped off.
    We’ve just taken over managing our own properties with the help of OpenRent and are delighted with how well it all works and so are our tenants. We’ve been doing so much for years ourselves where we were continually let down so this was the right move for us and we’ve heard of others doing the same.
    It was always “Come the Revolution …” well now it has thanks to OenRent.

  6. I live overseas and have never used a full management service as I believe they are a full rip off. Through open rent I had a choice of excellent tenants and I have dealt with all issues from cambodia where I was living at the time. I simply contact trades people who I have worked with before transfer the money and they do the job. Open Rent provides an excellent service the estate agents have had it their own way for too long and everyone seems to have a story of poor service and extortionate fees from them.

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