The cost of how much it’ll cost to rent out a property isn’t a topic that is discussed much in the industry.
But having this conversation, and an approach of transparency will help landlords, just like yourself, make a clear and informed decision on what routes to take when putting their property on the market.
There are loads of variables that’ll determine that cost, as usually the level and quality of service will dictate the cost of the service.
Costs Of Having No Agents
Choosing to go with no agent with undoubtedly save you money, and if you lead a relaxed lifestyle, it could suit you well, to take your time looking for and vetting applicants.
As a private individual, you usually wouldn’t have access to the backend of third-party websites such as Zoopla, or Rightmove. So, improvising with traditional window adverts, Gumtree, Facebook, SpareRoom etc will likely be your source of tenants.
If you decide to do this yourself, taking the time to go through their documents and paying for background checks will help you. As good tenants usually equal long-term tenants. Otherwise, the alternative will be having to do the footwork to find new tenants again sooner than you expected.
Costs Of Having An Online Letting Agent
There is a multitude of online-based letting agents that offer to market your property to let, then pass the management of the tenancy usually to yourself.
In some instances, there are options to increase the levels of service including referencing the tenants and guarantors, signing contracts, and even management of the duration of that tenancy.
As they are based far and wide, they can gain national recognition from potential applicants. Sometimes, for as little as £50, they’ll advertise on third-party property search websites to do the work of finding a tenant for you.
These companies are usually based nationally and are limited to being contactable via phone or email only, rather than face-to-face, which may not suit your needs if you’re looking for a personalised account handler to continue working with. Also, in most cases, you will need to do the viewing yourself.
Costs Of Having A Traditional Local Letting Agent
Traditional letting agents have been the tried and tested way to market properties to rent for years! Fun fact, the first letting agents ever opened in the UK, was way back in 1805!
Letting agents in your desired area will have historical data to determine the most competitive asking rents to maximise the rental income, but also to minimise the time a property is vacant.
You’ll normally encounter two levels of service, both of which have sub-services that can be included to make life a little easier for you. The first is a tenant find/let-only, and the secondly is a managed service.
A Letting Agents Tenant Find/Let-Only Service
A Tenant find/let-only service will do just as it says, find a tenant, vet, reference, and get them housed, then for continued tenancy management to be taken over by the landlord going forward.
An additional service that can usually be added on is a ‘rent collection’ service, the same rules as above apply, however monthly rent payments will be made to the letting agent to be recorded – or demanded if necessary – and statements to be generated for the landlord’s income records.
The cost of this service is classed as a letting fee which is usually anything up to or equal to the first months’ rent for a tenant find/let-only agreement, and expect up to 9% of the rental amount, as a monthly fee for the rent collection service.
Depending on personal experience in the property field, some may find this task to be something that a regular landlord can undertake and may not see the value in the service, and therefore can’t justify the cost.
It all falls dependent on if you have the time, resources, know-how and expertise to ensure complete compliance through the tenancy to carry this process out.
A Letting Agents Managed Tenancy Service
A managed service is one that is increasingly popular, a letting agent will oversee the tenancy for the duration and will usually only refer to the landlord when authorisation is needed for certain aspects. Most landlords are normal working and busy individuals, their having a rental property as a form of passive income is helpful, with the aid of a letting agent doing the necessary checks and ongoing management.
The cost of this service will vary, and a letting fee will incur – again, anything up to or equal to the first month’s rent – with an ongoing management fee charged monthly. Expect the fee to be anything from as little as 10% of the rental amount, up to 25%. The huge variance in this figure is due to the extensive levels of service that are on offer.
Usually, the bare bones of a managed service will be as followed:
- Marketing the property with photography, and something videography
- Accompanying viewings and providing the landlord with feedback
- Collecting the rent in advance as well as the tenancy deposit
- Registering the deposit with the relevant Deposit Protection Scheme
- Arranging EPC, Electrical, and Gas Safety Certificates
- Notifying the relevant suppliers of change in occupancy
- Preparing and supplying move-in statements
- Testing smoke and carbon monoxide alarms
- Receiving rents and providing landlords with statements
- Manage any rent arrears
- Regular reviews of the achievable rent
- Organise maintenance works
- Be a direct point of contact for the tenants
- Tax and rent recorded statements
- Maintain valid EPC, Electrical and Gas Safety certificates
- Arrange return of the deposit at the end of tenancy
- Assisting with end-of-tenancy settlements
- Arrange end-of-tenancy cleaning
For any services needed that are beyond the list above, you’ll either have the option to pay individually, or have some of the following included, at a marginally higher cost of the monthly management fee to make the level of landlord involvement smaller, and smaller.
The following services are ones that are offered at a premium, for the reason that they can require more work than is expected from a regular tenancy:
- Referencing of guarantors
- Cutting and testing of keys
- Online portal access to view statements
- Negotiation and preparation of tenancy agreements
- Right to rent follow-up rechecks
- Periodic property inspections
- Renewals of the tenancy agreement
- Obtaining two or more quotes for remedial works
- Dispute handling, evidence collection and submission for end-of-tenancy deposits
- Serving of notices
- Purchasing items
- ‘Featured’ property listings
- Rental insurance cover
- Dealing with insurance claims
- Obtaining quotes for general redecoration or refurbishment
- Court appearances
- Annual statements of income and expenditure
- Preparation of documents for court attendances
- Statutory declaration submissions
- Land registry searches
- Changes in ownership costs
- Vacant property management services
- Abortive lets
- To manage major works costing over £1000
- Making a payment outside of the UK
- Same day payments
- New and renewals of HMO licencing applications
- New and renewals of selective licencing applications
- Safety alarm installations
- Non-residential landlord’s monthly tax administration fee
As you see, there is an extensive list of potential work that is entailed with owning or managing a rental property. And that list is not exhaustive, there are plenty of other points that can be added on as part of managing a property.
Depending on how much you’d like to be covered will determine the management cost the letting agent will quote you. A higher level of service will always equal the amount of cost involved to carry the workout. A managed tenancy needs an individual who is well-versed in their field, compliant with compliance measures, and has great customer service skills to communicate in a clear, calm, and concise manner.
For some, however, the costs of having a managed tenancy may be too high. For example, a landlord with a mortgage that has an already limited margin of profit between the rental amount, maintenance & upkeep, and the mortgage repayments may not be able to find it sustainable to pay for ongoing management fees. Someone who has time to spare, or is retired, could find it suitable to manage their property going forward as they have the time to spare and to research the relevant topics to stay well-informed about the ever-evolving property market. Having said that, the industry is vast, and legislation is changing at a faster rate now than ever before.
So, what now?
Weigh up the variables within all the considerations I spoke about above:
- Work out whether you’re well-informed enough to take on such a task and the risk associated with it and save some money in the process. Or if it’s best for you to instruct a professional to handle it for you for complete peace of mind.
- That you’ll have the availability and time to ensure the maintenance and ongoing compliance measures will be at the forefront of your mind throughout any tenancy you in the property
- And what you’ll be able to afford, whether it’s the bare minimum of finding your own tenants, the compromise of having a tenant find service and overlooking management yourself or being able to pass management over to a letting agent, absolving you of most responsibilities of an ongoing tenancy.
You’re likely to find like-minded individuals on landlord forums, easily found on the internet, facing the same questions, worries, and concerns that you are. Do research, and if needed, speak to local letting agents to enquire about their levels of service and how it fares against your ideals of tenancy management.
Give us a call to see whether we can help you move forward!