Unlike estate agents, letting agents are not controlled by any form of regulatory framework, leaving them more or less free to do what they want.
This news raises obvious concerns for residential landlords who use a letting agent, or who are thinking of using one in the near future.
Most landlords would agree that a good letting agent reduces the workload and stress of managing a property portfolio, but what steps can landlords take to avoid the potential pitfalls and risks of using letting agents?
1. Self-managed Properties
Once you have found a suitable tenant and checked them into your property, there is very little for you to do after this point other than: maintain the property; do an annual gas safety check; renew your landlord insurance and last but by no means least, check that the rent is being paid. So long as you've got a good tenant you should not have to do any more than this – so the trick is to make sure you get a good tenant.
To ensure you get a good tenant we would recommend using a letting agent to provide you with a Tenant Find service. This service involves:
• Promoting the property
• Making viewing appointments
• Assisting tenant viewings
• Vetting and reference checking tenants
• Taking the first month's rent and tenant bond
• Completing the inventory schedule
• Signing up and checking in the tenant.
A good letting agent will do a thorough and legally watertight job of tenant your property. However, to ensure that your agent has done its job properly and that you are happy with everything, we recommend that you always check the paperwork before the tenant is formally offered the property.
Make sure the agent is using an Assured Shorthold Tenancy agreement containing terms and conditions that you are happy with. Check the tenders application form, references and other documents for consistency and raise any concerns you may have with your letting agent. If you are not reassured by any explanations given to you, reject the tenant and ask your agent to continue with their search.
Always remember that it's your property and you have the final decision on who you chose to let it to.
Once the agent has checked in your tenant on a Tenant Find only basis, it then becomes your responsibility to manage the property from this point onwards. At such point the agent will pass all relevant paperwork over to you.
We believe it is reasonably practical to self-manage a portfolio of up to 10 properties by adopting this strategy, although more experienced landlords may self-manage more.
2. Managed Properties
If you are very inexperienced at buy to let investment, incredibly busy or simply have too many properties to manage yourself, you may choose to have a letting agent manage them for you.
If you know of a reputable letting agent which you have complete confidence in, we believe it is still wise to check out the paperwork to make sure you are happy with everything before tenancy agreements are signed.
If on the other hand you have never used a agent before and do not know of one that you can depend on to do a good job for you, you will need to adopt a more cautious approach.
Most agents operate by taking the rent from your tenants and transferring it to you, after they have deducted property management fees, maintenance charges and any other costs chargeable to you for the payment period.
We feel this sort of financial arrangement should be avoided wherever possible, especially when you do not know for certain either the letting agent you are dealing with is trustworthy or not. After all, what other businesses do you know of which allow their revenue to be paid to a 3rd party before it comes to them? Imagine running a retail shop in this way!
To minimize risk particularly ones you have never worked with before, insist that rents are paid to you directly from the tenant and set up a direct debit to pay the agent's fixed monthly service charges. You may need, however, to put some kind of financial arrangement in place which enables your letting agent to carry out emergency repair work while you are on holiday for example.
If your letting agent charges you for any costs other than those you have previously agreed to, always make sure you get supporting paperwork to confirm the costs and question them if necessary. Where maintenance and repair costs are concerned, tell your letting agent that you want to inspect the property first and require written quotes, prior to instructing work to be carried out.
3. Choosing a Letting Agent
When choosing a letting agent it makes sense to focus your research on those which have an office or shop window presence in closest portfolio to the location of your properties.
These agents possess local knowledge of your area and are more likely to know how best to market your property and what kind of tenants to target. More importantly, their local presence will bring forth a steady flow of inquiries from prospective tenants looking to rent in your area, which will help speed up the tenant finding process.
Speak with a number of agents to compare prices and service offerings as these can vary broadly. Read reviews, seek feedback from forums and fellow landlords and weigh up the strengths and weaknesses of each letting agent.
When you have completed your research and made an informed choice, begin building a relationship with the agent you have chosen.
4. Maintain Close Working Relations
If you chose to manage your property portfolio through a letting agent this is a reasonable investment. To make sure you maximize your return on this investment, it is important to build a close working relationship.
Your letting agent plays a very important part in determining how successful you will be at making money from buy to let investment and the more you get on with them the better they will look after you, your property and your tenants.
5. Landlord Support
To help you make informed decisions and get the support you need to be a successful landlord and buy to let investor, there are a variety of websites that offer a wide range of useful tools and information.