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How Much Letting Agents Charge & Cheaper Alternatives
- Saulius Bertauskas
- Sep 24, 2010
- 8 min read
If you’re looking into the financial costs of using a letting agent, the odds are you’re about to enter the game… welcome.
Since yesterday, I’ve been bitterly leading a tenant-finding campaign. I say ‘bitterly’ because any self-respecting and reasonably sane landlord knows that finding and/or replacing tenants, particularly good one’s, is always a despicable chore, and never a pleasure.
One of the most undesirable aspects of the process is dipping into the coffers to fund the marketing, whether it be by paying a local agent (which is landlord hell) or utilising one of the other alternative means.
But first, let’s take a look at their costs. Please note, none of my examples includes the fees required to comply with the various landlord legal obligations, such as Gas Safety Certificates and EPC’s. I’m purely discussing letting agency fees today. If you want an idea of what the running costs are to be a landlord, you may want to checkout my blog post on the financial costs of being a landlord.
The cost of using a local letting agent
To clarify, the fees used in my examples are based on real life average fees I would incur at this moment in time from the local agents in my area. However, while each agent will set their own fees and are usually open to negotiation, I believe the below should demonstrate and reflect how the majority of local high-streets operate nationally, so should provide an overall picture of the glaring discrepancy…Local Agent ServiceBased onIncludesPriceAgent Service
“Tenant-find” / “Let-only” ServiceBased on
2 Bedroom House, £750 PCM rent
Rental Assessment i.e. guidance on how much rent to charge.
Marketing (e.g. local and on portals like Rightmove and Zoopla)
Viewings
Tenant referencing & credit checkPrice £750One off + £120 annual tenancy renewal fee*Agent Service 12 month Full managed ServiceBased on 2 Bedroom House, £750 PCM rent
Marketing (e.g. local and on portals like Rightmove and Zoopla)
Viewings
Maintenance & repairs managementPrice £1830£750 + 12% of rent PCM + £120 annual tenancy renewal fee*
SHHHHHHHHHHHHEEEEEEEETTTT! How much?
* Tenancy renewal fees are tragically nasty thorns ALL landlords should be wary of. Essentially, if you source a tenant from a local agent, most of them will ask for an annual fee for you to ‘retain’ that tenant, even under a “let-only” service. It’s daylight robbery as far as I’m concerned, because we already paid them to find the tenant, yet they expect us to continually pay a tariff.
My local agents’ charge £120 and that’s comparatively reasonable (on the basis that the principle of the fee in itself is reasonable, which it is not). I’ve heard of some agents charging the equivalent of the initial full finder’s fee per year. So in my case, it would be £750. The agent’s that charge those insane rates can royally do-one!
Totally shameless!
Worthy notes…
Location – the ‘going rate’ of letting services can vary by location, so I wouldn’t go entirely by any ‘national’ or ‘average’ guidelines. To get accurate costings that will be applicable to you, I recommend contacting a couple of local agents and working from there.
Haggling – don’t forget, letting agents are open to negotiation and are often prepared to lower their rates!
Local agents are too rich for my blood!
Now, I’ve personally ditched the local high-street letting agent like a bad cold long ago, because to put it bluntly, I’ve never felt like I’ve received enough value in their (my local agents) ‘professional’ service to justify the heinous fees, and I know many other landlords feel the same. In fact, I think it’s safe to say that there’s a general consensus among society, from both tenants and landlords, that letting agents are generally bloody expensive. Of course, it’s fair game when you actually feel like you’re getting some bang for your buck. But when you’re paying through the ass for a sub-par service, it quickly becomes increasingly frustrating! And that’s precisely why I started investigating my other options. Best decision I ever made.
Ultimately, using a local agent isn’t even an option for me anymore, and I can’t see that changing in the foreseeable future. Every time I need to find a tenant I’m just reminded of how much money I’ve spent wasted on them, and how much cheaper it is to achieve the same result using alternative means. It’s truly a bittersweet sensation. On one hand I can’t help torturing myself by calculating the amount I’ve unnecessary blown on agency fees, on the other hand I feel liberated for eventually ‘seeing the light’- “I was blind, but now I see”
So since I’m currently going through the bittersweet emotions, I thought I’d highlight my realisations…
The objective of this blog post is to analyse the cost difference between the average cost of using a traditional high-street letting agent and other options available (e.g. doing it yourself), although it will probably seem like I have an agenda against agents. Ahhh well. I can only say that my intention is not to tar all agents with the same slimy brush or reduce their profession to dog-turd. Using a good local agent for the right price makes perfect sense for many landlords, but there are also too many landlords using them unnecessarily! They’re the landlords I want to liberate today!
The cost of ‘finding tenants’ without using a local agent (and my preferred method)
A common misconception among novice (and even experienced) landlords is that we need a local agent in order to find tenants efficiently, consequently we have no choice but to bow down to their obscene fees. FALSE! That really isn’t true, especially in this digital age.
You and I may not [allegedly] be as professional, knowledgeable or skilled in the trade as the ‘professional local agent’ (which is the common go-to rebuttal when agents hear of landlords going all independent), but my point is I haven’t received value from the professional service I have received so I refuse to continue funding it.
In any case, I’m going to break down the costs of acquiring a tenant since I stopped using my local high street letting agents…D.I.YBased onIncludesPriceAgent Service
“Tenant-find” / “Let-only”Based on
2 Bedroom House, £750 PCM rent
Rental Assessment i.e. guidance on how much rent to charge, Free
Marketing (e.g. local and on portals like Rightmove and Zoopla), £60
Tenant Viewings, Free
Tenant Referencing & Credit Check, £12Price £181One off
* The Professional Photography & Floorplans service is truly optional. I’ve found great tenants without them on many occasions, but to do a fair comparison between the two means, I included the cost (because most high-street agents include them as part of their package). Also, bear in mind, you’ll only need to pay for professional photos once because you’ll be able to reuse the same ones over and over, unless your property goes through dramatic alterations.
The easiest way to get started on the D.I.Y solution is by using an online letting agent…
So that was the comparison for the “Tenant-find” / “Let-only” Service (the “fully managed” is a little trickier, which I’ll address shortly). Evidently my D.I.Y method is a shitload cheaper, but it does require greater investment of our time, which should be valued and not forgotten (not that the agents on the other side of the argument wouldn’t remind us, and perhaps rightly so). Our time is precious! So I’ll leave it in your capable hands to value your time.
Personally, I find that even after investing my own time (on addressing the tasks that I’d otherwise have to pay an agent to complete) it still makes more financial and practical sense to do it myself. The process of finding tenants is like any other process- the more you do it, the easier and more efficient it becomes. Moreover, you continuously learn different ways of improving the process. For example, the biggest time consumer by far is taking viewings, so I do all my viewings in block-sessions, one after another i.e. I pick two days out of the week and organise my viewings on those days, so I get them all out of the way relatively quickly.
The cost of a ‘Fully managed’ service without using a local agent
As mentioned, it’s a little trickier to D.I.Y the “fully managed” service.
Actually, what am I talking about? It’s impossible. The entire point of landlords using a “Fully managed” service is to have someone else to manage their property e.g. handle all the irritable repair & maintenance calls (which isn’t necessarily the case when a landlord is only after a pure “tenant-find” service), so it’s a complete contradiction to D.I.Y.
But just to clarify, if you want to save a shitload of money, one of the best ways is by managing your own BTL. It really isn’t that difficult as long as you do your due diligence when finding and referencing your tenant. A good starting point to help determine whether managing is a viable and sensible option for you could be downloading my free guide for new landlords. Fair warning, it hasn’t won any awards or been critically acclaimed by anyone important/influential, but I’ve been told it’s alriiiight!
That said, if you’ve done the decision making and concluded with ‘fully managed’ being the best solution for you, you do have a cost-effective online alternative to your local agent. Not really surprising though, considering that in this digital age there’s pretty much a cheaper online solution for everything.
Here’s a list of online letting agents that provide worthwhile fully managed services, some of which provide viewing services (for an additional chunk of change, mind you). The best part about them? Unlike with high-street agents, you won’t be tied into any lengthy contracts, because they all operate on a month-by-month contract…Letting AgentRatingContractNotes / IncludesPrice Howsy
Rating 4.4 TrustPilot Reviews Duration Month by month Notes / Includes
Full Management Service
£0 up-front - nothing to pay until tenant moves in.
Tenancy agreement drafted and signed.
Rent collection service.
24/7 phone support.
24/7 repairs and maintenance support.
Inspections: full photographic reports after 3 months and then 6 months thereafter.
Access to legal helpline.
Key holder service
Free legal helpline
Negotiate renewals on your behalf
Online platform gives you visibility over your portfolio, including overseeing repairs, statements etc.
Optional Extras
£149 Tenant find service.
£300 for hosted viewings. Covers 30 days of unlimited viewings.
£95 Professional photos for marketing
Pricing & Discount explained
*£45pcm price is based on one years' fee and with the usage of the discount (which qualifies you for 3 free months service). Normal price is £59pm.
*£67pm for properties inside of the M25 with the usage of the discount (which qualifies you for 3 free months service). Normal price is £89pm.
**Sign up to get the first 3 months FREE if you mention you came from Property Investment Project. Price *45pmInc VATPrice shown with discount!
Discount availableVisit Website**First 3 Months FREE using link above! 99 Homet
Rating 4.9 TrustPilot Reviews Duration Month by month Notes / Includes
Full Management Service
Will market your property on Rightmove, Zoopla + more.
Free online valuation
Viewing & Enquiry organiser
Tenant referencing
Contract drafting & Digital signing
Deposit registration
Letting board
Offer negotiation
Professional photos and Floorplan
Property dashboard to control and check progress on your advert
Inventory
Legal assistance
Periodic inspection
Maintenance
Notifying the local council and utilities providers of the new tenant details
Rent collection, including chasing arrears, and issuing late payment notices as required
Annual rental tax return statements
Gas safety check & Carbon monoxide test
CP12 certificate
24-hour UK helpline. (T&C apply)
Optional Extras
£300 for hosted viewings
*Exclusive £40 discount code: 99PIP40 Price *£39 + £85pmInc VATNormal price: £79 + £85pm
Discount availableVisit Website£40 Discount Code: 99PIP40 Letting A Property
Rating 4.9 Review Centre Duration Month by month Notes / Includes
Complete Package
Solution for Rent Collection & Guaranteed Rent, Home Emergency Cover and Legal Cover!
Advert on all major property websites, including Rightmove & Zoopla
Rent paid on time - paid to you on time even when the tenant doesn't pay!
Full tenant referencing (2 x people)
Digital tenancy agreements
Deposit secured
Holding fee service
Dedicated advisor
Guaranteed rent
Legal helpline
Legal expenses
Eviction support
Home emergency cover
Dispute resolution
Free tenancy renewals
Read about my fantastic Experience With Letting A Property To Find Tenants
*Landlord pays one-off £149 upfront, and then £99 per month. Price *£149 + £99pmInc VAT
Promo runningVisit Website
Please note, I try my best to keep the information of each agent up-to-date, but you should read the T&C’s from the agents’ website for the most up-to-date information.
If you’re not in the loop about online letting agents and how they work, you really should read my complete guide on online letting agents. That blog post alone could save you a gazillion quid!
Conclusion
How do I wrap this up?
Hmmm.
Ok, so I’m not denying the need or requirement of the traditional local letting agent, although I can’t help but feel they’re a dying breed as other options are becoming available. I guess the entire point about this blog post is to make it apparent that there are significantly cheaper alternatives to the traditional route… if you’re interested in them, that is.
Either way, do your research and due diligence… and, good luck :)
If you have any questions or experiences to share, grab the mic and speak up. I’d love to hear all.
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