Why Use a Lettings Agent?
A condition of most buy-to-let mortgages is that the property must be managed by a managing agent. Most of the mortgage lenders go further and insist that the managing agent is a member of the Association of Residential Lettings Agents (ARLA). This condition is imposed because the lenders know from experience that a good agent will significantly cut down the risk of something going wrong with the tenancy.
If you are buying an investment property for cash you could decide to handle the letting of it yourself. However, I would advise you against doing so. A good agent will add value at every stage of the process. By finding a better tenant, negotiating a higher rent and avoiding subsequent problems a good managing agent could earn their fee several times over.
Let Versus Full Management
Most lettings agents offer three kinds of service:
Let only
This means that the agent will find a tenant, check their references and move them in. Thereafter it will be the landlord's responsibility to collect the rent, manage the property and deal with all repairs. The typical cost of a let only agreement is around 10% of the rent agreed plus VAT. It is usually payable in one lump sum at the start of the tenancy. A further fee is often payable if the tenant renews the agreement.
Let plus rent collection
The agent will find a tenant as above but will also collect the rent on your behalf. However, you will be left to look after the property and to arrange any necessary repairs. The typical cost of the rent collection agreement is about 12.5% of the rent plus VAT.
Full management
The agent will find a tenant and collect the rent as above. However, with a full management agreement they will also look after the property and arrange all necessary repairs. The typical cost of the full management agreement is around 15% of the rent plus VAT.
Most landlords go for the full management option. It is a condition of most buy-to-let mortgages and most other investors find that the convenience is worth the cost.
