Landlords - do you use a letting agency and is it worth it?

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DH and I are investigating in a buy-to-let house, first one with our savings, no mortgage, as a long term investment for retirement income.

There is so much to research and I am inclined to use an agency for full management at least in the first year. If anyone can share the experiences, advice, mistakes to avoid and red flags to look out for in working with agency, I will be very grateful.

If you are letting directly to tenant, I also be keen to know if this works out better / easier. Thank you.

Why are you choosing this form of investment? I am a long term landlord and am just waiting for my tenants to give notice so I can sell up. The regulatory burden on landlords now is huge, with more coming, repair costs have gone through the roof and the returns just aren’t what they used to be. Plus the risks are higher now of getting a nightmare non paying tenant as you can’t get a section 21 notice and the court waiting times for other forms of notice are going to be long.

Can you describe why you think BTL is a good investment at the moment ?

To answer your question - I do use an agent and if you have a good agent, it's well worth the fee.
Do your research carefully. I'm more of an accidental landlord and it's not a short term investment. Tbh the real value is in the uplift of value of the property rather than the income. There's a lot of outgoings you need to be able to cover plus no income if you get a bad tenant.

What @Lacoutine said.

The days of the small, inexperienced landlord are over. Returns on capital are low and you can get as much, if not more, for your money if you invest in totally risk free NSI. Potential stock market returns would be much greater.

Say your headline rent is £2000 per month.
You will pay 10% to an agent for managing it - and they will find an endless list of things to inspect and repair at exorbitant fees using their own contractors.
Local authorities are introducing additional licencing fees.
You will need landlord insurance.
If your tenant pays regularly any profits will be taxed at 20% if you are a basic rate tax payer (including the rental income) or more likely 40% or above.
You will not see much capital growth in your life time. If you do, you will pay CGT when you sell or otherwise dispose of the property.
Renters rights legislation will mean you will need years to evict a tenant who does not pay or who is antisocial.

It really is not worth it.

We just use tenant find service from letting agent and then manage the property ourselves. If you have a decent property in a good shape you hardly get any repairs throughout the year so not much management is needed. Do get landlords insurance- we use simply business. Get rent guarantee with your insurance in case you have problem with your tenants. Most tenants are nice honest people but for occasional hassles it is good to be covered. Also ask the letting agent to discuss with you before finalising a tenant.

I do agree with pp about regulatory burden but so far I have found them okay. Most regulations for example safety certificates also benefits the property.

You might not earn a lot with a rental but if you are buying in a nice area then the return after selling the property after few years should bring you enough profits to make it worthwhile.

We have a rental flat - a managing agent is not “worth it” financially (they charge a bomb for fuck all 99% of the time, and yes their tradespeople charge double what a local tradesman would cost).

But for us it is worth it not to get woken up at 5am because the boiler needs re-setting (we aren’t local and both have demanding jobs we can’t just drop to sort out a leaking roof).

The ROI isn’t important to us as long as it doesn’t cost money - we used to live in it and expect to again in the future, so not worth selling up then buying again.

I won't comment on the BTL side

I don't use an agent. I did at first and they were awful. Slow to flag repairs (and therefore pissing off my tenants) and just looking for constant ways to charge one of us for something. I also trusted their vetting processes over my instinct with tenant choice and it cost me a fortune.

I much prefer managing it myself and having a good relationship with the tenant

Be aware that the legal responsibilities are yours - make sure you know the ins and outs of all of the processes because you need to be sure your agent is doing things correctly. It's not just a case of handing it over to them and sitting back and doing nothing.

I do, and they're so hopeless I'm thinking of sacking them off. Luckily tenent is a gem so we deal with most things between ourselves.

It's certainly an "interesting" time to be investing in BTL property, when most experienced landlords are getting the hell out!

We have had BTL properties for a couple of decades and will be selling up in the next two or so years. Assuming you are set on this means of investing my thoughts would be:

yes use an experienced agent - btw, full management fees are about 15%, not the 10% mentioned above! Ten percent will only get you a new tenant and the checks on them but not ongoing management. Because of our long-standing relationship with out agent and because we have more than one property we get a rate of 11% but they keep attempting to change that;

if you don't live close to the property and you don't have lots of good reliable tradespeople - plumber, LX, handyman etc on hand, don't even think about managing yourself;

hopefully you have a comprehensive spreadsheet and have worked out ALL the costs involved in letting and any fallow periods. You need a float of money to allow for any works which need to be done, including large works which may be urgent such as replacing a boiler. You must have regular gas and LX checks. Your smoke alarms must always be in date - and if they aren't, don't think you can just ask the tenant to replace them! If you don't live close to the property, you will be charged the base rate to send a handyman around to do it so your £10 replacement will end up costing probably £80. Again, if you don't live close to the property, anything like a blocked sink, a loose door handle etc needs a contractor, rather than the plunger that you would probably try yourself if you lived there. Generally, you need to redecorate every 5 years and re-carpet every 10;

don't forget your tax liabilities!

It is very difficult to get money back from tenants for repairs/maintenance which may be due to their lack of care. We had sinks which were blocked a month after a tenant moved in which would seem to be their fault for pouring fat etc down the sink but impossible to prove because they will claim it was a build-up from the previous tenant.

Using an agent will remove at least some of the time/advertising/checks element from finding a new tenant but comes at a cost - now that costs cannot be passed on to tenants, agents charge hundreds of pounds for new tenancies, plus charges for check-in and check-out inventories. You are also liable for council tax, utilities etc for any period between tenancies.

It is already a process of months to get rid of non-paying tenants or those who refuse to leave at the end of a tenancy. The imminent advent of the Renters Rights Bill may make that even more difficult.

I think the fact that so many experienced landlords are leaving the market should give you pause for thought at this time. The bottom has certainly fallen out of the flats market, I know you are buying a house and there are still lots of landlords about but unless you really know what you are doing I think this is completely the wrong time to get into this.

I rent out a property I used to live in - had to move for work shortly after buying it, and now live in a tied house. I agree with what PPs have already said about the private rental sector being more difficult than before. That said, I do make a small profit once costs are paid, and the value of the property has increased. So far, over 7 years renting out I've had 2 tenants - found and checked by the letting agent. When the first tenant gave notice, the letting agent quickly found a new tenant and house was empty for only one day - for checks and cleaning.

My letting agent owns her own small local company and so is very motivated to keep both tenants and landlords happy. She is very hands-on, communication is good, and she doesn't get unnecessary repairs done.

For me, it is very much worth having an agent manage the let, but I think much of that is down to the agent herself - so contact various different agents, meet up with them for a chat and find out how they operate and what their priorities are.

I'm an accidental land lord.

My dad moved into residential care and we kept the house because it paid his fees (along with his pension).

It's a few hours away from us and i am too busy with work and family to want to manage it actively.

Agent takes a massive whack and I seem to spend a lot of time telling them I want 3 quotes before signing off a job.

Its not something I'd actively choose to do but it does bring in more money than my partner most months.

Thank you for your answers. Those with fully owned / paid off property and the agent, do you make more that 4% return on the property value annually?

Don’t use an agency to manage it. Mine sent out their very expensive contractors for absolutely everything, charging me around £250 several times per month, and 90% of the issues could have been solved with a simple phone call:

• Hob doesn’t work - electrician sent only to explain to tenants that this is an induction hob and tenants should use cooker ware I provided and not their own non-induction pots
• Letterbox doesn’t unlock - locksmith sent - tenants should have used correct key for it which I had provided.

£500 gone within the first week and each of
these issues would have taken me about 45 seconds on the phone to resolve, had they called me and not the estate agent.

as you are intending to buy a property and without a mortgage have you assessed other forms of investment ?

whilst it appears attractive to have a rental income in retirement, it is actually more tax efficient to pay extra into a pension than it is to have a BTL.

Ok it is crystal ball territory, but I think it unlikely the current disparity between higher rate of income tax compared to higher rate CGT will remain for much longer, and that matters a great deal when it comes to your exit plan for your investment. No CGT on a pension pot and you have access to tax free withdrawals!

If I were to sell tomorrow, after CGT etc, I would have about £270K. I make about £10K per year. So about 4%. Plus I get the capital growth.
So for me, the easy route is to maintain the status quo. The clincher for me is that it is a different revenue stream to savings, state pension and private pension.

I use the local council run lettings agency. I still pay a monthly charge but it’s the council who pay and underwrite my rent. The scheme has been running for years and is used by people who don’t have a deposit/wouldn’t pass referencing so would otherwise be homeless.
The gas and electrical inspections are carried out by the council, if something needs repairing they will ask whether I want to arrange it or if the council should carry it out (I usually have them do it). The tenants’ point of contact is the council. Properties are inspected/visited every 3 months and I visit once a year at contract renewal. It suits me.
My return is approx 8% and of course tax is payable on that.