How much do letting agents charge?28-04-2023 | Financial
The question of how much letting agents charge is a bit more complicated they you might think. After all, there is no industry-standard pricing that all agencies must legally comply with.
Letting agents can offer landlords different services. Do you just want a tenant-find service? Let-only? Rent collection? Or a comprehensive full property management service where the letting agent looks after the whole scope of management tasks which would otherwise fall under your responsibility as the landlord?
Costs are high at the moment, and like many other landlords, you are probably thinking about ways you can bring down your spending on overheads while also keeping tenants satisfied. Many landlords decide to use the services of letting agents. So, we at CIA Landlord Insurance have decided to take a good look into how much letting agents charge.
What’s the difference between a ‘let-only’ and a full management service?
These are the two primary categories of service that letting agents will typically provide. The difference is that you get a much more comprehensive package with a full management service and the letting agent will take the property management almost entirely off your hands. Whereas a let-only service will only find your tenants and process the paperwork, and the rest of the management will be up to you to sort out.
What a let-only service entails
A ‘let-only’ service, means that the letting agent takes responsibility for tasks such as coming up with a rental assessment to give you an accurate idea of how much rent you can realistically charge tenants, conducting viewings of the property on your behalf, and performing the tenant referencing.
A letting agent’s ‘let-only’ service could also take care of the tenancy agreement, credit checks on prospective tenants, and take the tenant’s first payment, as well as set up any direct debits.
What a full management service entails
A full management service will do all the above and also take the responsibility for the day-to-day management of the property off your hands as the landlord. This means that in the event of the tenant locking themselves out or the boiler ceasing to work, for example, the letting agent will arrange for one of its approved contractors to pay a visit. Remember, you must first receive tenants’ permission to access the property for property inspections or repairs.
What fees can be expected for these services?
The answer to the question “What do letting agents charge?” can be a tricky one to answer even before one contemplates the differences in the above services from one letting agent to the next.
Knowing the fees a letting agent is likely to charge you is tricky to figure out, many letting agents are also open to negotiation on prices, so, you may be able to get a better deal if you are willing and prepared to haggle.
Make sure you get price quotes from several letting agents
We would therefore suggest that as a starting point, you simply request pricing from two or three letting agents in your locality, and take negotiations from there.
If you choose to hire a small independent high street letting agent and use their let-only service to find you tenants and arrange the paperwork to help them move in, they will usually charge you 3 or 4 weeks’ rent or 6-8% of the entire tenancy contract.
If you opt for a full management service, which is typically a 12-month deal, a letting agent will usually charge 10-15% of monthly rent. But, on the upside, you do get a lot for your money, and full management service can include:
- Property advertising
- Tenant search and reference checks
- Rent collection
- Compliance and safety updates on your property
- Regular inspections
- Monthly income statements
- Maintenance management
- Annual gas safety certificates
- Plumbing and electrical cover
- Boiler servicing
- Legal eviction cover
- Monthly income statements
Location will play a part in letting agent fees
Bear in mind that the cost of rent always varies depending on location, and 10-15% of monthly rent in London for example may amount to you giving a large chunk of money to an agent every month. For instance, the average monthly rent in London is now around £1000 per calendar month.
Be wary of exceptionally cheap full management service offers
If you see full management service prices lower than 10%, you should really start to question the standard of service that you will receive in your mind and look into the reputation of the letting agent. After a bit of research, can you also find out legitimate stories out there about previous landlords having had bad experiences with a given letting agent? If so, best to avoid them.
The digital era has seen an explosion of online letting agents, and with them, you can expect to pay fees along the lines of 3% of the first month’s rent. However, again, the pricing can differ significantly from one online letting agent to the next.
With online letting agents, is it still worth using a traditional letting agent?
In today’s digital age where a lot of information is easily readily available online, you could try conducting traditional letting agent’s duties yourself, as you might be attracted to taking a ‘DIY’ approach to the initial letting or the complete management of your property.
Admittedly, doing all of your own property management can be difficult, but it all depends on factors like your level of landlord experience, the size of your property and the nature of your tenants, but doing it yourself isn’t impossible.
Finding your own tenants without needing a letting agent’s support is a more realistic option, although this still requires a heavy time investment. Nonetheless, tasks such as property viewings, tenant referencing and tenant deposit registration can be done for little or nothing. So, from a financial point of view, this route may make good sense. Only you, as a landlord, can ultimately make such a decision that fits in with your own circumstances, requirements, and experience.
Nevertheless, by keeping yourself well-informed and up to date on what fees letting agents ought to charge, you can maximise your chances of making the best possible choice.
The devil is in the detail
Essentially, how much you end up paying will largely be affected by what you actually sign up for. This is why, before accepting a service, you should read the attached T&Cs carefully to make sure you aren’t landed with an expensive service you never really needed.
Of course, sometimes, the exact opposite can happen, where you could find that certain costs – like those of repair work – are not actually met by the letting agency’s service you originally took out.
Another cost you’ll need to consider as a landlord is landlord insurance to cover yourself against eventualities and risks. Landlord insurance policies can cover you in the event of loss of rent, fire, theft, damage by tenants, and more.
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