Whether you use a property manager or go it alone is really often down to your personal circumstances and what suits your needs best. To offer a non-bias opinion of the pros and cons of both options this month we have asked Scott Fraser a property investor in Glasgow who has had ten years experience in property investing to give his option on both options.
If you are renting out a property, one of the big questions is whether to use an Agent to manage the property or not. I’ve been renting out properties since 2004 and wanted to share my experiences to help you reach a decision.
No Right or Wrong
Firstly there is no right or wrong answer to the “Using an Agent question”, there is only what’s right for you. It’s also important to realise your answer to the question may change over time and you may change from using an Agent to self managing as your circumstances change. I know plenty of landlords who self manage, and plenty who use an agent.
So lets look at the pros and cons and what you should expect from your Agent.
Pros and Cons
An agent will obviously advertise the property for you. In these times of Gumtree, Rightmove, Facebook and Twitter that might not seem a big deal, but it is four extra elements which tick the “value add” box for me.
- They put a “to rent” sign up! Old fashioned I know, but boy does this work. If your property has a good location, it’s not long before tongues are wagging and the phone starts ringing.
- They already have a list of vetted potential tenants looking for properties to rent, so will contact them pro-actively.
- They show prospective tenants around! Easily overlooked, but seriously do you have time in your day to show 20 different people around, deal with no shows and take criticism about them not liking your taste in décor?
- They vett the tenants. So they do credit checks and make sure the references check out. If you are self managing this can be tough to do thoroughly and most Self Managing landlords I know skip this and take a calculated guess. This can be a step too far if you are risk averse.
The Agent then should provide a range of services for you which if you are going down the Self Managing path you have to do yourself. Maybe not a huge overhead if you have one property to rent out, but a significant overhead if you manage multiple properties. Of course if you forget to do some of these annual things (Gas Safe for instance) there can be legal implications.
Additional things you need to do – have you got the time?
- Inspections
- Maintenance
- Ensuring legal and legislative compliance
- Safety certification and Repairing Standard compliance
- Utilities and council tax changeover Check outs , dilapidations reports and deposit release and dispute process
- Rent guarantee warranty
- Source landlord insurance
Ok, so your Agent has found and vetted your tenant, what happens next? The Agent makes sure you have an EPC certificate, Gas Safe certificate and are registered with the local council as a landlord. They also conduct an annual check that this stuff is up-to-date.
Tenancy Agreement and Deposit
They then create a tenancy agreement which is a legal document and forms an agreement between you and the tenant. This is to protect both you and the tenant. Don’t forget, the Agent isn’t just there to look after the landlord, they represent the tenant’s interests too and could be back asking you for repairs and replacements if required.
The tenant pays a deposit which the Agent will hold in escrow until the tenant leaves and everyone is satisfied with the condition the property is returned in. Don’t expect to see much of the first month’s rent. As well as advertising costs and management fees there is usually a finders fee which can be 50% of the first rent payment.
Inventory
On move in day, an inventory of your furnishings is presented to the tenant and that is double checked at the end of the tenancy for completeness and financial adjustments are made to the deposit to cover breakages. This can also include cleaning but allowances are made for general wear and tear.
For me the best part of using an Agent is when things go wrong and difficult situations arise, for instance break ins, flood damage from other properties, late rent payments, boiler breakdowns, evictions etc. All real life situations which can and do happen. Now if you are happily going about your daily business, at work, at the gym, whatever, do you have the bandwidth to deal with this? Do you have a list of tradesmen who can attend at the drop of a hat? Do you know legally how to evict someone? What about if you are away on holiday, how do you deal with these situations then? For me, that’s the number one benefit of an Agent, however I always ask to visit and do minor repairs myself. This keeps costs down for me. I like to think the Agents tradesmen all charge the going rate for repairs, perhaps they do but perhaps I can get certain repairs done cheaper!
Factor in the Costs
So in summary, for me using an Agent does cost money compared to self managing. However I factored this into my sums when I first thought about renting properties out, so it was a known cost.
Knowing someone will deal with problems is a big stress reducer for me and allows me to go about my daily life without waiting for the phone to ring. If you have the bandwidth, lists of trade contacts and want to save some money then maybe self managing is for you, but go into it with your eyes open.
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