So you’ve bought your first buy to let property or have become an accidental landlord, the question now is do you self manage or use a letting agent.
Many first-time landlords quickly find themselves overwhelmed with the management of a single property. Others take to the process quite naturally and get on with it fine. Knowing where you fall on this spectrum can help you make the decision of whether you want to manage the property yourself or take on a letting agent to manage it for you.
Before we compare self-management to use of a letting agent, let’s go over the duties that must be performed for the property, regardless of who is performing them. Then we’ll compare how those duties are assigned under various property management options.
- Property advertising
- Tenant move-in
- Repairs and maintenance
- Tenant move-out
Depending on your skills, confidence, and time availability, some or all of those may be beyond your capacities. That’s where a letting agent can take the work off of you in exchange for a fee. (We’ll talk more about the fees as we go on.) First, let’s compare how each of those duties would fall under three different structures: Self-managed, standard letting management, and premium letting management. You can opt for any of these arrangements depending on how you feel about your level of commitment and the resultant level of income from each of them.
When you manage your own rental, you get to do it all. Yes, you keep every pound you bring in, but you’ll be saddled with lots of other work. When your property is ready to rent, you’ll have to do marketing from the ground up. As applications come in, you’ll have to evaluate them yourself, make time to show each one the flat, and make a decision that is both financially beneficial for you and in compliance with the Fitness for Human Habitation Act.
Once you choose a tenant, you’ll need to collect the deposit and monthly rent (making sure the cheques clear) and get all the necessary forms completed. Then you’ll need to conduct periodic inspections to ensure proper care of the unit, and when repairs are needed, you’ll have to either locate a qualified contractor or do the work yourself. Your personal cell phone will ring more often than you might think, as some tenants seem to be professional problem finders. If your unit is old, its complete history will soon come to bear on your bank account.
When the tenant leaves, you’ll have to deal with that process as well. That means inspecting the unit to find any and all damage left behind, refunding the deposit, collecting keys, changing locks, and restoring the unit to rental-ready status by performing deep cleaning, painting, and repairs.
In short, you’ll get both 100% of the money and 100% of the work. If you have time available and know how to do most routine repairs, this may be the best option for you.
Standard Letting Management
Many property owners find that it’s helpful to have a letting agent handle some of the more difficult chores while retaining responsibility for others. For example, if you’re not the most handy property owner, it can be very beneficial to have the letting manager take care of repairs. This also gives you access to better qualified contractors instead of having to scour the internet every time something needs work.
Partial management will cover rent collection, a helpful boost when you may not live close to your property, or if you’re just not comfortable dealing with conflict when the tenant is running behind. You’ll find a letting management firm will be much more effective at advertising your vacant unit because they already have resources and experience in this area.
Taking on letting management for parts of your business does cost you a few quid, but it gets you off the hook for having to deal with some of the time-consuming and specialized work. You’ll see far less activity on your phone and spend far fewer hours with the headaches of collecting rent and performing simple repairs.
Premium Letting Management
For some people, this is the ideal arrangement. They’ve put up the money to purchase the rental and don’t want any bother. They prefer to turn over full management of the unit to the letting agent and simply wait for the money to roll in.
With a premium letting management arrangement, everything is handled by the agent. That includes advertising your property, handling applications, getting the tenant moved in, conducting regular inspections, dealing with repairs and maintenance, and moving the tenant out. You pay a larger fee, but your effort is slashed and your time is preserved.
It’s All About Time
Think back to your reasons for owning rental property. With a single unit, you can easily clear a few thousand pounds a year with no work. If you manage it yourself, you’ll show more revenue, but if you divide those extra pounds by the hours you spend advertising the unit, showing it, doing repairs (or dealing with contractors), you may find you’ve a rather low hourly wage. How you value those hours is a key factor in whether you should use a letting agent.
In economics there’s a term called “opportunity cost”. Basically, it means that anything you do or spend costs you the opportunity to do or spend something else. This is the most fundamental thing you should consider when deciding whether to use a letting agent.
The tenant calls to report that a light is flickering. You head over straight away to find only that the bulb was loose. That trip has cost you the opportunity to spend time with your family, hang out at the pub, or do something that could have brought in some additional money. Think back to your reasons for owning property. If managing the property is more than you bargained for, it could be worthwhile to look into use of a letting agent.
The hours you commit to your property management duties are all taken away from something else. If you feel that your time is worth more than what you’d pay for a letting agent, then that’s the best course for you. If you live close to your property, have some good basic skills in trades like painting and electrical work, and possess lots of free time, maybe you can self-manage.
The landscape will change with more properties. If you leverage your profit from this first unit toward purchasing a second, then a third, and so on, will you have the time and desire to bounce all across town to handle your duties? You may find that keeping up with one has a manageable opportunity cost, but that owning several properties will quickly become a full-time job that you don’t really want.
Know your property. Know the value of your time. Know the business of property management. Take all those factors together, and you’ll easily be able to decide if a letting agent is the best option for you. Once you’ve made the decision to use one, talk to Horizon Lets. We’ll gladly walk you through the process of getting started with us.
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