Landlords – how to save around £5500 letting your property
There has been a lot of discussion recently about how letting agents regularly rip off tenants – and they do. The government is belatedly introducing legislation to restrict their fees to tenants. But they also rip off landlords and whilst it’s difficult for tenants to avoid them, it’s much easier for landlords, as long as their property is local.
Given letting agents outrageous fees to landlords, it’s incredible they have the nerve to invent all the other charges they make to tenants – that’s why most tenants and landlords alike dislike them.
Letting Agents’ charges to landlords
Agents love to talk in terms of percentages because it enables them to disguise the iniquitous levels of charging they engage in. So let’s take a property that the rent is £1500 per calendar month. I have taken as an example the quoted fees of a well know high street agent, which do include landlord rent guarantee insurance.*
I am assuming the case of tenants who remain in the property for a total of two years…
These agents charge 7.5% plus VAT for Sole Letting Rights – this means that WHOEVER lets the property this agent gets their cash.
The real costs of using a letting agent
- Letting fee for let only will be £1500 x 12 x 7.5% = £1350.00 plus VAT for the FIRST year, paid in advance.
- Let’s say you are stupid enough to use their ‘Full Management Service’. This involves collecting the rent – it just goes into their account before eventually going into yours. They deal with everyday calls from the tenants and make 6 monthly inspections etc. Add an EXTRA 6% plus VAT. So that’s £1500 x 12 x 6% = £1080.00 per annum extra plus VAT.
- Providing you with an Inventory – between £140 – £200. So, let’s say £170 on average.
- If the same tenants simply decide to stay on in the premises which involves the agent in doing VIRTUALLY NOTHING they will charge the landlord another 7.5% plus VAT – Yes ANOTHER fee, amounting to £1350.00 plus VAT
Let’s add up all the bold figures because they are indeed bold. That’s £1350.00 x 2 + £1080 x 2 + £170.00 = £5030 plus VAT where applicable.
So, you let a flat or house for £1500 pcm and end up paying the letting agent £5030.00 plus VAT, which is £6036.00!
Even if you only elect for the let only service, over two years it would cost you £2700.00 plus VAT which is a massive £3240.00. And all this is paid up front at the beginning of each year.
Letting agents fleecing the tenants as well
So the letting agents get all this money from the landlord then they proceed to rip off the tenants for even more money!
They have various ingenious made up charges, such as ‘Administration Fees’, ‘Checking In Fees’, ‘Checking Out Fees’.
Then there’s the scandalous ‘Holding Fees’ to retain a property while referencing is carried out. It is reasonable to withhold them in the event that the tenants change their minds. But they also withhold these fees in the event that the references come back as unsatisfactory. These fees can be as much as £700 – £800. They probably hope they’ll come back as unsatisfactory.
Some letting agents charge tenants for ‘drawing up the Assured Shorthold Tenancy’ document’. This takes about 15 minutes to revise a template on their system.
And then there is referencing. Charging for this is justified, but for tenants in full-time employment with proof of previous address etc it COSTS around £10.00 per tenants. Many agents charge around £60 – £70 per tenant.
If you’re a landlord and you can, just let it yourself
As a landlord you can list your property on the main portals like Rightmove, Zoopla, Primelocation etc, using companies that will charge you around £60.00. You then ensure that you THOROUGHLY reference any prospective tenants rather than saying to yourself ‘Oh they seem such a nice couple’.
Don’t forget Landlord Rent Guarantee Insurance
Then you buy Landlord Rent Guarantee and Legal Expenses Insurance* – we do it for about £105.00 per property per year. This insurance pays your rent in the event that the tenants stop paying for any reason and the legal team then go to work to evict the tenants as soon as possible. Strict tenant referencing is a requirement of this insurance. Let’s assume you charge the tenants for referencing, which is reasonable then your total outlay over two years will be about £170.00.
So it’s your choice. Pay a letting agent £3240.00 or £6036.00 including VAT or spend £170.00 letting it yourself. Some agents will charge even more than the amounts quoted above and some will negotiate for less but as the Americans say, I think it’s a no-brainer.