So you’ve bought a property No Money Down, it’s in Doncaster and you live in Bristol. Your initial idea of finding a quality tenant, showing them the property, negotiating the rent, interviewing and referencing them, then providing them with suitable documentation has gone a little sour since you discovered you can’t find the 3 and a half hours to drive the 185 miles to Doncaster over a couple of evenings.

And where would you find the tenant? You could research the local papers in the Doncaster area and take a punt on which would be the best to advertise in. But then you may discover a primal reluctance to advertise your mobile phone number. Dark thoughts cross your mind…”What if the washing machine breaks down at 3am and they call me to get it repaired?” or “What if some loony takes my number down and plagues me with phone calls?”.

Yes, it’s possible to find your own tenant and follow the process to get them into the property but it can be time-consuming and if you’re unsure about the referencing process, have bought your AST from W H Smith and wonder if it’s fully compliant, don’t know what an AST is, haven’t a clue about the Tenancy Deposit Scheme or in fact any of the provisions of the 2004 Housing Act, or are generally a little nervous about any part of the procedure, then it may be time to consider the merits of using a letting agent.

Why use an agent?

The benefits are numerous and we’ve already touched on some of them. Letting Agents are great in acting as a buffer between you and your tenants. You can let them take the calls, the flak, the enquiries and can instruct them to contact you only under certain circumstances. More importantly, good letting agents will be legally proficient, will be effective in dealing with issues and will be a good investment, if your requirements suit.

So, how do you find a good one?

Like many businesses, there are good and bad agents. It’s estimated that there are around 18000 letting agents in the UK and many new ones are hitting the high street… many are also leaving the high street, but that’s a story for another time. Sifting the good from the bad can be hit and miss, or can be by design. To find a good agent, ensure you take the following steps: (These steps are geared towards full management but can be applied if you only require a tenant find service).

1. Agents can be found using Yell.com, Google, Yellow Pages and local newspapers.
2. Initially target half a dozen agents in the High Street and possibly a couple of agents without a shop (these are usually the guys with black and white, bullet-point ads in the local paper). Don’t necessarily discount those without a High Street presence… I’ve dealt with quite a few who are new (and great at what they do) or have elected to move from a shop to a serviced office for commercial reasons.
3. Call and book a meeting with each agent and try to tie up all meetings on the same day. Explain you are a landlord with a growing portfolio and that you’d like to place one of your properties with them. Ask them to send you details of their service prior to the meeting. HINT: discard any that either refuse to send information or are slow in responding. IMPORTANT: Keep details of each meeting on a spreadsheet so you can ‘stare and compare’ your results.
4. Analyse the details you’ve received. Look for quality of service (quality of documentation is a start), background, experience, memberships of organisations such as ARLA or NAEA (non-membership is not always a reason to ignore those agents, but a convincing answer needs to be provided to the question “Why?”), and finally analyse their terms and conditions.
5. Key points in the T&Cs are:
   • They must be clear English (it’s an offence if they contain legal jargon and confusing or unfair terms).
   • The sole agency period: anything more than a couple of weeks is
     unrealistic. You don’t want be tied in to an agent who is unable to find a
     tenant within a few weeks. Some agents use ‘sole agency’ as a negotiating
     tool. (See below for some negotiating tips). Try to negotiate Sole Agency out
     of the T&Cs. If the agent is confident they can find a tenant fast, they will
     agree, but you may have a job on your hands.
   • Check their fees. HINT: cheap normally indicates cheap service but
     expensive does not always indicate quality! If an agent is too expensive, they
     need to justify where your money is going. If an agent is too cheap, they will
     not be able to provide a decent service. (It has been calculated that for an
     average High Street agent, a full management fee of 8% is about break-even
     point. In other words, if they are charging around the 8% mark, they are not in
     profit. You have to ask yourself how they can provide a quality service and
     how long they will be in business!). See below for a table of fees to expect.
   • Ensure you check for any penalties, should you decide to stop using the
     agent. Sacking the agent can be straight-forward, if they have done a shoddy
     job. But sacking them if you have a change of heart may prove costly.
6. Ask how many properties they manage. If they are unwilling to tell you, consider discarding them.
7. Ask how many people they have in their management department. If ‘only me’, run a mile!
8. IMPORTANT: ask them to state whether or not they mark up repairs. Some agents will be straight and say they mark up repairs (ie, charge a premium on the contractor’s invoice), and generally do so if the repair is ‘messy’, ie, if it takes the agent a lot of arranging. This is fair practice. It’s plainly unfair when an agent marks up repairs without disclosing to you that they’ve done so (it is also illegal and is called Non-Disclosure) and I’m afraid a fair few do this. (HINT: Insist on being provided copies of repair invoices by the agent).
9. Ask them how you will be paid. Most agents will deduct their fees then pay you the net rent directly into your nominated bank account via internet banking. HINT: Good agents will pay within a few days of receipt of the rent. Some agents will tell you they have a strict payment run of twice a month… if they do, ask why and consider discarding them.
10. Ask for a copy of their tenancy agreement. If they refuse, consider discarding them.
11. Ask them which Tenancy Deposit Scheme they use. If they don’t know, or if they don’t use a Scheme, run another mile!
12. Ask how they reference tenants. IMPORTANT: quality referencing is essential as one way of mitigating bad- or ‘professional’ tenants. If the agent seems to cut corners, discard.
13. Ask the agent for references from other landlords and speak to other landlords in the area via networking groups or forums. Bad news travels fast and if a landlord has had bad dealings with an agent, it’s worth avoiding them. If the agent is unwilling to offer references (they may use the Data Protection excuse), consider discarding them.

Finally,

14. Don’t sign an agency agreement until you’ve had chance to review your spreadsheet. A good agent will follow up your meeting to ask if you’ve made a decision. Consider discarding those who don’t or who delay for a couple of weeks.

Fees you may be charged:

Full management:

• Commission or Management fee: usually charged monthly and ranges from 8% to 15% full management, although one of the biggest chains is known to charge 20%!
• Letting fee: You may be charged anything up to £200 (ask the agent to justify if the fee is high. It could be due to a low commission).
• Re-letting fee: could be anything up to £200 (same applies as above) and applies when a new tenant is required.
• Inventory fee: ask if there is a separate inventory fee and whether or not a third party (inventory clerk) is doing it. If so, request a copy of the clerk’s invoice.
• Withdrawal fee: some agents attempt to charge a withdrawal fee, if a landlord decides to take their business elsewhere, should a tenant not be forthcoming. This is justifiable only if the agent has done a lot of work and can prove so.

Tenant Find service:

You could be charged anything up to a months’ rent (8.33%), and you shouldn’t expect to pay much more.

Notes on negotiation

At present, it’s a competitive world in the land of letting agency and most agents are willing to negotiate, especially if you have a desirable property. If they have reasonably high commission rates, hint at your ‘growing portfolio’ and try to get a reduction on the monthly commission. Whatever you do, don’t attempt to negotiate down a low commission rate, because you will find the agent will cut corners. If they won’t budge on commission, try to negotiate the letting and re-letting fee down.

Happy hunting.

Gavin Williamson