Letting agents help to let out the properties that landlords have because they are able to access a greater number of potential tenants and they are specialists in this area of the property. As a result, they charge a landlord a fee. This article goes over how these fees work so you can position yourself best as a landlord and know how to interact with a letting agent.
From how much the fees are that a letting agent should charge to the different types of services a letting agent can charge for. This article will go into detail about how these agencies make their money.
How much do letting agents charge landlords?
Usually, a letting agent will charge a fee for every tenant that is let into a property. Some letting agents charge a flat fee and others charge a percentage of the first months of rent. This is similar to a property manager who will usually charge around 10% of the rent on an ongoing basis and deal with all of the issues of a property.
Sometimes, you can find someone who is a letting agent and a property manager combined to deal with any tenant who will leave the property and deal with any issues in the property that arises for a combined letting agent fee.
What are the flat fees an agent will charge?
Typically, for a standard rent of around £1000 to £2000 per month, a letting agent will charge a fee of around £200. However, this depends on the letting agent you go with as they all have different rates. Some letting agents will also charge a percentage of the rent for a few months. For example, they could change 10% of £1000 worth of rental income for three months and make a total commission of £300.
A letting agent should make this clear before the tenant moves into a property and before you make it clear that you need a tenant in a property and ask them for help.
Another way that some letting agents charge fees is to keep a certain amount of rent that is over the market value. As an example, if the rent for a property is expected to be £1,500, if the letting agent is able to present and sell the property in such a way that they are able to sell the room for £1,700 per month, perhaps they keep a percentage figure of the rent above £1,500.
A landlord can get away with doing this because it is the rent they would have been missing out on anyway so everyone involved is profiting – apart from the tenant. However, if they agree to the tenancy agreement and agree to the rent this shows that they are happy with living in the property and see it as a fair deal anyway.
What other letting agent fees are there?
If you compare letting agents throughout the UK or within the city you’re in, you will find there is a wide range of charges that each letting agency will charge. This is because they all have individual fees. To make things simple, here are all the types:
Letting agent and finding fees
Letting agents and finding fees relate to charges that are there as a result of an agent bringing a new tenant into a property. It can be a flat fee or a combination of a flat fee and a fee that the letting agent will charge upfront for their time.
This is why this category is broken down to “letting agent” and “finding” fees because a letting agent may charge two separate fees. One upfront for finding and referencing a tenant by the letting agent and one after a tenant is found and starts paying rent.
Full management fees
Full management fees are for letting agents who also offer services typical for property managers. This means the management of tenants and the maintenance of a property. However, instead of calling himself a property management company, they may still be called a letting agency with full management.
The extra fees for this type of charge include making sure that professionals are hired to maintain the safety of a property. This includes electrical safety, gas safety and also making sure there is always a valid energy performance certificate in the property.
Finally, any issues to do with tenants including damage to the property and any issues to do with their tenancy such as them wanting to end the tenancy by handing in a notice to quit or issuing eviction notices on behalf of the landlord.
This is useful because often landlords who have multiple properties or have other forms of employment simply do not have the time to deal with everyday issues that happen in a property and need someone to manage this for them.
If a letting agent manages multiple properties – including properties from multiple landlords, they can easily and seamlessly manage tenants as this is what they’re used to
For example, a landlord who has two properties that produce an income of £5,000 profit through their property business and has a full time job on the side may find it useful to pay a letting agent with full management fees a percentage of the rent and take home £4,500 instead as an example.
This £500 will be paid to the letting agent to manage the property and deal with the tenant and the letting agent will be dealing with other properties and also collecting other £500 commissions as they manage properties from multiple different individuals.
Guaranteed rent fees
Sometimes, a letting agent will lump in rent guarantee insurance with their letting agent charges. This is because they will be paying for the insurance themselves and need the landlord to also cover the charges. The reason they offer this service themself is because they will do the tenant referencing checks which decide if a tenant is risky or not to the property and are likely to fall into rent arrears or cause damage.
Therefore, if they do, the letting agent has some form of guarantee that the tenants are safe based on their tenant referencing and they are able to show this to the landlord by charging them a small extra fee to guarantee that rents will always be paid in the property.
This can be quite risky for letting agents because sometimes the tenants genuinely fall onto hard times and aren’t able to pay their rent. In this case, a letting agent has to take into consideration that their tenant referencing process isn’t one hundred percent accurate and there are always things that can go wrong.
On top of managing tenants and finding the tenant in the first palace, a letting agent may also choose to collect the rent from the tenants too. This would make sure that the rent is always paid on time and it means the landlord doesn’t have to deal with any rent arrears.
In addition, in some places in the UK, rent collection is still done manually as the landlord collects cheques. Instead of a landlord having to do this themself, a letting agent could do this on behalf of the landlord and charge a letting agent rent collection fee.
Average estate agent fees for landlords
Sometimes, letting agents may be confused with estate agents because estate agents typically help sell homes and letting agents help rent homes. Sometimes a company may brand itself as an estate agent but still offer letting agent services.
Either way, both agencies typically charge a flat fee or a commission of the sale or rent of the property.
How can landlords self-manage a property without a letting agent
If you think that letting agent fees are too much, there are things you can do like managing your property yourself as a landlord. You will have to note that this will mean you will have to answer a lot of phone calls and emails and constantly be open to communication with your tenants.
However, especially for those who are new to being landlords with perhaps one or two properties and maybe a few tenants, managing tenants yourself to avoid fees can be great. Also, it will be a great learning experience.
Communicate effectively with your tenants
Communication with tenants and encouraging them to communicate with you is the best way to notice issues with a property and figure out when a tenant is likely to leave a property.
For example, if you are able to talk to tenants and figure out their occupation and future plans, this is easy as you can conduct a verbal tenancy referencing process that makes tenants less likely to move out of the property with short notice or fall into rent arrears.
Keep a good record of tenancies
Knowing where you keep your tenancy agreements whether that be in digital format or physical copies is excellent to keep track of break clauses in tenancy agreements and knowing what rights a tenant has to move out of the property based on the clauses of the agreement.
If you can anticipate when a tenant is likely to come to an end you can start advertising the room for rent before the tenant moves out and have little time in between the end of one tenancy and the start of a new one.
Keep a good record of maintenance
As a landlord without a letting agent or a property manager, you will also have to do all the repairs and maintenance of a property yourself. Even if nothing goes wrong physically with the property, you will have to conduct general safety maintenance such as a gas safety certificate, an electrical safety certificate and an energy performance certificate.
If you miss out on some of these mandatory checks, there is a chance you could be in breach of a tenancy agreement or face fines depending on how much your tenant pursues the issue. This is why a lot of people prefer paying a letting agent with management services to take this headache away from you
Use a property management software
The Lofti property management software is excellent for keeping track of all the things a letting agent with property management services can do. This includes receiving enquiries from listing portals such as Rightmove and Zoopla so you can save time managing all tenant interest in your property in one place.
If that isn’t enough, you won’t have to deal with all the headaches of arranging viewings for the property because you can arrange e-signing solutions, hold deposits and set appointments on an electric calendar all through the app.
Finally, creating new tenancies is quick and easy as you can gain access to tenancy agreement templates. Signing tenants with little effort but maximum assurance they are good tenants and everything needed by law in the agreement is in place
Letting agent fees can be charged in different ways and it depends on the type of letting agent on what these fees are and if they will be charged on a flat fee or a commission basis. On top of this, different letting agents may offer different services such as letting agent management and it is up to the landlord to figure out if these fees are worth it.
Either way, if a landlord feels like the letting agent fees are ever too much, they can always manage the property themself and follow our advice to make sure they manage the property in the best way.