Why Landlords should get less hung up on Agency Fees
I have never understood why landlords get quite so hung up on letting agency fees- I know I’m biased but equally If I were letting a property out- I would be asking myself how some agents can do a professional service so cheaply? A bit like how I ask myself how is it possible that I can get a lithium battery for my phone off eBay for ¼ of the price than from the manufacturer- because it’s probably fake and will cause damage to my phone in the long term, possibly even in the short term. The same applies for a cheap letting agent- will they find you the best tenant that matches your criteria? Probably not- they will most likely put the first applicant that comes along in because they don’t have time to be selective or have an experienced letting agents intuition. The trouble is- similarly to bad lithium batteries causing damage, bad tenants will cause damage to the property or may go into rent arrears.
So, that’s all very well but you want to get as much of the rent as possible to keep the letting as a business. Let’s look at how much difference it actually makes:
If a property fetches £800pcm
The cost for a decent agency who charges 10% + VAT of the rent to fully manage is £1152 over the year.
The cost for an agency who charges 9% + VAT is £1036.80
The cost for an agency who charges 8% + VAT is £921.60
You can see the difference between a good 10% letting agent and a cheaper 9% agent is £115.20 and £230.40 between a 10% and an 8% agent.
What are either of those differences in the grand scheme of things if you consider the following possibilities:
- 2 weeks void (because they have not done rigorous pro-active marketing)- £369.23
- 1 month void- £800
- Tenant damage (because the agent let it to the first person) can be in the thousands
- Court and solicitor costs to evict a bad tenant- Anything from £2500 plus any rent not paid on top.
To summarise, I would urge all landlords not to get so hung up on the small percentages and look at the bigger picture. Look at the service on offer- check if the agent is RICS and ARLA registered, where and how they market the property, whether they are experienced letting specialists or whether the staff have to do both sales and lettings- all of these things are so important.