In days gone by, a landlord's only choice when considering how he wanted to manage his portfolio was simple - hire a lettings agent or manage it themselves. But this is no longer the case; now landlords have a much wider reaching decision to make when it comes to portfolio management. Indeed some are even calling and end to the usefulness of typical high street agents.
The new kids on the block of portfolio management are online service providers offering the services of the high street lettings agent without the costly percentage commission approach. Of course the main as many will know is online letting agents, but there are also online viewing companies and more allowing landlords to be hands-off without paying an arm and a leg.
Online Letting Agents: What's the Deal
Much like online estate agents online letting agents offer the core letting agent service of finding tenants but at a much lower cost than their high street counterparts. The online letting agents are able to charge less because they don't have the overheads totted up in an expensive high street shop-front or the agents and their company cars. Meanwhile they can be just as effective in finding tenants because they have access to the major portals including Rightmove and Zoopla from which most of the UK now searches for their properties to buy and let.
The drawback of online letting agents is that they do not tend to offer the same level of property management services as their high street counterparts. High street letting agents handle everything from arranging and conducting the viewing of the property to the contracts and key handover as well as regular maintenance, while online letting agents do not offer such a comprehensive service.
How to decide what is Right for your Portfolio
Some articles and stories looking at this topic recently have said it is as clear cut as if you have time to maintain and manage your own properties you should use an online agent, whereas if you don’t you should use high street. Thank fully (though also unfortunately in a way as it makes for more of a decision) for your cash-flow it is not as clear-cut as that.
This is because most of the online estate agents have tag on services and offerings to go some way to bridging the gap.
MyOnlineEstateAgent.com offers a letting agent package at £49+vat, this is pretty much a straight up online advertising only deal whereby you are paying the GBP 49 for access to the major portals. However, they also offer optional and free tenant referencing and even give you a free tenancy agreement template. For an extra GBP 40 you can have a To Let sign as well although it could be argued that these should be free as they also advertise the agent.
As is the case with estate agents, many online players are taking to offering full management packages.
A couple of examples
Among the top of the search results for these fellas is The Letting Angel, which offers a pure online advertising package at GBP 49 and a full management package at GBP 299 + GBP 55pcm. The full management package includes advertising on the major portals until let (actually until let unlike some which have a cap of 3-6 months) including a featured listing on Rightmove, enquiry screening, tenant referencing, erection of to let board at the property, property match marketing (email shots etc.), professional photographs and floor-plans, inventory check-in/out, ongoing rent collection, deposit protection, monthly management reports, 24/7 maintenance, inspections every 6 months as well as when tenants move in and out and tenancy renewal management.
Meanwhile the average charge of a traditional lettings agent is 10 percent of the rental rate.
So, if your portfolio is filled with properties local to you, and you have the free time to manage and maintain your properties, it is a no-brainer that you should choose an online estate agent. But if you don’t then the choice is slightly harder and really depends on your portfolio and your needs.
For example John Johnson from Ronson Road Bath inherited 2 properties in Leeds from his uncle Jack. He works full time as a clerical clerk and has no time to manage or maintain the properties. He pays 2 X GBP 299 to list his properties on with The Letting Angel till let. As the market is strong his properties are both let within 1 month at GBP 650 per month each + deposit. In the first month John's properties bring in GBP 2,600 giving him a first month profit of GBP 2,002.
John's brother Jake, Jack's son also inherited 2 properties from his dad in Manchester. Jake also lives in Bath and has no time to manage the rentals of his properties, but he decides that a letting agent would earn him the most money. His first two tenants pay the same GBP 650 first month's rent and the same for a deposit. But of the GBP 2,600 he owes the letting agent GBP 260, leaving him a first month profit of GBP 2,340. Making him the best off in month 1.
But over the next 6 months Jake earns GBP 3,900 and owes the letting agent GBP 390, leaving a profit of GBP 3,510, whereas out of John's GBP 3,900 he owes his online letting agent GBP 330. So John will make an extra GBP 140 per year in profit, minus the larger initial outlay. Of course if John's tenants move out then he will need to re-advertise. However the best bet would be to buy a simply advertisement package from the Letting Angel or another provider and simply keep the management package open, although one would need to check Letting Angel's terms on such things.
All that said the one thing that none of the online letting agents offer is handling viewings, which is offered by traditional agents. Right now the ratio of tenants to the properties they need is heavily balanced in favour of tenants, but it won't always be that way. If you don’t feel you can convert viewings into tenants or if you quite simply prove that you can't then it may be that a high street letting agent is the only service offering what you need.
The main point is that now there is a choice. It is not go it alone or fork over 10 percent of your empire every month.
- Wednesday 24 July 2013