THE RISKS POSED WITH A SELF-MANAGED PROPERTY

As a landlord, whether you have restricted time, little experience or prefer the convenience, letting agents provide a range of services to take on the responsibilities involved with letting a property. Frequent changes to Government legislation during the COVID-19 pandemic poses additional challenges for landlords, which is where a letting agent's knowledge and experience could help.

On the face of it, managing your own property investments can seem like a good idea. In fact, for some, it may even appear to be a bit of a no-brainer. However, self-managing property investments can prove to be a lot more trouble than it’s worth. Firstly, we explain the role of a letting agent and the different services you can choose from.

Is a letting agent for you?

Letting agents can manage some or all the work involved in letting a property to a tenant. You may want to use a letting agent if the following apply to your situation:

• you do not have enough time to fulfil all the responsibility

• you do not have much experience of being a landlord

• you would prefer to have someone else deal with tenant issues and relations

• you do not have a good awareness of relevant regulations and legislation

• you are letting property in a different area from where you live

What does a letting agent do?

Letting agents can manage some or all the work involved in letting a property to a tenant. Here are the different service options explained:

• Let only agents

A “let only” agent is responsible for finding a tenant and moving them in. The agent will market the property for you and host property viewings. They will find the right tenant for you by performing background checks and will collect necessary information from an interested tenant. Once a suitable tenant has been found, the agent will draw up the tenancy agreement, create an itinerary of the property and will move the tenant in. After the tenants have moved into the property, the responsibility goes back to you, the landlord.

• Full management

Full management is exactly what you might expect. With full management, your letting agent takes care of everything from finding a tenant to sorting out maintenance issues to ensuring your buy-to-let investment is always aligned with the latest laws and regulations. Whether you have just one property to let or multiple, this is a safe and easy option for any landlord.

Decide which service you are looking for

Are you looking for someone to find you a tenant then take it from there or would you like to have someone look after your investment for you? Once you have made a decision, you can research which agents provide the best overall service for what you require.

Ask about their services

Ask for a full list of services they provide, what their process is and how they conduct their services. Here are a few things you might ask about:

• Marketing strategies

• Paperwork

• Contact hours

• Maintenance and repairs

• Protocols for late rent payments and other potential issues

• Your contract with the agent

Compare fees

Comparing fees can help you find the best value for money. However, don’t immediately opt for the cheapest option you can find, as you may discover that cheaper fees can sometimes indicate a less than satisfactory quality of service.

Tenants prefer Letting Agents

Tenants are savvy. They know that the law is on their side when it comes to living standards and that the landlord is obliged to provide them with decent standard of living whenever they rent out a property they own.

The thing is, though, most tenants also want a quiet life. They don’t want to take on a property and then have to fight to get that rental up to scratch; they want guarantees from the get-go...which is where a letting agent comes in.

Renters know that properties offered by a reputable letting agent like Rentaholics will be fully checked and legally sound before they sign their tenancy agreement, which puts their mind at rest and allows them to proceed with confidence.

The danger of self-managing

Finding tenants

How hard can it be? You’ve read it in all the papers; people are crying out for decent rented accommodation. They’ll be battering down your door! Actually, the truth is probably a little different.

While there are certainly plenty of renters out there, you still have to find them, and they’re unlikely to seek you out without you being at least a little bit proactive. That means you’ll have to do your own marketing, and marketing costs money (not to mention being time consuming too).

Professional letting agents and property managers, on the other hand, are geared up for this and they’ll also already have a database full of potential renters for your property. Compare this reach to a couple of listings online and in local newspapers, which is about the strength of the average self-manager’s scope, and it’s easy to see why you’ll be at an instant disadvantage should you choose to go it alone.

Getting the right tenants

If you do strike out on your own and manage to find yourself a tenant via your marketing efforts, how do you know what they’re like? Are they the right tenant for you and your property? Will they cause you no end of grief? You’re effectively rolling the dice with what is likely to be a rather large investment.

One of the key problems landlords face when marketing their own property is tenants who scour the types of advertising streams available to self-managers aren’t always the best. Their history may be sketchy (if they have any at all), so their options are limited. This leads them to your door and, if you’re not prepared, it can be the beginning of a bad tenancy.

It’s no one’s fault, per se. Even bad tenants need somewhere to live, and you need to get your property filled to avoid leaving it empty, so you naturally come together. However, it’s still far from ideal.

Employing a professional and accredited agency will help lessen the chances of this happening as they’ll have vetting schemes in places, protecting both landlords and tenants.

Holding your portfolio back

This is a point few landlords think about when they opt to self-manage their rental property, but it’s a big one and something which needs serious consideration. Self-management takes time, lots of time, and it can often stop people who go down this route from reaching their true potential as landlords.

There’s a very good chance that if you are in the property game you are in it to make money. While plenty of investors love the hustle and bustle of dealing in property, the underlying motivation is usually profit. With this in mind, wouldn’t it make sense to put yourself in the best position possible to make as much cash as you can? Of course it would!

With a property management team on your side you are free to do more of what you should be doing as a business person: sourcing more property that will bring you and your business greater returns.

Damaged reputation

A landlord with a bad reputation is going to have a tough time, even in a market full of opportunities. The problem with reputations is that they are fragile. Warren Buffett summed it up nicely when he said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently”.

While Mr Buffett’s area of expertise is the stock market, the same applies to property. Poor customer service is high on the list of things that’ll get you a bad name, and it’s surprisingly easy to fall foul of this when you’re doing everything yourself.

Ensuring that your tenant’s needs are met takes a lot of work and diligence; one slip and you’re in the bad books! Experienced property managers have a distinct advantage here, as they’ll have a team ready and able to answer all of your tenants queries, questions, and problems.

As an example, what happens when self-managers go on holiday and the tenant needs to get in touch with them about water pouring in through the ceiling? They may be able to contact them via email or phone, but that’s far from ideal if you’re luxuriating on the other side of the world!

Having a reputable property manager handle your day-to-day tenancy affairs not only makes your life easier, it also gives you a degree of separation too. This will help keep your reputation intact.

Personal attachment can bring poor results

Let’s face it, if you’ve laid out a substantial sum on your investment it can be hard not to become personally attached to it - especially if you are new to buy-to-let. For those who inherit properties, things can often be even worse.

You’ve received a property from a loved one, possibly even the family home, and now you’re supposed to be objective and remain professional when dealing with a tenant who may not be looking after it. You can see where that could lead! As with maintaining your reputation as a landlord, having a degree of separation will stand you in good stead. A more hands-off approach to being a landlord removes the risk of subjectivity, allowing you to be more business-like and, ultimately, successful.

Letting (seemingly) small things slide

For the uninitiated, the importance of things such as inventories can be underestimated. It can be easy to do a half-hearted job or, worse still, not do it at all. After all, it’s another drain on your time and wallet, so why do it if it can be avoided?

Well, the truth of the matter is, inventories are important. In fact, they’re vital if you want to avoid disputes and get your property back in the same state as the day the tenancy began. Proving that damage has been done by your tenant without an inventory being conducted is impossible, and it might leave you with an extremely painful bill which could have been easily avoided.

Falling foul of the law

We’ve saved what is probably the most important point until last - getting on the wrong side of the law. Being a landlord can be a minefield if you’re not legally minded. Even if you are, legislations change, so you need to be prepared to keep abreast of new rules and regulations.

DIY property managers can really come unstuck with the legal side of being a landlord, and the consequences can be very serious indeed. Custodial sentences are not unusual, so this isn’t something to be taken lightly. Knowing the relevant laws is of utmost importance.

A good property manager will protect you from such disasters as they’ll be constantly monitoring the legal side of things for you. They’ll be aware of any new rules and laws before they come into play and they will inform you of any changes you need to make in order to stay on the right side of the legal fence.