If you have a portfolio of buy to let properties should you manage them yourself or use the services of a letting agency?
This is a common question that property investors ask me a lot.
At the most basic level this is all about time and cost. By managing your properties yourself you will save on paying the fees that a letting agent will charge. But it can be a time consuming process and even get in the way of you planning and executing your next property investment move.
When I first started out with buy to let property investing I did everything myself. I do not regret this as I learned a great deal. If you are just starting out and purchasing your first rental property then I highly recommend that you learn what is required so that you can appreciate what managing a buy to let property really entails.
But as you grow your portfolio of properties you need to give strong consideration to having a letting agent take care of property management for you. Time is your most valuable commodity and it makes sense to do everything that you can to free up your time to develop your portfolio for greater profits.
What is involved with Property Management?
When you decide that the buy to let strategy is right for you it is important that you fully understand what you will need to do to be a successful landlord. I was determined to learn this first hand, and what started out as a fairly short list of property management tasks soon became a very long one.
Here are some of the things that you will need to do if you decide to self manage your rental properties:
- You need to secure your properties
- You need to find tenants
- You need to attend viewings with potential tenants
- You need to decide on whether a tenant is right with background checks etc
- You need to have contracts ready
- You have to take the deposit money and manage this properly
- You need to conduct an inventory prior to the tenant moving in
- You will need to take care of any necessary maintenance and repairs
- You need to deal with day to day tenant issues
- You need to collect the rent each month
- You need to deal with late payments or non payment of rent
Being a landlord can really be a full time job – and it gets worse the more properties that you have. There will be times when you receive calls in the middle of the night about some emergency such as a blocked toilet or the heating has failed in the middle of winter.
The Benefits of Self Managing your Buy to Let Properties
As I said before, you will gain a great deal of experience from self managing a buy to let property. Even if you decide to hand the responsibility of property management to a letting agent afterwards, it is always good to understand what they will be doing for their fee.
One of the major benefits of self management is that you get to choose your own tenants. Sometimes a letting agent may choose a tenant on your behalf that you are not happy with. There are things that you can do to minimise this happening, but it is possible that they will get this wrong.
The other major benefit is the money that you will save by not having to pay letting agents fees. These fees can be as high as 20% of the monthly rent that you collect from your tenants. Another thing is that not all letting agents are the same. Some are better than others and if you have special requirements then you must find the right agent.
You can easily manage your buy to let properties even if you have a number of them and several tenants. The easiest way to do this is to use a spreadsheet such as a Microsoft Excel sheet or a Google Sheet. There is no need for you to invest in expensive software to manage your buy to let properties and tenants.
There is a limit to the number of properties that you can manage on a spreadsheet without missing something important and I would say that the maximum is 10. After that, if you are serious about managing your own properties then you need to look at investing in a property management system. You can link these to your bank and they have many good features.
Why you should consider Outsourcing to a Letting Agent
These days it is not uncommon for buy to let portfolio owners to have properties scattered around the country. If this is the case for you then you need to find a good letting agent in each area where you have a property. One good agent is OK if your properties are in the same general area.
The first thing to do if you are considering outsourcing property management to an agency or agencies is to meet with them to discuss costs and what they will do for the money. Not all letting agents are the same and some will do more than others. You need to feel confident that the agent has:
- A thorough understanding of the area where your property is (or properties are) located
- A total awareness of rental prices in the area
- A track record in marketing properties for rent and finding good tenants
- A process for screening tenants where you have a major input
You may think that all of these things are obvious and I guess they are. But I see a number of people that are new to using letting agents make fundamental mistakes that they could have avoided if they had just done their homework.
Find out what the average time is for them to find new tenants. You want to minimise the amount of void time for your properties as this will cost you money. Ask these questions of the letting agent as well:
- How they will find tenants for your properties?
- What is their process for lodging deposits?
- How do they handle contracts?
- How do they handle tenant evictions?
- How do they manage late payment of rent?
Once you appoint a letting agent then you need to monitor them closely. One thing that you certainly want to watch for is that the agent finds you the right kind of tenants. You should certainly have discussed this initially.
Here are some of the things that you can expect a letting agent to do:
- The marketing to ensure you get tenants for your properties
- Viewings to meet with potential tenants and show them around
- Ensure that the tenant signs a tenancy agreement and understands the rules
- Arrange for the deposit collection and comply with the Tenant’s Deposit Scheme
- Complete a full inventory before the tenant moves in
- Meet with the tenant when they move in
- Inspect your properties on a regular basis
- Deal with any issues that arise on a daily basis
- Follow up with tenants to pay their rent
- Deal with evictions if necessary
If you can find a good letting agent then they can save you a great deal of time and hassle. It is certainly worth putting in the leg work to find a suitable letting agent to manage your properties. Don’t just go for the first letting agent that you meet.
Recommendations from other property investors are definitely worth following up. If you know others that use a letting agency in your area then you should check them out. However you find a good letting agent doesn’t really matter – the important thing is that you can trust them and that they will save your precious time so that you can work on your business.