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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Property Investors, Affiliate Income and HIPS – More Baloney!

I recently received a magazine in which a Get Rich Quick in Property Guru was harping on about how “Property Investors” - (funny that these guys never refer to “landlords” who have to actually get in and do real work like arrange to get fixes for boilers, sort out tenant issues etc, but let’s leave that aside for now) - could make money by other sources of income linked to their property sourcing business.


The guru referred to how investors could make thousands each month by becoming a letting agent for other, er, investors, how they could do a spot of mortgage broking on the side or how they could make lots of cash each month by running affiliate schemes for landlord products such as we do on our Landlords Services page.


Not Much Money Here!


What a load of baloney as they would say in New York.

Most letting agents I know do OK, but they are not rich - and the work is very hard indeed involving long and antisocial hours dealing with difficult tenants and more than a few awkward landlords. And as the barriers to entry to become a letting agent are so low, profits have always been and always will be on the low side.


Or Here.....


The same goes for mortgage broking.

Right now mortgage brokers are having a very hard time in the buy to let arena as volumes are low and as more and more people go direct to the lenders (hardly surprising as there are so few lenders to choose from.)

And as to affiliate income, well I know from experience that even with our own busy site there is not much money to be had from that source either. A few hundred pounds a year from one of our insurance affiliates and that’s about it.

Maybe these guys have to promote these ideas about other sources of income because too many of their clients are so disappointed when they find they cannot make the £s they were promised at seminars through the route of No Money Down or Cash Out Property Deals, so they have to sweeten the clients up a bit and tell them the Holy Grail of Get Rich Quick is still possible. As they say in New York, again, Forgeddaboutit!


HIPS


So, Labour is the only political party that wants to persevere with the Home Information Pack (or HIP) in its current form.

My view is that it was too bad the current Government allowed itself to be bludgeoned into jettisoning the Property Valuation Report, which was to have been in the HIP when it was originally designed.

What should have happened was the Valuation Report should have been included in the pack provided by the seller.

It could have been made to be valid (or extendable at low cost) for say a minimum period of 6 months. And as a neat side benefit, this would have helped ensure only serious sellers put their property on the market in the first place – which seems sensible to me.

So why didn’t they do this?


The Banks and RICS Scuppered the Best Plans


Well, the net effect would have been to reduce the number of valuations that were done overall and so this idea may not have appealed to those with vested interests in the valuation business – namely RICS and the mortgage lending banks.

The banks (who make a pretty penny out of Valuation Reports) moaned about how no buyer would trust a report produced by a vendor. (Really, even one done by an esteemed RICS surveyor?)

Unfortunately, the government (back then as close to big business as ever) believed this nonsense and didn't face down the surveying industry or the banks on the issue.

And so we ended up with a HIP that, without a valuation, was not much use to buyers at all.


MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the broadcast media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one-to-one mentoring / coaching basis or through our occasional group seminars. With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

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David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Letting Agent Fees – What’s a Fair Fee to Find a Tenant by Letting Focus

Since my last two blog posts, many people have asked me what is a fair fee to pay a letting agent for finding a tenant.
My answer is
1) It depends where in the country you are (London agents always charge higher fees as a % of the rent)
2) How good a negotiator you are.
3) How easy the agent thinks it will be to let your property
Read the Contract
Do you like reading contracts?
No?
Well, sorry, but it’s time to get “down and dirty” with a letting agent’s contract.
Write this in bold letters, WHEN I USE A LETTING AGENCY I WILL READ THEIR CONTRACT VERY CAREFULLY.
Why?
Well, you have to in read it order to understand the limits of what they will do and won’t do for you.
Most will not evict a tenant who does not pay the rent, for example - at least not in their standard fee.
So why do contracts matter so much?
Well, if I had a fiver for every time a newbie landlord said to me “Wait a minute, the agent has just sent me another bill for a thousand pounds for a tenant who moved in 6 months ago” I would have about £500. The reason is, “renewal fees or repeat letting fees.”
As we have seen from the recent OFT case involving Foxtons, letting agents - especially those in London – just love renewal fees because if the tenant agrees to stay on after the end of 6 months; the agent gets to bag another fee for doing not very much.
If you have signed a contract agreeing to this, you are a bit stuck unless the existence of the renewal fee was hidden in the small print.
And if that was the case, then see my last post for more on what to do.

What’s Included and What isn’t Within the Letting Fee
Also, check out what’s included in the letting agent’s fees – for example, some agencies offer a free inventory as part of their service whilst most others charge extra for this.
If inventory is included, then great, but always request a copy of an old inventory to check quality and detail which varies greatly.
Also, ask if they make extra charges for checking references, doing check-ins on move-in day, signing tenancy agreements or notifying utility providers and the council tax people.
Ask if the agent uses an up to date credit referencing system to check out tenant’s ability to pay the rent and does it check for County Court Judgments too. What does it say about the referencing system they use on the internet?
Assess if the agent understands the importance of having proper references and an inventory done.
The former will reduce the chances of ending up with a tenant from hell – one who won’t pay rent and who could take months to evict - and the latter will ensure that if the property is returned in a mess or with things damaged beyond normal wear and tear, you’ll be entitled to keep some or all the deposit to pay for it.
If the agent does not understand this, go elsewhere, because this is basic stuff.

Letting Fees - What I Pay
For Tenant Find Only services - where the agent find and “reference checks” a tenant, sends the reference report to me for my OK, collects a holding deposit, does the move in, collects the balance of the tenancy deposit and first months rent and signs the tenancy agreements - I have never paid more than 4 weeks rent, even in London.
And no, I won’t pay the agent any other extension or renewal fees (as all my tenants will move onto a periodic tenancy at the end of the initial term.)
I have a phone and I know good plumbers, heating engineers and plumbers so I can easily manage all my properties myself too - so no need to pay a letting agent a management fee. I just pay them to find a tenant and that’s it.
Some landlords who used letting agents before may wonder about doing it themselves. We can help you with this. Just ask about my one to one property advice service and my property seminars or join my newsletter by emailing me at [email protected]
Plus at our Property Affiliate page we have set up links to lots of good long established merchants who can find tenants for you by putting your property online, checking tenant references, arranging the best buy to let mortgage, finding good landlords insurance and a lot of other landlord services too. Click on our Landlords Resources page for more information and great deals from our merchant partners.
We are having a couple of well earned weeks off. We will post again on 12th August!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book.
What’s unique about LettingFocus is that I offer independent unbiased advice on buying property as an investment because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas) and what type of property to buy and I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
AFFILIATE PRODUCTS
Find out about all the GREAT DEALS we have arranged at our Property Affiliate page. More will be added over the next month.
Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week.
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