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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.

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.
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Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week.
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Letting Agency Fees Can Be Traps for Accidental Landlords says Letting Focus

Just the other day, I popped in to a local letting agent and was pretty surprised.
It was all very impressive with a posh waiting space and lots of young twenty somethings all busily taking calls at rows of high technology work stations. Wow! You don’t see that kind of thing in our local high street too much.
I was there to see if they could help me.
You see, right now I’m pretty busy preparing for my talks at the London Property Investor Show – the only property show that is worth bothering with. (You should go -see our ticket offer below)
So I thought, maybe this agent could take the time off my hands and find a tenant for a property that I have which have just become available.
As you may know, I usually do all this stuff myself for my London properties.
I find that finding and checking tenants’ references is easy for me because I know what I am doing and have done it a lot.
And in London, we have the blessed Gumtree.com free site to use to find tenants which works very well – as long as you remember to take a few pics of the property and keep refreshing your ad each day.
So, I asked the agent what their fee was.
“10% plus VAT” they replied.
OK, so far so good, but this is a bit like saying that a piece of string is, “Oh, so long.” In other words it is not much use at all.
“And what term is that 10% based on?” I asked.
“All our tenancies are for 24 months” was the reply.
Gulp. …..Now let’s see.
For this one bedroom flat, which was to rent at £758 per month, that is a cool fee to them up front of £2137.56. Crikey!
Now, let’s be honest, how many tenants do you get who come along and would willingly sign up to a 24 month term?
Not many. In fact, in all my 22 years of letting, I have never had one who wanted such a long tenancy.
For a start, they don’t know what you will be like as a landlord and 24 months is a long time to be stuck with a lousy landlord. But more importantly most tenants like the flexibility that renting gives them and would quite naturally like to be able to get out of a letting after 6 months. As a landlord too, you would be nuts to willingly sign up for a 24 month term because if you get a tenant who is, frankly a bit of an a**e you will want to be able to get rid of him a bit earlier than 24 months.
And unless, he was at least 2 months overdue on the rent or decides to run a brothel at the property or do something else of a nasty criminal nature, there is no sure fire way you can be easily rid of him if you have signed up to such a long term.

OPT FOR 6 MONTH TENANCY AGREEMENTS
That is why most sensible landlords opt for 6 month fixed term contracts which are extendable if everyone is happy after 6 months has ended – i.e. you simply agree to roll the same tenancy agreement on (it is called a monthly periodic tenancy)
After I walked away, I called this agency, this time posing as a tenant.
They explained about the 24 month thing - but only when pressed.
I queried why it was so long.
And the answer came back: “Sorry, all the landlords insist on it” which is, of course, is utter nonsense.
However, many new Accidental Landlords who have decided to rent out their home because they can’t sell it - will fall for all this – which is why letting agents like this one are trying to get away with it.
Oh, what happened in the end?
The next day, I let the property for nil cost using an advert in Gumtree. A nice lady tenant moves in next week.
And before I get complaints form letting agents reading this, I should say that not all letting agents operate like this.
Many agents in London and all the ones I have used for my Kent properties are sweeties and charge a fair rate for very good work.
However, there are rogues about – and some of the rogues are big names. So watch out.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of property investment expert lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 3 years has been the UK’s top selling property title - buy the UK's top selling landlord book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist, property speaker and a well known landlord blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords coaching
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentoring programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property investors coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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Accidental landlords are coming to an area near you soon says Lawrenson of LettingFocus.com

Accidental landlords are coming to an area near you soon says Lawrenson of LettingFocus.com
Ah, another week of more bad news on house prices.
I see the likes of the Telegraph and other right leaning papers are whipping up the bad news in an attempt to sink what slim chances the Labour government will have at election time, though one of their most pessimistic writers at the Tory, Ed Conway did break ranks recently to suggest that there may now be bargains to be had for credit rich investors.
Perhaps he has been reading this property blog.
Still, despite Mr Conway’s recent comments, the fact is that because of all this negative house price news, we are also seeing more signs of the re-emergence of the “accidental landlord” -this is the person who can’t sell their property (for the price they want) and have chosen to rent it out instead until such time as house prices improve.
Actually, a lot of this kind of thing happened in the last property recession in 1989-1995. Indeed, many of today’s property millionaires started back then – they rented out their first property through default rather than choice.
However, for each millionaire today there were many back then who “had a go” at being a landlord, had a bad experience and then gave up and cried off hurt.
And so it will come to pass, once again, that we will see many novice accidental landlords sign up with letting agents to find them a tenant.
Nothing wrong with using an agent of course!
But, they will happily sign contracts with the letting agent where they will end up paying big letting agent fees forever -and long after they have found them their tenant.
This is particularly likely in London and the South East where high and ongoing renewal fees are standard practice for some agents who regularly foist them on novice landlords who know no better and can’t be bothered to read the small print of the letting agent’s contract.
Hopefully this practice will be outlawed very soon once we have the judgment in the Foxtons case.
Also, there will be many an accidental landlord who gets a tenant from hell because he or his letting agent did not do proper and thorough tenant reference and background checks on the tenant. Others will not know they must lodge tenants’ deposits or how to do a good property inventory.
And there will be quite a few who will adopt a Rigsbyeque approach to being a landlord which will ensure they quickly lose their good tenants and end up with someone far less suitable.
However, some will prosper. They will have done their research – some will even have read my own book - and will do well.
Despite these accidental landlords coming into the market and adding extra supply to the stock of properties to let, there has so far been absolutely no sign of rents coming down in my patch of south London and Kent.
And that is not surprising really if you listen to the independent experts.
But the chances are you won’t have read what they have to say because on the subject of experts, the likes of the independent academics haven’t really got the hang of PR and all that jazz.
You are far more likely to hear from Nationwide, Rightmove and the like about house prices and rents than you are from the independent Joseph Rowntree Foundation.
But in an interesting report that only the FT picked up, the Joseph Rowntree Foundation - which is pretty independent – pointed to the fact that today’s first time buyers may be less interested in buying property and more into having a good time. The report is called, “Housing market recessions and sustainable home ownership.” It is well worth reading.
I agree with Rowntree on this and a lot of other stuff they say as well and I also think the peak of house ownership in the Thatcher years is now over.
I think that in the future there will be lots of people CHOOSING to rent - and hence lots of tenants for landlords (outside the city centre identikit buy to let ghettos, of course)
And on the subject of independent minded thinkers, another report by Professor Michael Ball of Reading University predicts that outside the buy to let ghettoes rents could increase 10-15% in both 2008 and 2009. It is called the “Modern UK Housing Market - origins and prospects”. Another good read that you wont have seen in much of the press though.
So there you go. As I always say, listen to the independent property experts and try to ignore the headlines that the rest put out and the papers gobble up. There are many vested interests out there - some of them political and most of them commercial.
Instead, listen to the independent voices if you can.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord experts’ lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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Letting Agency Fees - Negotiate on Them

If you use a letting agent, their fees are not set in stone so look carefully at their rates.
My advice is to look at the contract they present and be prepared to negotiate (or remove altogether) any clauses fees that you might feel are unjustified or excessive.
For example, if a fixed term assured tenancy becomes a periodic tenancy after 6 months then the workload for the agent should be minimal at the 6 month point.
In these circumstances, all that might happen is an exchange of emails between your tenant and your agent to say they wish to stay on. This type of situation would hardly justify a hefty renewal fee.
Neither is a big fee justified for producing a tenancy agreement. These are available from the internet or from landlords associations at little or no cost.
But don’t be mean.
Good letting agents are well worth their fees and will work hard and do unsocial hours on your behalf so be prepared to pay for the work that the agency does when they do it.
In many cases this will mean at least 10% for finding a tenant and at between 3 and 5% for managing them.

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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