One of the first decisions landlords need to make when getting a buy to let is who’s going to manage the property. Many landlords (including myself) decide to manage it themselves. However, others don’t have the time or inclination, and need to appoint agent to manage their properties.
Finding a great property manager can totally transform a buy to let business. However, bad managing agents can cost stress, hassle, money and a loss of reputation locally.
How can landlords make sure they choose a good managing agent? What things should they ask when choosing? What can landlords do to get a great service from their agents?
This blog post will help landlords make the right choice of property manager, and get the best out of them.
PS I use the term property manager and managing agent interchangeably in this post, and mean a letting agent who provides property management services to landlords
How landlords can get the best out of their property managers
- What exactly does property management include?
- What should property managers actually do?
- What does great property management look like?
- What questions should you ask potential managing agents?
- What should landlords ask for in contracts with managing agents?
- Final thought: Landlords need to manage the property manager
What exactly does property management include?
Put simply, when renters move into a property, someone needs to be responsible for dealing promptly with maintenance issues, making sure all the regulatory checks are done, and making regular inspections. This person is said to manage the property, and of course, manage the relationship with the renters.
If a landlord doesn’t want to do it themselves (click here for a guide on how to self-manage), they’ll need to appoint a property manager.
Most property managers are part of the management department of letting agents. They’re usually called “managing agents”, even though they work for letting agents. Letting agents in turn may be part of an estate agency, whose main focus is to sell houses, with letting and property management as another service that the estate agency offers.
Also, there are many standalone specialist lettings and management companies that aren’t part of an estate agency.
As an aside, many tasks that managing agents do can be done by virtual assistants and contracted property managers. Take a look at this blog post to find out how to manage a growing property portfolio, and obtain economies of scale, without agents or doing it all yourself.
>> Related Post: How to mange your buy to let yourself
>> Related Post: How to manage a growing property portfolio efficiently
What should property managers actually do?
A property manager is effectively the relationship manager between the client (the renter) and the service provider (the landlord). They have a particular responsibility for making sure a good service is provided and that any problems are dealt with promptly.
These are the different aspects of managing the relationships between landlords and renters:
Lettings: what letting agents do to find tenants
A letting agent finds renters for the property by marketing the property and carrying out viewings. Some will take professional photos and provide a floor plan, but others charge extra for this. Do check to see what is included as it’s not unusual for unbudgeted costs to suddenly appear due to poor transparency.
Usually agents will provide the landlord with a shortlist of tenants to choose from, and talk through the pros and cons of each candidate to enable the landlord to make a decision.
Once preferred renters are chosen, the agent takes references, and does right to rent checks. If these renters pass the checks, the agent will arrange the tenancy agreement, collect the deposit and first month’s rent, register the deposit in a deposit protection scheme, and provide the prescribed information about the deposit registration to the renters.
Letting agents will also carry out a compliance check before letting to make sure the property is safe to let and that the various landlord obligations have been complied with. This means a valid Gas Safety Certificate from the last 12 months, smoke alarms on each floor, carbon monoxide detectors installed next to boilers and working fireplaces/wood-burning stoves, a satisfactory EICR from the last 5 years, and an EPC of E or above from the last 10 years. (The rules for EPCs are due to change from 2025 to make the EPC requirement a C, but the law is still pending).
An inventory is normally an optional extra as is taking meter readings and liaising with utility companies. I recommend that landlords (or their agents) arrange for an independent professional inventory clerk to carry out the inventory before the renters move in. This helps to avoid any bias in the report, and improves the report’s evidential value in the event of a dispute.
Most letting agents will offer letting as a standalone service called “let only”, for a one off up-front fee, if the landlord wants to self-manage. However, they often prefer to bundle it with their management service. The reason for this is that agents make more money from property management, as the retainer is an on-going fee on the gross rent until the tenants move out, or an earlier termination.
It’s also possible for landlords find tenants themselves by using the online portals. It’s fairly easy at the moment, with such high rental demand, and it’s very cost effective. I’ve done it myself twice using OpenRent, and share my experiences and tips in the related posts below.
>> Related Post: How to find tenants using OpenRent
>> Related Post: How to let a property yourself
Property management: what property managers do for landlords
The property management starts once the renters move in. The lettings department will usually hand over responsibility for the relationship with the renter is handed over to the management team. This is because the skills are different. The property management team might be based centrally. It’s worth checking.
Full property management usually includes the following services:
- Tenant find (some charge an additional set up fee), ie the letting agency work to find new tenants for the landlord, which usually includes the tenancy agreement, deposit registration, referencing and arrangement of an inventory.
- Changeover of utilities at the start and end of a tenancy (agents sometimes have preferred suppliers who give them commission).
- Point of contact for tenant, providing a buffer between the tenant and the landlord during the tenancy.
- Arrange repairs and maintenance up to a certain pre-approved amount.
- At least one inspection visit per year.
- Collection of rent from the tenants and sending it onto the landlord, after deducting the fee.
- Chasing ‘initial arrears’ from tenants (not formal debt collection)
- Checking off annual safety certificates and arranging renewals eg gas safety certificate (charged separately). Some agents charge a separate annual compliance fee for this.
- Negotiating and documenting rent increase (some charge extra for this).
- Annual renewal for another fixed term (sometimes not included in the price, which means an additional fee).
>> Related Post: What landlords need to know about full property management services
What does great property management look like?
So, what does great look like, when it comes to managing agents?
It doesn’t mean doing the list of things above. They should all be a given.
I spoke to property investor Subhi Khandelwal (you can follow her journey on Instagram here!), who has over 10 buy to lets that are a long way from her home. Her advice is to choose managing agents who are landlords themselves, as they can see both sides of the coin. They’re also more likely to understand the long-term issues with buy to lets.
Subhi has such a great relationship with hers that she sends links of properties for sale to them for feedback, and sometimes they go with her to viewings. Subhi says: “the best agents want to create a long-term relationship, and want to understand my long term plan, as that’s their future too. It’s not a one off transaction for them, but a partnership”.
Simon Ruocco from Acom Property agrees. He has been a landlord for a long time, initially in London and then in Manchester. Simon was unhappy with the service from traditional management agents, which tend to be an add-on to an estate agency. He found they often use the junior staff in the property management, who didn’t understand the needs of landlords. It was all one to do list, without there being any real insight.
He became so disillusioned with managing agents that he decided to set up his own property management company in London and Manchester. For Simon, the big issue was the lack of transparency on costs, and the hidden mark-ups on maintenance work. He doesn’t charge a mark-up on maintenance work, and his team upload all invoices to the landlord portal.
Simon recommends using managing agents who have invested in a portal, as it’s efficient, and makes it easy to find documents. Renters can log maintenance issue in the portal, and it’s all transparent. He has agreed service levels with landlords for repair turnaround times, which helps put the renter experience at the heart of the business. The last thing a landlord wants is to lose a good tenant because the repairs take too long.
My experience is that national estate agencies tend to have a higher turnover of staff, and lower customer-care. Independent agents are far more likely to value their landlord clients, but do be careful with due diligence.
What questions should you ask potential managing agents?
It can be difficult to choose agents to manage your buy to let. The person who pitches for your business might promise the world. However, you might never see them again as either they’re front of house, or they leave.
Here are some questions that landlords should ask shortlisted managing agents:
- How long have they been in business?
- Why should you choose them over the competition?
- What do they think good property management involves?
- What’s their staff turnover?
- How much is the fee? (It tends to range from 10-20% of the gross rent, but is will be negotiable. Just ask).
- How much is the mark-up on repairs?
- Is there a named central contact for you as a relationship manager? What is their experience? Are they a landlord?
- What does the fee include, and what is extra?
- Who does the administration – is it local or in a centralised call centre?
- What affiliations do they have. For instance, ARLA Propertymark, The Royal Institution of Chartered Surveyors (RICS) or the National Association of Estate Agents (NAEA).
- How do they handle complaints?
- What if you’re not happy with the service? How much notice can you give to terminate?
Most importantly, do check to see which property redress scheme they belong to. This is mandatory, and if they’re not a member, it’s the ultimate red flag and you should walk away.
What should landlords ask for in contracts with managing agents?
Your chosen agent will no doubt tell you they have a standard agreement, but agreements are always negotiable. Don’t just sign what they put in front of you. Remember, it’s always easier to negotiate at the start, rather than once you’ve started.
Here are some tips for your contract negotiation with your property manager:
- Do check everything to make sure it reflects what you’ve agreed. For instance, if they’ve promised there’s no mark-up on repairs, it should say so in the contract.
- Make sure the contract is clear about what’s included in the fee, which is normally a percentage of the gross rent.
- Any extras should be clear.
- You need to be able to terminate the contract if you’re unhappy with the service, or even if you decide to self-manage. Make sure the contract is clear on your rights to terminate. There shouldn’t be a penalty for terminating the contract before the tenant leaves. Just a fair notice period or a fair fee in lieu of notice.
- Note that the Property Redress Scheme advises “It may be unfair for an Agent to charge cancellation fees in circumstances where the Landlord has terminated the contract for good reason for example where the Agent has breached the contract or has not carried out services with reasonable care and skill.”
- Any agreed service levels should be in the contract.
- Check there isn’t a hidden sales commission that’s payable if you sell the property. I spotted that in a let-only agreement with Leaders in 2019!
Fees are negotiable, particularly if you have a portfolio, but the cheapest agent isn’t always the best. You should be looking for value for money. This means a good level of service which leaves the agent with a fair profit.
>> Related Post: How to terminate the agreement with your letting agents
Final thought: Landlords need to manage the property manager
Whether you choose to manage your properties yourself, or using managing agents, property management is key to the long-term success as a landlord.
Landlords remain liable for anything an agent does on their behalf. So, it’s important not to wash your hands of it all. The buck really does stop with the landlord.
>> Related Post: Is passive income a myth for landlords?
How can landlords hold their property managers to account if they don’t know what they’re supposed to be doing n their behalf?
This is why it’s really important for landlords to be up to speed on their landlord responsibilities, and the details of new laws that come into force. Understanding landlord responsibilities actually helps create an effective working relationship with a property manager. Not only will the landlord be able to manage them better, but they should both be on same page about the compliance checks and the need to do prompt repairs.
Finally, landlords need to to understand what it means to be a responsible landlord, and why that’s good for business. Happy renters stay longer, and having excellent property management is important in keeping renters happy. It’s a virtuous circle.
>> Related Post: How to be a responsible landlord
>> Related Post: The 10 key changes in the Renters Reform Bill