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, and get the best out of their property managers.
At a glance
What exactly is property management?
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 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.
What should managing agents actually do?
A managing agent 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 service
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. Click here here for a guide on how landlords can let properties themselves by using online providers such as OpenRent. I did myself for the first time in 2022, and I was so impressed, I’ve become an OpenRent Affiliate.
Property management
The property management starts once the renters move in. Often responsibility for the relationship with the renter is handed over to the management team by the lettings team. This is because the skills are different.
Property managers are responsible for managing the relationship with the renters on a day to day basis. Here are the key responsibilities:
- Repairs and maintenance
- Property managers will have a method to enable the renters to report maintenance issues. The best have portals, and others rely on renters calling into the property management office or sending an email when somthing goes wrong.
- It’s the responsibility of the manager to arrange for the repair or maintenance to be done eg ask a plumber to see why the hot water isn’t working and fix it.
- Normally the agent will agree a figure above which they will need to consult first with the landlord. This is usually £100-250. Costly items such as a new boiler will need the approval of the landlord.
- After the repair has been done, the agent will invoice the landlord. Some agents add a mark-up on the cost of the repair. Agents don’t usually check the work in person, but will ask for the trades person to send before and after photos.
- Safety compliance
- Managing agents take responsibility for making sure the property remains compliant with safety rules.
- This means renewing Gas Safety Certificate and other certificates (eg EPC and EICR) when due for renewal, testing the smoke and carbon monoxide alarms once a year.
- It also means ensuring the property has the relevant licences, eg if it’s in a selective licensing area (although this remains the landlord’s responsibility) or if it’s a relevant HMO.
- Relationship management
- Rent collection and chasing late payments.
- Property inspections (usually once or twice a year).
- Assisting with disputes and complaints as a go-between.
- Tenancy renewals and rent increases
- At the end of the fixed term period, the tenancy will automatically become a rolling periodic tenancy which the tenant can terminate with one month’s notice, unless they enter into another fixed term contract, called a ‘renewal’.
- Letting agents normally try to arrange for the renter to enter a renewal. Some management services include this, and others charge extra.
- Agents will usually handle negotiations for a rent increase if they manage the property, but some charge extra. Do ask them to check with you first before proposing an increase to the renters. Agents normally push for the highest increase, whereas a more moderate one might be more appropriate for good tenants.
- End of tenancy
- The managing agent will usually check out the tenant. However, a check out inventory report will be an optional extra.
- Make sure it’s clear who is responsible for taking meter readings and informing the utility companies of the change of tenant. Some agents do it, but not all.
- Managing agents will usually be able to serve a section 21 notice on behalf of the landlord. However, if there are rent arrears and you need a section 8 notice, it is best to get specialist help.
Finally, remember that the buck ultimately stops with the landlord, even if an agent manages the property. Although they manage the property on the landlord’s behalf, the landlord ultimately remains liable if the property manager doesn’t comply with the law. If a gas safety certificate isn’t renewed at the right time or the property falls into disrepair and becomes unfit for human habitation, it’s still the landlord’s responsibility. You can read more about landlords’ repairing obligations here.
What does great 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 bing 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.
You can follow Simon on instagram by clicking on his profile here.
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?
It can be difficult to choose managing agents. 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 to ask the managing agents on your short list:
- 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 8-15% of the gross rent, but is usually negotiable).
- 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.
The scheme logo should be on their website and you can cross-check it on the relevant website. Here are the links: The Property Ombudsman or The Property Redress Scheme.
Tips for the contract
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 half-way through.
Here are some tips for your contract negotiation:
- Do check everything to make sure it reflects what you’ve agreed. For instance, if they’ve promised there’s no mark-up, it should say so in the contract.
- Make sure the contract is clear about what’s in the fee, which is normally a percentage of the gross rent.
- any extras should be clear.
- You need to be able to terminate if you’re unhappy with the service, or even if you decide to self-manage. Make sure the contract is clear. 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.
- 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 an agreement with Leaders!
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.
How to manage the property manager
Landlords do remain liable for anything an agent does on their behalf. So, it’s important not to wash your hands of it all. For more information on why it’s wrong to say landlords can earn passive income, take a look at this blog post: Simon Ruocco says the best thing a landlord can do to create an effective working relationship with a managing agent is learn about landlord responsibilities. This means they’ll be on the same page about the compliance checks and needing to do prompt repairs.
It’s important for landlords to understand what it means to be a good landlord, and why that’s good for business. Click here for tips on being a good landlord. Happy renters stay longer, and having excellent property management is important in keeping renters happy. It’s a virtuous circle.
Whether you choose to manage your properties yourself, or using managing agents, property management is key to the long-term success as a landlord.
