[Bluey]

Honestguy posted this wish on another thread: "If I had the capital I would open an agency charging no fee's to tenants and a very low fee to landlords (3-4%) and cut out these extortionate agents out completely!"

Fees for Landlords average 10% for a letting service and 15% for full management and this probably excludes VAT and other common charges, such as the charge for drawing up a tenancy agreement, inventory and so on. Tenants generally pay a fee for their credit check and I assume that the Letting Agent retains the interest made on deposits that they hold. Landlords are responsible for all legal fees and non-payment of rent so there is little financial risk to the Letting Agent who has usually received most or all of the fees up front.

It is a lucrative business. For example, if a Letting Agency has an employee managing a portfolio of 50 properties that are rented out for a modest £1000 each and reap an average of 12% from the rental income and additional fees, then they generate a gross monthly income of £6,000 (£72,000 per annum). In return, this employee is able to spend an average of 3 hours managing each property during that month, costing each Landlord about £50 for each theoretical hour expended on it.

Obviously if the property portfolio per Letting Agent employee and gross rental income is higher, then the amount of time than can be spent on managing the property decreases and the hourly rate increases. If an agency has 100, 200, 300 properties on its books that are successfully let out, then the figures get mind-boggling.

That's the likely reality so what would your Fantasy Letting Agent do differently?

[jimjam]

You don't have the capital to open a letting agent because you clearly have no business sense or a clue about how much it costs to run an office.
If you you have 50 managed properties that requires at least 2 members of staff. On your figures of £72k pa this means 2 staff (1 to let and 1 to admin/ manage) this will cost at least £40k, advertising is around £10k, office/ shop £15k. So you are conservatively up to 65K before any sundry costs, insurance, tax, utilities, computers, vehicles etc.etc.
I agree that tenants fees are often unnecessary however landlord fees are completely justifiable. Many agents do not offer a good enough level of service to warrant their fees however most do a very good job and are well worth their charges.
If you had some business sense you'd probably be earning more money and wouldn't need to waste your time whinging about fees!

[Bluey]

The purpose of this thread is to stimulate a discussion about the service that tenants would like to see from Letting Agents and it includes the term ‘fantasy’.

fantasy: The creative imagination; unrestrained fancy.

It never purported to be an actual business case for Honestguy and myself to establish a Lettings business…

It is fine that you are optimistic that Letting Agents pursue a policy of having a ratio of 1:25 between the number of agents they employ and properties on their books and that they don’t cram them onto as few staff as possible.

Some landlords and tenants may not be so convinced from the service that they receive from their Letting Agent that it is that generous. Lettings staff, like most sales staff in any industry, tend to receive a low base salary with the remainder paid on commission – this does not promote an incentive to share out the properties between them as it reduces their salary and increases company expenses.

It is fine to be pessimistic about high advertising costs but there are plenty of opportunities for a canny company to keep their tenant and property finding/advertising costs low or even free. There are a plethora of payable sites but as they compete with each other, this keeps client costs lower. There are plenty of property sites where lettings can be posted for free. Website costs for a company’s own site are low.

Has anyone else noticed that Letting Agents frequently haunt other websites, such as the Gumtree and Loot, at no cost to themselves and approach prospective Tenants and Landlords, despite the stipulation “Do NOT contact me offering services or anything of a commercial nature.” ?

So you can even bag tenants and properties for free while sitting at a PC scratching your belly through your dirty vest while puffing on a fag – marvellous!

My belief is that the reason why the service offered by some Letting Agents to tenants and landlords is so expensive and so poor is because they lack true competition which would stimulate them into offering better or cheaper service. This is indicated by the fact that they produce virtually no variation in the terms and conditions they offer, charges that the bill and type of service they give regardless of differences in their size or operating costs. Although they compete with each other in theory, it is only to grab each other’s properties and tenants and both are plentiful.

But back to fantasy.

As a tenant, my fantasy Letting Agent would describe the properties accurately before I viewed them to save wasting time and undertake prompt repairs. They would be as friendly to me after they've taken my deposit as they were before they had it.

[jimjam]

Fair enough. My fantasy letting agent would be paid a high basic salary and low commission to ensure that they enjoy their job and do not do everything they can to take advantage of tenants when doing deals and thus causing the numerous people who have complained on here to be out of pocket and upset. This can only be done by charging the landlord a fair fee of 10-15%. If your fee to the landlord is reasonable then you do not need to subsidise your income by charging the tenant. This would mean tenants are happy because they don't pay a fee and they feel they are getting good service. Landlords are often happy to pay a higher fee if they feel they are getting an honest and professional service. All too often the low fee agents are the cowboys. Letting property can be a highly risky and legally dangerous business and as such it should be dealt with by qualified professionals, this service does not come cheaply.
The old saying of paying peanuts and getting monkeys applies!

[tantricgent]

if it is that easy to make money from renting out property is ever one doing it? Why not ask your bank for loan, if your right you could repay it in a month/

[jimjam]

Tantric boy:
a.) Go back to grammar classes
b.) It is that easy to make money from being a letting agent which is why there are so many letting agents and consequently a few dodgy ones. Because there are so many agents the amount of money to be made is reduced and therefore people start charging high admin fees to make so extra cash.

[Bluey]

I agree with JimJam that there are a few dodgy estate agents but disagree on the observations that on the level of competition and that it forces letting agents to raise their fees.

Generally, business competition tends to benefit the consumer so that the services they are offered are better and the costs billed to them are lower – it becomes a buyers market where the consumer can pick and choose. You’ve only got to think of how the high number of telecoms and ISP companies over the years has driven down the price of broadband and mobile, made contracts much more flexible and resulted in lots of technical innovations and new services for their customers. I wouldn’t be here typing this on the Gumtree if the British Telecom monopoly of the 80s hadn’t been dismantled.

In the case of Letting Agents, despite how many there are, the sheer number of tenants and Landlords looking for their services makes it a sellers market – it’s like shooting fish in a barrel. They may compete with each other notionally but it’s easy come/easy go with the customer because the next tenant or property is just around the corner because there’s no real choice for them, just an attempt to hopefully pick the least worst of the bunch. This is why differences in their prices and services are miniscule – there’s no pressure there for them to raise the bar or incentive for them to lower their prices or go the extra yard.

Speaking of which, a colleague has just decided to let out his privately owned flat to a housing association on a 5 year lease. Though the rental income is lower than private market rent, it is equivalent to the net rent after letting agent fees have been deducted but, unlike an estate agent, the rental income is guaranteed and not subject to any voids. In this particular instance, it is actually more cost effective and less risky to hand over the property to a social housing group than to entrust it to an estate agent.

Apparently, Estate Agents that first inspected it to give a market appraisal for its rental, who previously all stated ‘our terms are not negotiable’, insisting they provided good value to manage it and who justified charging fees even when the tenants withhold rent ‘because of all the hard work we provide’, then fell over themselves to offer better terms when they heard about this. One went as far as to slash her fee saying she’d probably only have to make the occasional phone call to a workmen each month to sort out a broken appliance.

So I hope that illustrates my point that when there is true competition, costs come down and level of services improve to attract and retain customers increase.

[tantricgent]

jimjam sorry about the grammar but I am still recovering from a stroke. I used to rent property but gave up after coming out of hospital. Whilst ~I was in hospital one of my university students wanted to when will the bin men knock on the door and ask for the rubbish. He was doing an english degree so his grammar was perfect.

[tantricgent]

jimjam sorry about the grammar but I am still recovering from a stroke. I used to rent property but gave up after coming out of hospital. Whilst I was in hospital one of my tenants a university student wanted to know when will the bin men knock on the door and ask for the rubbish. He was doing an english degree so his grammar was perfect when he telephoned at the hospital.

[jimjam]

I agree the logic of more agents makes no sense with high fees.
10 years ago there were significantly less agents doing lettings. At that time fees to tenants were very low, if at all. Gradually a few new agents started charging fees to subsidise their income and seemed to get away with it. Because of this everyone else felt that if one could do it then so could they, fair enough. I think that Foxtons really messed it up for everyone by charging £300ish for a fee, just because they had the properties and were arrogant enough to do it. When smaller agents who may only get an average fee from their landlord of £500 saw tenants fees that high, they saw it as a good way of making serious money. so everyone jumped on the bandwagon.
Strangely the largest agents who deal in the top end i.e Hamptons, Knight Frank etc tend to charge some of the lowest fees.
Its a greedy business I'm afraid!
Housing association lets can be very good when you take into account the lack of void periods etc. Just make sure he has a professional independent inventory clerk do a check in.

[tenant101]

Hello everyone, having had such a terrible experience with my previous letting agent I thought I should expose them to avoid others having similar strife.

THE EDINBURGH LETTING COMPANY

Obviously this is my own personal opinion but I found them to be extremely unhelpful and discourteous. Unannounced visits were to be expected from time to time and various unreasonable charges were issued upon vacating the flat.

Again, this is just my opinion but I would actively discourage anyone from using their services.