A 21st Century Letting AgentMake Text Bigger
What should a landlord expect?
ARLA have been complaining that the Government should regulate Letting Agents in the same way they have done for Estate Agents. They may have a case, but ARLA standards are still pretty minimal compared to what the best agents are providing already. Landlords often make their own bed by going for the cheapest headline option without looking in detail at the service being provided. Added to which Grant Schapps and the government are not minded to regulate in the near future and with the current state of the economy, I believe they have more important issues to attend to.
So what should a Landlord expect of a 21st Century Letting Agent?
First of all what is crucial to the Landlord to maximise the income from their properties.
- Maximise Rent Year on Year
- No Arrears
- No Void periods
- Minimal Repairs
Therefore the 21st Century Letting Agent must be working towards these goals on behalf of the Landlord. The problem is that for many agents these goals do not align with their own goals and, being charitable, in many cases are clearly not understood by the new breed of Letting Agent.
Landlords own an asset which they hand over to a letting agent to run (note not manage) for them and it is in this crucial aspect that a 21st Century Letting Agent will differ. Asset Management is the art of managing an asset to maximise net income from it while protecting the security of the asset. Most (not all) letting agents run a portfolio to maximise profit from it for themselves rather than maximising the net income to the Landlord.
Usually the lower the basic fee, the more ways the agent will find to generate other income from the properties they ‘manage’ which is all very well but it must be transparent what those charges are right from the outset. Unfortunately, in many cases it resembles the chaos and confusion of the energy industry with landlords being unable to compare like for like. Neither should agents take kickbacks from supplier as it works against the landlords best interest. Therefore, it only goes to say that if a regular turnover of tenants increases their profit, an Agent will not be looking for long term tenants which are the most profitable for the landlord. Longer tenants means fewer finders fees and fewer voids and it also means fewer refurbs and repairs on which the agency may also make a margin. A 21st Century Letting Agent should ONLY charge a single finders fee in any 18mth period following the induction of a tenant and the commission fee as a % of the gross monthly rental income, with any other chargeable activities clearly and transparently set out. Then, if with truly comparable data this results in proper price competition between agents and drives fees down and or the 18mths to 2 years so much the better. Voids are the cancer that eats away the profits on a property in lost rent and refurb costs so by only making these their charges totally transparent the agent is incentivised to find long term tenants. Anything less than 18mths and the Agency loses money as well as the landlord.
If all lettings agents adopted this strategy alone it would revolutionise the industry at a stroke and allow landlords to make really effective comparisons between agents.
But that is not all a 21st Century Letting Agent/Asset Manager could and should be doing to provide the real level of service landlords should expect in the modern era and I will expand on these in the next part.
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