Rather than managing their properties themselves, a majority of private landlords are considering hiring property management companies to do the job for them.
Research reveals that 63% of private landlords are thinking of opting to use a letting agency or dedicated property manager.
Let’s dive in to find out the reasons why.
Background to the private rental market
It’s a time of property market upheaval: mortgage rates have risen due to rocketing interest rates, affecting the outlook for investors with buy-to-let property. This has made many landlords reassess the income they are actually getting from their properties. While some are deciding to sell and perhaps cash in on the uplift in their property’s value over recent years, others still keen to stay in the market are seeking support with their investment from property management companies.
Over 2,000 UK landlords were surveyed by Uswitch’s buy-to-let mortgage experts to assess their views on the market, find out the main reasons why they would use a property manager, and the likelihood of them doing so.
The top 5 reasons why landlords are switching to property management agencies
|Reason for using a property management company||% of landlords|
|No longer dealing with repairs||32%|
|No longer dealing with legal requirements||30%|
|No longer having to find tenants||30%|
|More knowledge of the market||29%|
|To avoid scams or fraud||27%|
|Would not switch||16%|
Analysis of the survey
The top-ranking reason for switching to a property management company is to avoid having to deal with property repairs (32%), closely followed by fulfilling the legal obligations of letting to tenants, and the problem of having to find tenants themselves (both 30%). The belief that property professionals have a greater knowledge of the market could lead 29% of landlords to use an agent.
Concerns about scams and fraud were expressed by 27% of landlords who felt that using a property manager would relieve them of this worry. False information and fraudulent applications are the main reasons potential tenants are rejected, with over 34% of landlords rejecting a tenant at some point. Another main reason for rejecting a tenant is because they have a poor credit score – 33% of landlords have turned down a prospective tenant because of this.
When asked for the reasons why they would sell up, 35% of landlords surveyed put it down to a lack of profit and 31% said repairs: according to Uswitch, the cost of property maintenance is estimated to take up a fifth of a landlord’s income.
Uswitch.com buy-to-let mortgages expert Kellie Steed commented on the trend for landlords engaging property management companies.
With both the Renters Reform Bill and higher interest rates on mortgages having a huge knock-on effect on the residential property investment market, some landlords may find the coming months more challenging than usual.
While it can feel like selling up is the only option, there are other ways landlords can keep profits afloat during the cost-of-living crisis. Switching to a letting management company offers some attractive advantages and gives landlords the scope to hold onto their investment. Property managers have a strong knowledge of the market’s changing regulations and can also take on much of the responsibility of owning investment property; lettings, repairs, rental disputes and complaints can all be tackled by an agency. Many offer increasingly alluring packages for landlords in return for around 10-20% of profits.
Remortgaging a property can also save landlords money, as any equity held in the property will give them access to cheaper rates. While a lower interest rate could offer less expensive loan repayments, releasing equity on a property can boost your finances and give you, and your property, more support in the form of a cash sum.
Advantages and disadvantages of property management services
The services offered by a property management company include:
Including credit checks, criminal history, and income checks as well as examining references for you.
An agent can draw up a tenancy agreement with specific terms relevant to you, such as whether pets are allowed.
A property owner must fulfill several safety regulations before their property can be let, including getting an electrical inspection (EICR), an energy performance certificate (EPC), a landlord gas safety inspection, a Legionella risk assessment, and a property must have the correct number of carbon monoxide and smoke detectors. Safety check documents must be given to tenants before they move in and following the last check. An agent will be up to date with all the legal requirements to make sure your rental property is fully compliant.
Additional services offered
A property manager can deal with deposit protection, deposit terms, and legal notice periods. They can also handle the eviction process if needed.
Better occupancy rates
A property management company will want to find a tenant for you as quickly as possible and will aim to find good quality tenants. They will ensure your property looks its best and advertise it on popular letting sites to get as much exposure as possible. An agent can carry out viewings and select the best tenant. At the end of a tenancy, the company will have processes in place to ensure a smooth checkout, and that the property is left in good condition or will be brought back to a lettable standard quickly.
With experience in the local letting market, an agent can give an accurate rental figure. They can also advise on how to maximise the possible rent, perhaps by suggesting that a property needs a coat of paint or new carpeting, and they will know good local tradesmen to use.
Speed is often essential with maintenance issues, such as a problem with the water or electricity. Property management companies will be able to act quickly to get the right local tradesmen to fix the problem. They will also liaise between vetted tradesmen and tenants to arrange a suitable time to get the work done. An agent will also carry out periodic inspections of the property to make sure it’s being maintained well during the tenancy. Having an agent will also give your tenant a 24-hour point of contact for issues, giving you peace of mind and relieving you of this responsibility.
Distance between landlord and tenant
Some landlords don’t want to deal with tenants in person and an agent takes away this element of being a landlord. An agent can deal with potentially uncomfortable conversations about late rent payments or damage to the property.
Make sure rent is paid on time
Property management companies can deal with rent collection and if there’s a problem, can start legal proceedings on your behalf to get a tenant evicted.
Before deciding on a property management company, check for extra maintenance fees and miscellaneous fees. Usually, fees are a percentage of the rent collected, so an agent is motivated to ensure the property is occupied.
Whether you’re tired of dealing with maintenance calls at inconvenient times, or you’re an inexperienced landlord wary of the pitfalls, hiring a property management company may certainly take the weight off your shoulders.
If you’re concerned about how much time your rental property is taking to manage, you may feel the best way forward is to put it into safe hands to ensure that you’re fulfilling your legal obligations and are retaining happy tenants. To identify a management team that will offer the best service to you, it might be worth consulting other landlords for their opinions.
Using property management companies can relieve you of all, or just some of the obligations of being a landlord: they can deal with key decisions from marketing and maintenance to compliance with regulations, or simply be hired for finding tenants.
You can structure a bespoke service to suit you after carefully researching a firm’s reputation and experience and clarifying how much or how little you want to be involved in managing your property.