Investing in property is one of the most popular ways of creating steady stream of income. Thousands of people every year snap up properties to add to their portfolio and create a ‘nest egg’ for a rainy day or top up a pension. However there are costs associated with renting out a property that many don’t realise. And one of the biggest costs is estate agent fees which can quickly stack up and eat into your profit.
It’s generally advised that when you rent a house out, you set the rental income at 125% of your mortgage. This allows you to put some money aside for any repairs that may occur further down the line, while allowing you to earn a steady income which covers your repayments. Yet when you decide to go through an estate agent, those margins get smaller.
Estate agent fees are usually a percentage of the rental income over the letting term. These charges start from around 10 per cent of the rental price, but can be higher. They cover things like the cost of marketing a property, finding and selecting a suitable tenant, obtaining references, and collating a tenancy agreement and inventory. Although 10 percent doesn’t seem like much on the surface, these costs make for a substantial amount over a 12 month period. If you decide to go down the route of a fully-managed service, expect fees to start from 15 per cent of the rental income. This option means that the agent will organise credit checks, collect rent, pay bills, inspect the property, as well as oversee any maintenance work.
Yet all of these charges can be avoided if you decide to do it yourself and become a ‘DIY’ landlord. Giving you more control over your income and property, going it alone can bring a multitude of benefits – and not just in your pocket.
If you’re unsure quite how to go about it, follow our top tips for becoming a successful DIY landlord and rent out a property without an estate agent:
Know what your responsibilities are
This is essential. Knowing what checks need to be done, what you are responsible for and what boxes need to be checked will see you off to a flying start, as well as help you to avoid fines and potentially, a criminal record.
Treat the whole process as if it were a business
When you are self-employed, you need to make sure that all paperwork is up to date, relationships are maintained and invoices are paid on time. As a landlord, all of the above applies. You need to ensure you have valid certificates, such as buildings insurance and meet safety regulations before you even start. It’s also important to maintain a good relationship with tenants, which means sorting out any issues they have in a timely manner to ensure rent is paid when agreed. Doing this will give you the best chance of having a stress-free experience.
Advertise your property
The upside to using an estate agent is they advertise and find tenants for you. However thanks to the wonders of the internet, you can now do that yourself with ease. Online estate agents are the best way forward for this as they allow you to advertise your property for a period of time for a much smaller fee than high street estate agents. I Am The Agent is one of the best platforms for landlords. We help owners looking to rent out their property to essentially ‘become the agent’, giving them full control over their property’s listing, before promoting it on some of the biggest property websites in the country. These include Rightmove and Zoopla. And with letting fees starting at just £19, you won’t find the same service for cheaper anywhere else.
Arrange frequent checks
All landlords get their properties checked, so as much as it can feel like an intrusion, you certainly won’t be treading on anyone’s toes. Checks are there to make sure that the tenant is treating the property with respect and not causing any damage. It’s always worth bearing in mind that wear and tear happens as houses are lived in, so don’t get too focussed on scuffs and scratches – that is what your surplus rent is for. And when it comes to the end of their tenancy, if there’s more wear and tear than usual, you have the bond to fall back on.
Although all of the above can seem daunting, becoming a DIY landlord can be extremely rewarding. It gives you infinitely more control, allows you to vet your tenants yourself and provides maximum return on your investment.
If you’re thinking about going solo, discover more about IATA’s comprehensive packages for landlords.
