Renting property is a popular type of investment nowadays.
However it is a bit different from investing on the stock exchange.
Renting property is a consumer service industry and is subject to complex regulations – which will apply whether or not you know about them.
For example when doing it themseves:
- Many landlords are completely unaware of the tenancy deposit regulations and only find out too late
- Many landlords renting to sharers are ignorant of the HMO Management and other regulations – which can result in a criminal record and a heavy fine
- A substantial proportion of DIY landlords will take on tenants with no checking whatsoever, only to find (unsurprisingly) that the tenant proves unsatisfactory and are then faced with the need to evict
This doesn’t happen when you invest in an ISA or government bond.
Most people do not have the time to acquire the knowledge needed to deal with rented property properly and will therefore use a letting agent to do it for them.
There are many pros and cons to using an agent
Reasons for using a letting agent
- They deal with all the regulatory stuff for you
- They will find you a tenant and do all the referencing and checking
- You get peace of mind and can just sit back and enjoy the money coming in
However it is not all flowers and sunshine
Potential problems of using a letting agent
- You do not need any qualifications to set up as a letting agent and some agents are untrained and incompetent
- It is not unknown for agents to rent to unsatisfactory tenants having failed to do proper checks
- Under the law of agency, you are responsible for everything your agent does
- Very occasionally,agents will ‘do a runner’ with your rent and the deposit, leaving landlords seriously out of pocket
So you need to take care who you use to manage your properties. Here are a few tips for finding a good agent:
- Does the agency belong to a professional organisation such as ARLA or RICS?
- Are they a member of SafeAgent?
- Do their staff have professional qualifications?
- What are their charges? (Tip – the cheapest agents are probably the ones to avoid)
- How do they check tenants?
- How do they deal with rent arrears?
- How long have they been trading
You will find some more guidance here.
Note – landlords who have had problems with their letting agents, will find guidance here.