New research published by Direct Line for Business has identified unscrupulous letting agents are “double dipping”, charging tenants and landlords for the same service. While most letting agents play by the rules, the research found evidence of both landlords and tenants being charged for services such as checking references or alterations to contract extension agreements, even when revisions to the contract amounted to very simple changes.
The research revealed that one South London letting agent charged a landlord £670 for a simple contract extension, which only necessitated a change of date, while the tenant was charged £90 for the same action.
It has also highlighted the variance in fees landlords pay to agents for various services. While on average landlords are charged 11% of their monthly revenue if they rent out their property through a letting agent, the research found that charges range from as low as 5% to a high of 17%. Charges for individual services vary too: the cost of a letting agent completing an inventory ranged from £65 to £300; property visits from £20 to £100; and the charges for managing a checkout from £30 to £125.
Other charges landlords often encounter include paying for the cost of running credit checks on prospective tenants, reviewing references and checking tenants into a property. These figures show how, contrary to the myths peddled in the tabloids, buying a property and letting it out is not a smooth route to getting rich quickly.
Jasvinder Gakhal at Direct Line for Business said: “Whilst most letting agents are transparent and fair, a minority are doing an injustice to the majority through ‘double dipping’ activities. That aside, it is important landlords consider all the costs they will face when estimating the yield for a property. Taking into account agents’ fees, taxes and unbudgeted costs such as emergency property repairs, landlords can easily pay out expenses of 25% per cent of their annual rental income for a property.
“Letting through an agent can take the hassle out of the rental process and provide additional legal protection in the event of an incident, and our research shows it pays to shop around for the best value as charges and services can vary significantly from one agent to another.”
To help landlords keep track of charges paid, ongoing expenses and to assist in calculating the yield on their portfolio Direct Line for Business, has launched a new landlord app, Mobile Landlord. This app enables landlords to manage up to five properties on the go through a single online, mobile portal. Mobile Landlord is free to download and available immediately on both iOS and Android.
It is not, however, clear whether minor steps like this will be enough to rescue landlords who rely on rental incomes to cover their mortgages, at least in inner London. House prices are shooting up in London as those who have spare capital can get better returns from buying housing (and leaving it unlet) than from keeping their money in a bank. However, wages remain low and benefits have been capped, so there will be something of a declining market in those looking to rent in central London and those able to afford to do so. Small scale private landlords may see the notional value of their capital increase while they remain unable to translate this into revenue. Too much of this, and house prices could collapse again – taking the rest of the economy with them.
For more information on DL4B landlord insurance, please visit the website: http://www.directlineforbusiness.co.uk/landlord-insurance
Or to find out more about the Mobile Landlord app visit the website: http://www.directlineforbusiness.co.uk/landlord-insurance/mobile-app