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Who’s cleaning up on your rental property?

14 Apr, 2017

Blog

Who’s cleaning up on your rental property?

We all understand that life isn’t fair. It’s something most of us were told from a very young age when we whined to our parents about something that had in some way disadvantaged us. Like the t-shirt says, ‘Life’s a bitch, then you die.’

But occasionally life throws up something that goes well beyond being unfair and strays into the realm of the completely unjust.

Imagine the following, admittedly implausible scenario.

You wake up tomorrow and you decide to hire a cleaner to come in once a week for three hours and keep your house looking presentable. After scouring local ads in the paper or online, you find a suitable individual who comes very highly recommended.

They agree to the job, but they want £34 a day, which is about twice as much as the going rate. It’s a lot more than you want to pay, but they assure you their level of service and standard of care is beyond anything you’ll find anywhere else. And because you want good service, you reluctantly agree to the fee.

The cleaner also wants a one-year contract (with a six month break) and all their payments up front. That’s around £1,800. So far they haven’t so much as dusted a mantelpiece. Do you pay?

No? Hold that thought.

Now imagine you go to the website of a big supermarket – one that might begin with the letter ‘T’ or ‘S’ or, if you haven’t paid the cleaner the eighteen hundred quid up front and you can afford it, ‘W’ – to order your weekly shopping delivery.

When you log in, a big banner appears on the screen, which reads:

In order to take advantage of our online home delivery service, you must place 52 weekly orders in advance at a minimum value per order of £35, payable in advance.

That’s £1,800. So far, you haven’t received so much as a broad bean. Do you pay?

No? Didn’t think so, but hold that thought, too.

Now imagine that having dealt with the cleaner and the supermarket, you want to change your broadband supplier. They too want a year’s worth of fees in advance. And after six months they can stop supplying you with broadband if they want to. Another £1,800. Do you pay?

No? Of course not. No-one in their right mind would pay in any of these scenarios.

Yet if you’re a landlord with a property to let, the principle of letting agents requiring their commission-based fees up front – sometimes to the tune of two years’ worth – is not uncommon at all. And they have you over a barrel because most agents operate in exactly the same way.

Generally, the cost of fees you’ll pay to your letting agent in the first month are likely to be within spitting distance of the amount of rent coming in from the property in that period – yet you’ll probably still have direct costs associated with the property that you have to meet (mortgage repayment, insurance premiums, water bills etc.)

And at the point you pay the agent, the only service you’ll have received from him is probably that of finding you a tenant – and though it might take a little longer, this arguably something you could do yourself by simply advertising the property locally.

So the fact is you’re going to find yourself losing out significantly in terms of cash flow in month one, and possibly – depending on the rental value – in month two as well.

There’s no doubt the system is unfair. Personally, I also consider it to be unjust and immoral – particularly nowadays when technology serves to automate so much of what an agent actually does.

The reality is that it’s not the only option – just as there are cleaners who will charge you when they’ve actually cleaned, supermarkets who’ll charge you when they’ve actually delivered your shopping and broadband providers who’ll charge you in arrears, so a property management company like Property Wealth Management will charge you a fair price for a service rendered.

If that just sounds like talk, how about this real example (based on typical agency commission of 6% inclusive of VAT)

The property has a rental value of £2500pcm. The agency commission is £150, but they want 12 months’ fees up front – a total of £1800. So rather than receiving £2,350 in income in month one (£2,500 less the agent’s fee of £150), you’ll instead receive £700. It’s quite a dent.

By using Property Wealth Management to manage your tenancy and property you’ll pay a fixed monthly fee of £88 + VAT – a total of £105.40. And the same every month thereafter.

That means that not only are you cash positive in the first month (and every month thereafter) to the tune of £1694.40 by comparison to an estate agent, you’re also saving the equivalent of £44.60 a month, every month. That’s £532.80 a year.

If you rent your property for ten years, which isn’t at all uncommon, you’ll have an extra £5,300 in your pocket that you wouldn’t have if you use an estate agent. That’s the cost of a small car or the holiday of a lifetime.

Not only that, but because you’re not tied to a long-term contract you can show us the door with 30 days’ notice if we don’t deliver the service you expect.

At PWM we’re fair, because we don’t act in our own self interest. We’re flexible, because you’re only ever committed to us for a maximum of 30 days at any time. And we’re focused, because our model only works if we retain you as a member – meaning we’ll always work as hard as we can for you.

Of course, if you’re the sort of person who’s happy to pay £1,800 up front for a service you haven’t yet had, by all means go ahead. For everyone else, why wouldn’t you try a different way?

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