Going it alone or hiring a company: how to manage your rental property

Manage the property yourself if you can get there and back inside a working day, own one or two, and can pick up the phone during working hours. Hire a management company when distance, the number of properties or your own availability breaks one of those three conditions.

Most owners weigh the fee against nothing at all. That is the wrong comparison. The fee covers a specific list of eleven recurring jobs, and the question is which of them you will still do in the month your tenant hands in notice, the boiler packs up and you are away. Answer that, and the decision stops being a matter of temperament.

What a management company actually does

A management company takes on eleven recurring jobs: advertising, viewings, the tenancy agreement, check-in, rent collection, chasing arrears, maintenance, utilities, day-to-day contact, periodic inspections and the check-out settlement.

Set out one by one, the work stops being a general burden and becomes a list you can work through. Each job is there to head off a specific failure:

• Advertising and finding a tenant. Heads off a void, which costs a full month's rent for every month it runs. Finding a tenant is covered separately in the article on tenant search.
• Viewings and referencing. Heads off the tenant who pays for two months and then stops.
• Drawing up the tenancy agreement. Heads off the dispute you cannot win because nothing was put in writing.
• Check-in with an inventory. Heads off the argument at the end of the tenancy over which damage was already there.
• Rent collection. Heads off payment drift, where the date slips by a few days each month until it is a month late.
• Chasing arrears. Heads off the quiet second month, when a late payment turns into unpaid rent.
• Maintenance and repairs. Stops a small leak turning into a claim from the flat below.
• Utilities and building charges. Heads off a supply being cut off, or a debt attaching to the property rather than to the tenant.
• Day-to-day contact. Heads off the tenant who stops reporting problems because reporting them gets nowhere.
• Periodic inspections. Stops you finding out at check-out what has been going on for a year.
• Check-out and returning the deposit. Heads off the deduction you cannot evidence.

Go through all eleven and mark each one of three ways: I already do this; I would do it, but grudgingly; I would not do it. Keep the marked-up list to hand for the rest of the article, because every comparison below is made against it rather than against a vague sense of how much work letting a property is.

How much time letting takes in a bad month

Letting takes very little time in a quiet month and a great deal in a bad one, so judge it on the bad month: a tenant moving out, a search, a check-in and a breakdown all land in the same four weeks.

In a quiet month with a reliable tenant, the work comes to one payment to check, one meter reading and one message. An owner who judges by that month is judging by the month that never causes any trouble. The workload is not spread evenly across the year. It bunches around two events: the change of tenant, and something in the property giving out.What matters is not how many hours a job takes, but who decides when you spend them. A tenancy agreement gets drawn up over an evening of your choosing. A viewing takes forty minutes at a time the applicant picks, rarely inside your working day, and a serious search means several of them in a fortnight. A burst pipe takes as long as it takes, right now, and a plumber you have never used before will not turn up any faster because it is urgent for you.

Three tests decide whether the bad month is manageable. Can you get to the property and back within the working day, without cancelling something that cannot be cancelled? Do you pick up during working hours, when the plumber, the building manager and the applicant all ring on the same day? And do you already have two or three tradespeople you can call, rather than trawling search results at ten at night? Fail one of the three and the bad month is unpleasant. Fail two and it is the month your tenant starts looking at what else is on the market.

What a management company costs and how the fee is structured

Management fees are structured three ways: a percentage of the rent collected, a flat monthly sum, or a separate tenant-find fee charged once per tenant. Work out which of the three you are being quoted before you compare two offers.

Each structure pulls the company's interest in a different direction, and knowing which way is worth more than the headline number. A percentage of rent collected earns nothing while the property sits empty, which puts the company under pressure to fill it quickly, so ask how it references applicants before putting one forward. A flat monthly fee is predictable and keeps running through a void, which suits an owner who wants a steady figure, but it takes away any financial reason to fill the property fast. A tenant-find fee is earned all over again at every change of tenant, so ask outright: if the tenant leaves after four months, is it charged again in full?

The figure worth comparing is the annual one, and it is not the fee on its own. Ask which of the eleven jobs are included in the headline price and which are billed on top. The extras owners tend to find out about late are advertising spend, out-of-hours call-outs, the mark-up on repair invoices, and the work involved if it comes to evicting a tenant. Then get it down to one number: twelve monthly fees, plus a tenant-find fee if you expect one change of tenant, plus the extras, set against a year with one void month in it. Two quotes that look much the same per month can be a long way apart over a year.

Which responsibilities stay yours, whoever manages the property

A management company takes on the work but not the liability: the tenancy agreement, the deposit and the evidence of what condition the property was in all stay with you.

This is where the usual mistake sits. Delegating shifts the doing, not the consequence. If no inventory was ever taken, the deduction from the deposit falls apart at the end of the tenancy, and it falls apart against you, not against the company that skipped it. If the tenant sublets and the neighbours complain, it is your name on the correspondence.

In practice that means a set of documents that has to sit with you under either arrangement, not just in the company's inbox: the signed tenancy agreement with every addendum, the inventory with dated photographs from check-in, the check-in and check-out reports, the payment record month by month, meter readings at every change of tenant, and the correspondence about any damage. Companies come and go, agents move on, an email account gets shut down. The rule is simple: if losing your contact at the agency would leave you unable to prove something about your own property, that thing is not documented, it is just known by somebody else.

Keeping that record is yours whichever route you take. This is why owners use the platform for owners.

The account stays yours rather than belonging to whoever is managing the property this year.

Can you hand over just part of the work

Yes, and a partial handover is the usual arrangement rather than a compromise: the company takes the jobs that need someone there in person and run on somebody else's schedule, and you keep the ones you can do from a desk.

Three splits work in practice. The company handles the search, the viewings and the tenancy agreement, and you run the tenancy from there, which suits an owner whose problem is weekday evenings rather than the tenancy itself. The company handles maintenance and call-outs while the tenant relationship and the money stay with you, which suits an owner with no tradespeople of their own and no time to find any at ten at night. Or the company covers a set absence, a season abroad or a spell of illness, with the scope written down and an end date on it.

Partial arrangements come apart at the join, and the join is always in the same place: the tenant does not know who to ring. When both sides handle the same thing, the tenant rings whoever answered last time, half the history ends up on your phone and half in the company's system, and check-out gets pieced together from two incomplete accounts. Split the eleven jobs one by one, in writing, and give the tenant a single point of contact for each category.

Three jobs cannot be split down the middle. The deposit is held by one side, and that is the side answerable for giving it back. The check-in inventory is done by whoever will have to stand behind it later, so the same person should sign it and read it at check-out. And repair authority needs a single figure above which somebody asks first, sitting on one side only.

When to manage it yourself and when to hire a company

Manage one or two properties yourself when you can get there and back within the working day and are reachable during working hours; hand the whole thing over at a distance, at four properties or more, or with short lets.

Rule one, manage it yourself, applies when all three conditions hold. On those terms the annual fee buys you jobs you can already do, and you keep the tenant relationship, which is what tells you a year ahead that a tenant is getting ready to move on.

Rule two, hand it all over, applies if you live in another city or another country, if you are letting short term, or once you reach four properties or more. Four is a rule of thumb, not a measured threshold, and the reasoning behind it counts for more than the number: bad months come round at roughly the same rate per property, so at four they stop being rare and start piling up on each other. Short lets multiply every one of the eleven jobs by the number of stays rather than the number of tenants, and they bring registration and reporting obligations of their own, covered separately in the article on short lets.

Rule three, split it, applies when exactly one condition fails. One failed condition is a gap you can pay to plug. Three failed conditions mean supervising a company you are in no position to supervise: you pay the full fee and get half the benefit.

The rules break down in three places. An inherited property where decisions need several signatures often works better with a company whatever the distance, because a single point of contact settles what four co-owners will never settle over the phone. An older building with recurring problems in the common parts pushes up the workload however close you live. And an owner several time zones away fails even the split arrangement, because a repair approved at three in the morning is the same as one not approved at all.

What to check in the management agreement before you sign

Check ten points before you sign: scope, repair authority, who holds the deposit, when you get paid, reporting, voids, term, notice, what comes back at the end, and whose name the company signs in.

• Scope. Which of the eleven jobs are included, listed out. An agreement that says "management of the property" and leaves it there has no scope.
• Repair authority. The figure above which the company has to ask you first. Without that ceiling you either sign off every replacement tap or find out after the event.
• The deposit. Who holds it, in which account, and what happens to it if you end the arrangement mid-tenancy.
• When you get paid. The date the rent collected reaches you, and what the company does when the tenant has not paid. This is the point owners discover during the first difficult month rather than before it.
• Reporting. What you get, how often, and in what form. "On request" is not reporting.
• Voids. Whether the fee runs while the property sits empty, which follows from the fee structure above.
• Term. How long you are tied in for.
• Notice. What ends the arrangement, and how much warning it takes.
• What comes back at the end. Documents, keys, the tenant file, the payment history and the inventory. Agree it at signature, because once you are terminating, the company's cooperation is entirely voluntary.
• Whose name the company signs in. Whether it signs the tenancy agreement as your agent or in its own name, since that determines who the tenant's contract is actually with.

Can you change your mind later

You can change your mind, and the cost of doing so is mostly informational: the contacts, the payment history, the inventory and the record of the property's condition all have to move across to you or to the next company.

Switching is easy in the month you sign and awkward in the third year, because by then the company knows things about your property that were never put in writing to you: which neighbour complains, which pipe was patched rather than replaced, what the tenant asked for back in March. Ask for four things in writing before you serve notice: the tenant file with the tenancy agreement and every addendum, the payment record for the whole period, the inventory and check-in and check-out reports with the photographs, and the outstanding maintenance items with their history.

Ask while the relationship is still working. Once notice is served the company has little reason to hurry, and there is no quick way to force cooperation over a document that should have been sitting with you from the start.

For the tenant staying put, the change is a change of contact and nothing more, and it is better coming from you than discovered when a message bounces. Send one message naming the new contact, confirming the payment details and giving the date the change takes effect. A tenant who first hears about it from a stranger asking for rent is a tenant who starts looking at what else is on the market.