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A guest blog by Tara Sparrow, Sales Director of Reapit.
Around 2.66 million landlords were operational in Great Britain in 2019, according to data estimations previously released by Hamptons International. Of those 2.66 million or so landlords, roughly 45% are believed to hold just one property in their portfolio, as discovered in the latest English Private Landlord Survey conducted by the Ministry of Housing, Communities & Local Government just prior back in 2018.
This figure was further corroborated by Reapit’s recent State of Lettings Report, based on data collected from respondents in our Big British Property Survey conducted earlier this year. What we found in our research was that the percentage of landlords with only one property in their portfolio were just over 49 percent.
Now, at the time of the English Private Landlord Survey, few landlords intended to reduce the size of their portfolio, with 53 percent planning to keep the same size portfolio, 10 percent planning to increase their portfolio, 10 percent planning to reduce their portfolio, and 5 percent planning to sell their whole portfolio.
Despite uncertain conditions and knocks to confidence over the past few years (for a plethora of reasons) it would also seem that Covid-19 has not significantly dented landlord’s plans to remain in the industry, as the NRLA Q2 2021 Landlord Confidence Index found that the proportion of landlords planning to buy over the next 12 months is 50 percent higher than in Q1 2020 – the fifth quarter in a row where the proportion of landlords planning to buy has increased.
Which sets up an interesting proposition: if more landlords are considering expanding their portfolios, how would they benefit from property management services? Ultimately landlords want to do as little as possible to get the maximum return on their investment(s) – and the data indicates that the easiest way to achieve this is with a professional service.
It is fair to suggest that managing tenant properties is not always an easy task. A buy-to-let (BTL) property is a serious investment and the ongoing responsibility of managing a property can cause considerable strain for landlords.
This is particularly so with legislative changes and regulations to look out for, as well the unfortunate albeit generally small proportion of tenants who cause damage to the property or refuse to pay rent or vacate at the agreed time.
Such concerns were reflected in Reapit's report findings, with almost 50 percent of landlord respondents citing damage to property and reliability of tenants as their main concerns – with rent arrears coming up closely in third.
Yet despite this, almost 60 percent of landlords from our survey choose to manage their own properties in their portfolio. This is slightly higher than the 52 percent of landlords cited in the English Private Landlord Survey who said they did not use a letting agent to let or manage their properties – though regional variances could account for the difference.
Given that most landlords only have only one or two properties in their portfolio, the perception could be that they can manage the demands themselves.
Looking at the percentage of landlords in Reapit's report who do use an agency or property manager to manage their properties, over 70 percent of landlords in our survey said that they were happy to delegate all responsibility to their chosen manager.
There are many reasons for this decision: it gives landlords the freedom to choose where they live, without having to settle nearby to solve tenant issues; it also removes the need for the landlord to manage all the responsibilities of property management such as maintenance and repairs, fire safety regulations, electrical system checks, gas safety checks, and ensuring that tenant deposits are held in an approved deposit scheme.
In fact, keeping up with rules and regulations are becoming a major reason for outsourcing property management. For example, new safety rules that apply to all existing tenancies from 1 April 2021 prescribe that landlords can be fined up to £30,000 if they fail to provide an electrical installation condition report (EICR). A property manager would help keep landlords on top of this, providing a very valuable service to landlords with multiple properties to manage.
The top-line argument that can be made is that lettings agents and property managers are incredibly valuable to landlords looking for a professional and successful service in full compliance with existing regulation.
In our survey we asked landlords to choose the letting agent services that they find most valuable. The following is a result of that question, based on which services were most valued:
All the above services can indeed be managed by the landlord themselves, but for landlords with larger portfolios to manage, the task of dealing with the myriad tasks and requirements of managing a series of properties, acquiring new tenants, and staying on top of all necessary regulations can be a painful series of hurdles.
That is certainly not to say it is impossible; many landlords with sizeable portfolios are quite capable of handling all of the referred tasks themselves. But more importantly perhaps, a well-maintained property will also help achieve higher rents, and for many BTL landlords, their properties are an investment – a primary source of income to be maintained and expanded as much as possible.
As the American investor Peter Lynch once said, "Know what you own, and know why you own it." Not every investor wants to be a fund manager, and not every landlord wants to be a property manager. For landlords looking to make as much as possible from their portfolio, with the minimal amount of personal effort on their part, a lettings or property management agency is the way to go.
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Oh Goodlord Limited is an Appointed Representative of Goodlord Protect Limited for general insurance products and credit broking. Goodlord Protect Limited is directly authorised by the Financial Conduct Authority, registration number 836727. You can check this information on the Financial Services Register by visiting www.fca.org.uk/register or by telephoning 0800 111 6768 (Freephone) or 0300 500 8082 from the UK. The FCA is the independent watchdog that regulates financial services.