Agency's Management Fee Too Low?

[arbredesoie]

We are looking into buying a 1-bed house to rent out unfurnished and visited a suitable property yesterday.  However, when we asked about the management fee we were told it was one month's rent p.a. but only if the tenancy changed.  So if a tenant remained for ten years, only one fee of one month's rent.  This seems too good to be true and so probably is too good to be true.  Where are they making their money?  Does it mean the tenants have to pay extra fees to the agent? 

Would appreciate advice from an experienced landlord as this is our first venture into long term letting.  Thank you.

[Panda]

Hello

I think you are talking at cross purposes, they are talking, I would suggest, about a 'finders fee' i.e. getting a tenant, it is normally around one months rent for this service.  Many agents do not offer anything beyond getting you a tenant so you need to find one that offers full letting agency services, what I've found is that some agents have arrangements with larger city based agents for this purpose, in hind sight I would have preferred to find an agent in the town you have the property who can fully manage all aspects and not subcontract any of it.

As a guide my letting fees are around 5% of the rent, this covers payment collection, insurance in case of non payment etc, general overseeing things.  I have to say I have yet to find a 'good' agent who is proactive in managing and you are left still having regular headaches over repaits in my experience, much easier if you are living nearby.

Its not a something I would suggest you take on lightly, it can be something of a trial if you have bad tenants or want to take the property back, do some research about french long term letting before you commit.

 

[arbredesoie]

Thanks, a finder's fee makes sense though I did ask about 'gestion'.  Perhaps that's as far as that agent's management goes.  If we take it on, we would be looking for the sort of management you mention so I'll allow around 5 per cent for the moment.  Seeing another agent and another house this afternoon so will find out a bit more.

Thanks for your warning - do understand it's a minefield.  We do live nearby but a visit to the tax office this pm may blow the whole thing out of the water anyway.

[Panda]

Tax is not a big issue, I've yet to pay any for rent of the appartments I have due to costs of renovation which the nice tax office took into account and have since carried forward the remaining sum each year. 

Now in year 6, I think it's all used but it was a big renovation project and total revamp of 4 appartments (new central heating, new electrics, new kitches, new bathrooms new windows, all allowed against my tax bill) so no small task, there are lots of ways of reducing your tax bill (mine are all classed under Robien, old properties at a rent per square meter below a certain tariff so get a 26% reduction on the income before tax, worth having, really depends  on what you are buying and if it will be your main income or not, if it is you might have to pay social charges on top of tax. 

Dont forget also mortage interest is taken off of income before tax is calculated as are all charges including insurance charges.

As I said I dont see tax being a show stopper for anyone, selection of the right tenant is the single most important factor.  I have now also rented out my house since returning to the UK to live and have heaven sent tenants, worth noting I selected them myself, they pay on the nose, they make minor repairs and they are great to deal with!