Choosing the right property Management company

Do due diligence on your property management partner

Buy-to-let residential investment property had never figured in Zelda’s plans until she realised how her cash savings were no longer performing. After taking into account rising prices, the cash in her account was losing its value. This article tells how hiring the wrong property professionals cost Zelda a small fortune, despite investing in a great property.

Identifying the need for property investment

Zelda had saved rigorously for more than ten years. She’d amassed more than £50,000 in her high-interest savings account. When she started saving, it was an account that paid almost 7% interest. Looking at her most recent account statement, she discovered that her money was now earning her less than 1% per year. At this rate, she’d never have a pot big enough to pay off her existing mortgage and think about retiring.

She’d read about property millionaires who’d started with nothing and began learning about how to invest in residential property with some free property investment education. She quickly realised that it was possible to bring retirement plans forward by investing in property.

Buying her first investment property

She’d learned about the importance of property investment research to find the best places to invest in property UK, and had found an exceptional residential investment opportunity. So far, so good. But this is where it all started to go wrong.

Zelda was pretty cautious as an investor, and one of the things that attracted her to residential property investment was that her money would be as solid as the bricks and mortar in which she was investing. The mortgage broker at her bank – the same one that she had been saving with for so many years – told her the same when providing the 75% buy-to-let mortgage she needed to complete her investment.

The cost of bad mortgage advice

The mortgage advisor, Steve, wasn’t long out of nappies when it came to buy-to-let mortgages. In fact, Zelda’s was only the seventh buy-to-let mortgage he’d sold. His expertise was in the residential mortgage market – more business, but lower commissions on his sales.

Zelda later discovered that her £150,000 buy-to-let mortgage with the bank cost her a full 1% more than she could have got elsewhere. Had she used a buy-to-let mortgage broker with experience and expertise in the market, she would have been paying £125 less per month in mortgage interest. On top of that, the bank didn’t offer fixed rate buy-to-let mortgages. When interest rates started rising, her mortgage costs immediately went up.

Finding tenants for her property investment

Zelda rightly decided that finding tenants were best done by a letting agent. She chose one that did a lot of business in the area, and that had been recommended to her by a friend who owned a buy-to-let property near to the one she had recently bought.

The agent had a lot of properties on its books, and also offered a residential property management service. She spoke to the agent on the phone, and was happy when told her apartment should rent for around £1,100 per month – a 6.6% yield on the property value. She signed the contract and was happy to accept the agent’s property management terms: 15% of gross rental income. She’d read about some agents charging as much as 20%, so was comforted with the fact that she hadn’t been duped into paying over the odds.

The cost of choosing the wrong letting agent

After two months, Zelda’s apartment still hadn’t been let despite dropping the rental asking price to less than £1,000. When she asked about the problem, the letting agent told her that most of their properties were houses further from the centre of town. It appeared that they had mispriced the potential rent. Zelda had suspicions that they had told her a higher rental figure to secure her business.

She decided to drop the rental price again, and finally, after a three-month void period, her investment property was let at £925 per month.

That delay in letting the property cost her £2,775 in lost rent. Plus, while the property remained empty, she still had to pay service charges, council tax, utility bills, and her mortgage.  That little lot added up to almost £2,500, which had to come from her now depleted savings account.

Overpriced property management

Zelda had another shock coming to her. A few months into the lease, the tenant called her. She thought this was odd because any problems should have been directed to the property management company. The tenant explained that her central heating was faulty, and she’d been trying to get in touch with the property management team for two weeks. Her emails and telephone calls hadn’t been returned. With a small child in the house, it was essential that her heating worked well, especially with winter on its way.

Zelda was horrified. Even more so when she discovered the ‘property management team’ consisted of the letting agent – who did most of the maintenance work himself – and his wife. She’d assumed they subcontracted any maintenance and repair work to trusted local tradespeople.

She was paying £139 per month in property management fees and was not getting the service she thought she would.

The cost of choosing the wrong property management company

The central heating was fixed within a couple of days after Zelda had managed to speak to the property manager. Two months later, the tenant left. She said she couldn’t risk living in a property that was poorly managed.

Zelda now had to find another tenant. She wasn’t looking forward to another lengthy void period.

She contacted another company that she’d been told about: Ezytrac Property Management. Within a month, her property had been let for £950 per month. Better still, the property management fees were only 10% – a saving of £46 per month over her previous letting agent fees. And Ezytrac has an online fault and maintenance reporting system that helps a tenant’s property issues get resolved within hours, not weeks.

Zelda has now had her property tenanted for two years with the same tenant. She’s increased the rent she charges to £975 per month, and she’s taken the advice of a buy-to-let mortgage broker and fixed her interest rate ( at a full 1% below the rate her bank had been charging). When she recently reviewed the cost of hiring the wrong professionals and getting bad advice, she was horrified to find that in that first year her mistakes had cost her:

  • Mortgage – £1,500
  • Void period – £2,775
  • Property Management – £555

A total of £4,830. Put another way, more than five months of her original rental income of £925 per month. Or nearly 11 years of interest, which she would have earned on her high-interest savings account.

Fortunately, with the right mortgage and property management now in place, Zelda’s investment property is producing positive cash flow. It’s also increased in value – she’d done her property research right. With the mistake of hiring the wrong professionals well and truly behind her, Zelda is about to complete on her second residential property investment. Her plan to become a property millionaire is back on track.

Don’t cut corners when choosing your property partners

Zelda made a lot of her decisions without any checks. She’d taken the time and trouble to make sure she invested in a great property – one that has the potential to provide steady and increasing rental income as well as strong capital gains – but had then skimmed over selecting her financing and property management partners.

Her story certainly goes to show that when it comes to due diligence, you’ve got to be just as hot about checking the professionals you hire as you are about researching the property investment opportunity itself.

Contact one of our team on +44 (0)207 923 6100 today, book a meeting, and you’ll find our process is cradle to grave in every way. There’s not a stone we leave unturned when helping clients buy the best property, and then turn that property into the best property investment.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
January 18, 2017


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