Investments in real estate abroad are always popular. This direction of investment allows you to save your funds in conditions of economic instability and acquire an additional source of income, for example, by renting out a well-located apartment or making a profit from a hotel room. However, in order not to miss out on great deals and keep your property in good condition, you have to constantly deal with various organizational issues. If you do not reside in the UK, it will be difficult to personally supervise the management of the residential or commercial property. Therefore, many foreign investors decide to entrust these tasks to a company that will act as an intermediary.
The property management company takes responsibility for the condition of the property, usually on behalf of the landlord. She provides interaction with tenants and tenants, representing the interests of the owner, solving emerging issues, and making the necessary decisions. Typically, her responsibilities include the following tasks:
- collection of payments from tenants, including monthly accommodation fees;
- building insurance;
- compliance with health and safety requirements;
- maintaining the building in good condition, performing current repairs.
Thus, by agreeing with a residential real estate company, a foreign investor does not have to worry about solving many privacy issues. Your presence is required only in exceptional cases, which means that you do not have to waste time and money on travel. Besides, the management company can provide detailed advice, helping to evaluate various options and choose the most profitable one. Ultimately, it is on the quality of the management company that the profitability of real estate investments largely depends: if tenants are satisfied with the conditions that are created for them in a residential building, they will be ready for long-term cooperation and, if necessary, will willingly agree to compromises.
Benefits of Working with a UK Management Company
Although some property owners still prefer to deal with organizational issues and paperwork on their own, more and more investors are transferring them to management companies. The costs of their services are well paid off since they allow you to save time and money in several directions at once:
- Specialists take on the solution of legal issues, which means that you do not have to independently understand the terminology and intricacies of British law. Besides, they will keep abreast of legislative innovations, such as changes in tax payment procedures, as well as take into account the rules specific to foreign investors. This minimizes the risk of error that could result in fines or interest.
- As a rule, management companies have already established contacts with suppliers of various services. As a result, the risk of overpaying or facing poor quality work is reduced. If you need to carry out any routine repairs, troubleshoot engineering systems, or solve other similar problems, the management company will be able to find a company with which it has already worked in the past. These employees are usually more conscientious about the tasks assigned, as they expect to receive orders in the future.
- The management company can take over all stages of communication with tenants. Her duties include finding new tenants, checking information about them, organizing a viewing of the apartment, and concluding an agreement. All these actions can take a long time, so it is quite reasonable to delegate them to specialists. Besides, this way you will be insured against unpleasant surprises such as conflicts with defaulters or tenants that damage the apartment.
- A consultation with the management company helps to set the optimal price, taking into account the average rental cost in a particular area, the characteristics of the apartment, and seasonal changes in the market. As a result, the price will remain attractive to potential tenants, but it will not become too low, and you will not miss out on possible income.
Those real estate owners who prefer to take the solution of such issues into their own hands consider the loss of control as the main disadvantage of working with a management company. It cannot be ruled out that an organization that works simultaneously with many objects will pay less attention to each of them than an individual owner. The solution to this problem is the conclusion of an agreement in which the obligations of the parties will be spelled out. The owner of the object in each specific case decides what powers he can transfer to the management company, and which he prefers to retain.
Another hurdle can be the cost of services. Typically, it is calculated as a percentage of the tenant’s income. For example, many UK management companies offer to pay them the cost of the first month of rent and then contribute 8-10% of the subsequent income. If you only own one property, it can be too wasteful. But if you receive income by renting out several apartments at once, the services of the management company become truly irreplaceable, and the costs for them are quite justified. Besides, do not forget that the services of specialists help to avoid additional expenses, for example, fines due to incorrect paperwork. Often, knowledge of local laws reveals opportunities for tax cuts that are not obvious to the layman.
Use of Digital Technologies
The state of the market in recent years has been very favorable for asset management companies. During the period from 2007 to 2017, the number of residential buildings and apartments rented by individuals increased by 63%. Consequently, the demand for the services of those who help landlords to manage the properties that they own has also increased. They are especially relevant for those who buy apartments for rent, planning to turn them into their main source of income. When it comes to the simultaneous ownership of several apartments or private houses, the services of a management company become indispensable.
The main task of the management company, in this case, is to take over the solution of administrative and financial issues, as well as to keep abreast of current events, especially if the owner invests in real estate abroad, not being in the UK. Recently, special software is increasingly used for communication, which allows you to track the status of an object, promptly communicate with tenants and a representative of the management company, and automate paperwork.
The use of such tools, although it requires additional costs at the initial stage, pays off in the long term, since it opens up the following opportunities:
- control over the state of the property and timely planning of necessary repair work;
- tracking and recording repair costs and other running costs;
- optimization of the budget;
- determination of the rental price taking into account the state of the market
It is important to understand that such applications do not replace the services of a management company, although they allow you to distribute costs optimally. Currently, there are several solutions on the market designed for both small and large businesses. In some of them, it is possible to keep records not only for ordinary residential real estate but also for other types of rent – investments in student housing, hotels, or commercial real estate.
How much does a UK management company cost?
Most often, the cost of residential property management services is determined as a percentage of the monthly income of the landlord. It is also charged every month. Besides, certain services may involve additional fees, for example, for organizing repairs. When concluding a contract, you should pay attention to what actions it provides if the tenants delay the rent. Separately, the situation can be stipulated when the landlord decides to sell the living space to tenants. In this case, the management company can count on a certain percentage of the value of the object.
At the same time, some management company’s offer fixed rather than proportional fees. Typically, such a scheme is used in situations where the property does not provide a constant monthly income, for example, if it is rented out only from time to time. How profitable this option will be for the landlord depends on the circumstances, but in any case, the likelihood of facing hidden and additional payments is reduced.
Another rarer option is property management on a guaranteed income basis. In this case, the company agrees with the owner of the home, according to which he receives a fixed amount from her every month. She, in turn, takes over the search for tenants, setting them a higher rent. The profit of the management company is made up of the difference between the payment for housing, which it receives from the tenants and the amount that it gives to the owner. As a rule, this scheme is less profitable for the landlord, but it minimizes the time spent, providing a stable income.
Who controls the activities of UK management companies?
Residential property management services are offered by a variety of UK companies with professional associations. Besides, in the UK there is the Institute for Residential Property Management (IRPM), which aims to develop this sector, maintain high professional standards, and confirm the qualifications of market participants.
Also among the most significant regulatory bodies in this sector are the following:
- The Royal Society of Certified Real Estate Professionals (RICS) is responsible for overseeing professional standards in the real estate market as a whole. The organization has adopted a code of best practice in real estate management. RICS provides information resources for landlords and is worth exploring before choosing one of the property management companies. The documents adopted by RICS contain recommendations and instructions for both property owners and managers and are aimed at protecting the interests of all market participants.
- The Association of Residential Property Management Agents (ARMA) is the largest organization of its kind in England and Wales. Choosing an ARMA-certified management company, you can be sure of its integrity and professionalism. In the event of any dispute, ARMA can mediate in the settlement of conflicts. The register of organizations available on the association’s website can be used to search for a company in a specific area.
- The Association of Rental Agents (ARLA) is an organization whose main task is to protect the interests of landlords who are looking for management companies or intermediaries. She also organizes refresher courses for market participants who want to develop their professional skills and want to keep abreast of current developments.
Thus, before deciding to cooperate with one of the management companies, it is recommended to check information about it on the websites of the listed regulatory authorities. This way you can be sure that in the event of a conflict, your interests will be protected, and you will have a chance to avoid serious losses even in the event of any unforeseen disagreements.
One of the main trends in real estate management in 2020, IRPM calls the growing influence of digital technologies. As a result, from solving technical problems, such as organizing maintenance or collecting payments from residents, the activities of the management company turn into a business, in the center of which is customer service. While creating the most comfortable environment for tenants, it must at the same time put the interests of the landlord at the forefront.
For this, modern technologies are increasingly being used, for example, data analysis tools are used to offer customers solutions that best meet their needs. Besides, the industry is facing the growing influence of automation: many technical tasks can already be transferred to systems based on machine learning. Therefore, the task of professionals is to provide services that still require an individual approach.
The importance of this aspect has increased even more during the pandemic. In a situation where people spend a significant part of their time at home, they become more attentive to any problems and shortcomings, which means that the requirements for living conditions also increase. Therefore, it is especially important for management companies to promptly respond to any emerging problems. Besides, many residents began to seek greater involvement in the decision-making process, seeking detailed information about the condition of the housing and the work planned for the future.
Another important factor was the change in the forms of communication with tenants. For a long time, technology penetration in this area has remained less noticeable than in other sectors of the real estate market. Communicating with tenants was limited to e-mails and old-fashioned paper notices that were posted on bulletin boards in the halls of buildings. Now management companies are increasingly creating Internet portals with up-to-date information and feedback forms. This improves communication with residents but creates an additional effect: people begin to expect a faster response, especially in the event of any problems or breakdowns, and managers must comply with this.
It can be expected that in the future the management companies will be able to take the leading position in the market, which will respond to new requests and integrate them into their activities. The transparency of information for clients, the use of “big data”, attention to feedback, and building new forms of communication are the key trends that will become defined in the coming years.
Thus, management companies are part of the real estate market, which is actively developing, mastering new technologies, and responding to the challenges of the times, such as the economic turmoil of 2020. If you are planning to buy real estate in England to further turn it into a source of additional income, the services of residential property management companies will help speed up the process and minimize organizational costs.
Contact us to get assistance at all stages of the selection and purchase of the overseas property. Having been working on the market for several years now, we have stable relations with British partners, which means that we will be able to find the best options for you.