As a first-time landlord, it's natural to be eager to receive your rental income as soon as your new tenant moves in. However, there's an important aspect you should be aware of: the upfront Lettings Fee and why it might affect when you start getting rent.
What is the Lettings Fee?
The Lettings Fee, also known as the Tenant Find Fee, is a charge paid to the estate agency for finding suitable tenants for your property. It covers various services like advertising, tenant selection, referencing, tenancy agreements, and more. This fee is usually taken upfront, but it might not all come in at once, and here's why:
How is the Lettings Fee Paid?
Typically, the Lettings Fee is deducted from the first month's rent. So, when your tenant moves in, the agency deducts their fee from the initial rent payment before passing the remaining amount to you. This is a common practice and helps you get started with your new tenant without any extra out-of-pocket expenses.
Why Haven't You Received Rent Yet?
In some cases, especially if the Lettings Fee is substantial or if your tenancy agreement spans a longer term, it might take a couple of months before you receive your full rent. Here's an example to illustrate:
Example: Let's say your monthly rent is £1,000, and the Lettings Fee is 8% of the annual rent, which amounts to £960. If this fee is deducted from the first month's rent, you'll only receive £40 as your initial rental income (£1,000 - £960 = £40).
In the second month, you should receive the full £1,000 because the Lettings Fee has already been paid. However, if your tenancy agreement spans multiple years, this fee could be spread out over several months.
What Should You Do?
As a landlord, it's crucial to understand your Lettings Fee and how it affects your rental income. Before signing any agreements, make sure you're clear on the fee structure and when you can expect to receive your full rent.
If you're concerned about the timing of your rental income, discuss this with your estate agency. They should be able to provide you with a clear payment schedule, so you know exactly when to expect your rent.
In summary, the Lettings Fee is a standard part of renting out your property, and it's usually deducted from the first month's rent. If it's a substantial fee or if your agreement spans an extended period, it might take a couple of months to receive your full rental income. Being aware of this process and discussing it with your agency can help you plan your finances accordingly and avoid any unexpected surprises. If you need any specific query or help on fees and rental income for a PropertyLoop tenancy please email accounts@propertyloop.co.uk.