Property Investment Companies – Are They Worth Their Fees?

With the buy to let market back in the limelight as a potential big money maker, the number of property investment companies advertising their services has increased dramatically. The main aim of a good company is obviously to help you, the buyer, to locate and buy below market value properties that have huge potential as investment properties, but some go a step further and offer letting and property management services as well.

Of course property investment companies don’t offer these services for free and their fees can work out to be quite expensive if you agree to put your investment property completely in their hands. The question is then, is the service as a whole worth the fees you’ll be expected to pay?

What are the fees?

Every property investment company has a different set of criteria when it comes to fees and so this question is quite open ended. Taking a random example from the internet though, the sourcing fee charged to a potential property investor comes in just below £5000. This fee is said to cover the sourcing of suitable properties, broker costs, legal costs and all other associated purchase costs if you decide to buy one of the suggested properties. In addition, the £5000 also includes any refurbishment costs that may be incurred getting the property ready for the rental market and a rental guarantee that assures a tenant within 28 days.

All in all this isn’t a bad investment when you consider that the costs entailed without the property investment company will still be around £2800…but sadly not all property investment companies offer such deals.

On top of the sourcing fee though there is also the on-going cost of property management, if this is offered. Some property investment companies suggest associated businesses that can offer management services if they don’t, whereas others just assume you’ll be managing the property yourself. If you choose to look at property investment companies that deliver the full package and nothing less then you’ll be looking at paying 10-15% of the monthly rental income as management fees in addition to the initial sourcing fee.

It’s important to understand as well that the sourcing fee will need to be paid every time you want to look for and buy a new property. So, you pay the first £5000 which will cover the sourcing and purchase costs of one property, and another £5000 if you then decide you want to buy a second property. Most property investment companies won’t even begin a search for suitable investment properties until the fee is paid.

Are the services worth the fee?

If you can find a property investment company that successfully sources BMV properties in your area and in your price range, that include all purchase costs in their fee and that literally do everything for you expect sign on the dotted line then they can be worth using.

Property investment companies that also offer letting and management services should charge no more than 15% of the monthly rental income, and their services should be so complete that you can truly be an ‘armchair’ landlord. If they only take on certain aspects of the management side and are constantly asking you for input though, they probably aren’t worth that portion of their fee.

So, if you want to be a hands-off landlord that simply watches the money come in each month then property investment companies are worth a look…providing you find one that offers a full service without breaking the bank.