Landlords: The Best £20 You'll Ever Spend

Donna Werbner reveals how you can replace your lettings agent with an insurance policy that costs just £20 a year.

Let's face it: in an uncertain economic climate, with mortgage costs rising and property prices stagnating, it's a pretty scary time to be a buy-to-let landlord. But last week, in The Buy To Let Boom Isn't Over Yet, I explained how some landlords are making the most of the current market conditions, snapping up bargains in a buyer's market in order to meet strong rental demand. Today, I have more good news. One of the biggest expenses for any buy-to-let investor - the letting agent - could soon be dramatically reduced. A Fair Deal The Office of Fair Trading (OFT) is currently trying to get an injunction against lettings agent giant Foxtons, to stop the firm from putting certain terms in its contracts with landlords. The terms state that a landlord must pay Foxtons a commission if a tenant who was originally found by Foxtons goes on to renew their contract or buy the property - even if Foxtons no longer manages the property or has anything to do with the tenant! If the OFT is successful in its court case, the watchdog intends to enforce compliance throughout the letting industry, wherever similar terms are being used. Of course, it would be great if the OFT wins this battle and we will certainly keep you updated as soon as there is an outcome. But did you know there is a way, even now, that you can cut out the lettings agent completely - and still ensure your property is well-maintained and rented out to tenants who always pay on time? Landlords' Emergency Insurance I cannot recommend heavily enough a fantastic type of insurance policy called 'Landlords' Emergency Insurance'. This will usually cover you for emergency repairs to your electrical system, heating or hot water supply, plumbing and drainage problems, gutters and downpipes, security and glazing, roofing and pest contamination, up to a set amount (usually £300 to £500) per claim. It should also provide an emergency locksmith if the tenant gets locked out. And the best part is, most providers offer a 24/7 year-round emergency hotline that the tenant can call direct. In other words, you don't even have to get involved. You never again need to pick up the phone in the middle of the night and hear: "The bathroom's flooded!" "I'm locked out!" "There are mouse droppings in my cereal!". You will simply receive notification of the works that have been carried out to fix any problem. Considering most lettings agents charge 15% of the annual rent to deal with such queries - and then bill you for the work - you might expect such a policy to be quite expensive. But Quoteline Direct offers this policy for less than £20 a year. Shocking, isn't it? But before you get blown away by that figure, bear in mind that if you don't use a letting agent, you do have to find the tenant yourself. And many landlords are understandably wary of going down this route for fear the tenant may not be reliable. Another landlords' emergency insurance provider, Homecall Plus, has come up with a solution for this. It offers a tenant credit checking service, which delves even deeper into the tenant's credit record than most letting agents. As well as checking for CCJs, it will look at whether the tenant habitually pays his or her bills late and so can give the landlord a much better idea of the reliability of a tenant. The cost for this credit check is just £10. Considering some letting agents will charge £100 or more for this service, I think it's quite a bargain! Furthermore, if you're still worried about the tenant's ability to pay the rent, you can take out a rent guarantee and legal expenses cover, so you are covered for any legal disputes/eviction proceedings. And remember, this is just one of the ways that you keep the costs of your buy-to-let investment down. There are three other key areas - read my article on Cut The Costs Of Buy-To-Let to find out more! More: Compare buy-to-let deals from the whole of the mortgage market with The Motley Fool Mortgage Service.