Starting a Letting Agency

Many letting agencies are started by those who began as Buy to Let Investors.  There is nothing wrong with that, in fact it is understandable that a landlord does a fantastic job with their own properties and feels that they can provide that level of service to others.

The reality is often very different. It is critical to bear in mind that other people may have very different expectations to you and the method you adopt for your own properties may not be what is expected by the paying public. As a  landlord you have to deal with your tenant. As an agent you have to deal with the tenant and also with the landlord. Your new role as the “one in the middle” may be something you are unaccustomed to!

Moreover the running of a letting agency requires skills that a Buy to Let landlord may not have experience of, such as staff recruitment and training, complaint handling, business generation, marketing and the like.

I am not saying it cannot work. I myself started as a Buy to Let investor in 1998 and ended up with a four branch letting agency in East Kent which won a Bronze Award for Best UK Letting Agent in the Sunday Times awards. What I am saying is that it is very different to being a landlord!

The critical issue in the current market place is to procure enough property to let. This is one of the hardest things to do and you will see a wealth of comments on online blogs of letting agents wanting to try and connect with landlords.  The answer is a tireless combination of marketing, leafleting, networking and searching through land registry records.

If you believe you have the personality to attract business to your agency then you are probably half way there. The next thing to bear in mind is that on a revenue basis, an agency will generally only work if you have a critical mass of managed stock. In an ideal world the management fees will pay the costs of the business and the letting and ancillary fees that you generate should be the cream.

If you are considering opening a letting agency then be aware of the time commitment it will doubtless require and look and see what the local agents are doing and see what you feel you could do which may attract the business to you. This should be a service differential as, in  my opinion, it is a false economy to compete purely on price.

Aside from it being law to belong to one of the property redress schemes you should also consider whether you join one of the professional bodies such as ARLA as this could open the door to instructions from banks, receivers and other corporate bodies as well as private landlords.

Furthermore you will need to comply with the raft of legislation that is in place including the Health and Safety at Work Act, Professional Indemnity Insurance, Workplace risk assessments, Property Redress Scheme, Registration for PAYE for employees etc etc.

Another thought is that your life as a Buy to Let Investor may be impaired. Presently you may have very good relationships with the local estate agents who may offer you all the juicy property deals immediately they arrive on the market. Once you own an agency you may be viewed as a competitor and therefore may fall off their favoured Buyer list. I know this from experience as there are one or two agents in my area who will not offer me property for sale even though I no longer own my letting agency!

If you have decided to press ahead then you have some options in terms of how you proceed. You could start a standalone business or alternatively join one of the franchise networks which operate in the UK. There are clear advantages and disadvantages for both but perhaps if you lack experience in an agency environment then a franchise could offer additional support and training in your early years.

Should you require finance to start your venture you will possibly find that a bank is more interested if you are following a franchise route which has some success history behind it. Don’t underestimate the costs of your venture. Aside from fitting out a shop unit and dealing with the rent and rates you will need a reasonable budget to attend to your advertising needs and to be able to feature your properties on the popular internet portals. These costs alone can exceed £3,000 per month for a single office.

My final suggestion is to think of your exit plan before you start. Are you planning to build up a business to sell, or for your children to run etc. By understanding where you want to get to will enable you to make decisions during your journey which will assist with your end goal.

Having set up and run a lettings business for over 10 years I am able to offer lots of hints and tips for those thinking of venturing out on their own and as always would be delighted to assist any readers who would like to pick my brain!