Real value: why every landlord counts


Real value: why every landlord counts.

There was a time when agents focused on sales. It was the source of their income and the speciality they proudly promoted. But times have changed. We went through an economic crash and lending became more controlled. More people were renting, and not just as a short-term move.

Agents who had shouted about their ‘sales only’ business model had to change and change fast. Some added the word lettings to their advertising, others went for a major rebrand. It seemed that, suddenly, every agent had become a sales and lettings expert.

For some, there was no immediate realisation this change had the potential to strengthen their business. But as they started to manage properties, they registered the benefit of a growing and consistent income stream. Economic factors were still at play, throwing the sales market through its peaks and troughs but rental income was steady and reliable. Just look at COVID as a prime example of this. 90-95% of agents’ income was protected whereas sales pretty much ground to a halt. Although sales have picked up since, the cash flow they generate remains highly variable. A delayed completion can be a real issue.

For many agents now in the sales and lettings business, their traditional business of sales still feels like the priority and the source of their income. But the real money is in property management. Achieving higher multiples on exit is all in relation to the lettings side of the business.

Let’s look at some numbers, starting with the value of a single lettings instruction. According to the latest statistics:

  • The average period a landlord lets a property is around 12 years.
  • The average monthly rent in the UK is around £950 (including London).
  • The average tenancy length has crept up to around 24 months.
  • The average management fee charged is 10.5% (data from our client base).

To the agent, the average lettings instruction is worth a huge £14,364. This doesn’t take into consideration any rent increases, additional churn in tenancies (with 24-month tenancies there could be 6), any other additional fees charged to landlords. Ancillary services such as trades people, commissions, financial services, renovations etc. These could take the figure close to £18,500.

Now imagine that after twelve years the landlord wants to sell the property. Zero cost of advertising, 1.2% +VAT instruction fee and assuming the average house price of £275,000, that’s another £3,300 income for the agent.

One let. A lifetime value of £21,800.

Obviously not all scenarios will be like this, but the numbers are based on averages and should give you a good idea of what you can expect.

Now that you’ve seen the numbers and understand that lettings is the key foundation of any sales and lettings agency, I’ve got a couple of questions for you to think about:

What systems and processes do you use to nurture the best possible landlord and tenant journey?

What steps do you take to win the landlord’s trust and secure that managed service agreement every time?

As an agent, how much would you pay for a landlord lead?

If you’d like to talk about that, give me a call.

Sim Sekhon – MD, Propoly.

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July 2022
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