Starting a letting service

[geordie100]

I recently bought and rented out my first property. I was (So far, touching wood) amazed at how easy it all was (Especially aided by this great website and more particular the community and advice i received from you guys). The most difficult thing was the refurb as i did most of the work myself around a 60hr per week day job!! :huh:/

Now, i was registered with 4 agents, all of which were going to charge me a months rent for the pleasure of an introductory service only (Around £650 in all) Now they were going to charge the prospective tenants around £400 also + other fees i believe.

In the end i advertised myself, found my own tenant, did all the necessary checks including gaurantor checks etc. I sorted the tenancy deposit scheme, ensured the house was lettable to all the current legislation, got the energy efficiency soreted, drew up my own contract and my own thorough inventory! Got it signed by the tenants and negotiated all of the moving in arrangements etc. Easy, all in all about 5 or 6 hrs work. (I'm sure it can and will get more complex, however, it seems to be not rocket science!!)

Now, what would stop me under cutting the letting agents and charging less for this service and providing it to other landlords (Bear in mind i was wholly suprised at how unproffesional and inexperienced some of the letting agents where in my negotiations and meetings with them. Honestly, my mother could have done a better job!! No offence mum!!)

I think with low overheads i could charge 1/4 or even 1/2 of the fees i was going to be subjected too and still make a healthy profit.

I wholly feel that the main reason prospective tenants are put off going through the letting agents is due to the high fees. I had around 6 people through the door in 6 weeks from the letting agents. When i advertised myself i must have had a dozen phone calls in the first day!! The demand is there!!!

I guess some of you will be thinking how arrogant and ignorant i seem, however, remember most successful business people are risk takers and often dive in head first into their ideas, especially early on.

Your thoughts please????

[Selkirk]

I wouldn't particularly defend or endorse a LA but in my experience it’s probably not quite that easy. The last T change I had I used a LA for a T find only and they charged me 50% of the first months rent. They did all the advertising, interviews and referencing so that suited me.

The other thing that springs to mind is a pilot, everything automatic, taking off, flying, and landing, all for big bucks, so easy that a monkey could fly one. However, they’re not really there for when things are going right they’re there if things go wrong, what price then would you be willing to pay.

Cheers

Selkirk

[Preston]

Hi

I admire your enthusiasm and your desire to learn. I also share some of your criticisms of some (though not all) letting agents; there are exceptions, but I find the general standard to be extremely poor.

However, I do think there is a world of difference between "doing if for yourself" and doing it for others. When dealing with your own property, you take the risks, you ask advice, you make mistakes, you learn - and only you lose out or gain, according to how well you do it. When providing the service for someone else you should, in my view, have a certain degree of experience and knowledge. Otherwise, you would just be like all those agents you have criticised wouldnt you?

The crucial question in my mind is, would I use you or recommend you to someone else, given your background; and I'm sorry, but my answer would have to be a definite no.

On a practical point, if you do choose to go down this route, make sure you get some professional indemnity insurance in place. In the property business, even a simple mistake could cost your client many thousands of pounds so its always been important, but in the current climate I would say it is vital. In a rising market, people often shrug off mistakes, because they are making money through capital gains and the next tenant is just around the corner. For the next few years, clients will be much less forgiving.

Anyway, what do I know? So long as you are honest, open and have your client's best interests at heart, then good luck to you and let us know when you make your first million!

Preston

[Trenners]

Hi Geordie,

I, too, am impressed by your enthusiasm. I created my own agency about 8 years ago having undergone the same "Eureka moment" as yourself (ie: can it really be this easy). Let me share some words of wisdom.

1) If you can only compete with other Letting Agents on price - you are not going to make a lot of money! Landlords HATE spending money and will always squeeze as much as they can (especially in a credit crunch). You run the risk of being a "busy fool". ie: You provide an excellent service and are paid a pittance. Differentiate yourself by the SERVICE you provide .... not the FEES you charge. Never apologise for your fees - if your clients want the BEST then they must be prepared to pay for it.

2) Do not offer a tenant introduction service. This will not help your business grow. The real money in letting is from the repeatable fees that you charge the landlords every month to manage their properties. It will be slow to grow this repeatable business but GROW IT YOU MUST. When you come to sell your business in the future it will be valued on these repeatable fees and not the number of tenant introduction service customers you have.

If a landlord asks me to find him a tenant I tell him to find the tenant himself. If the only value he sees in my business is putting pictures of property in the window / in the newspaper then he has missed the point of the value we provide.

3) The best way to grow the business is through word of mouth from both the landlord and tenant. Don't waste your money on buying loads of advertising - instead use your money to encourage landlords and tenants to recommend you to others. I give all landlords and tenants 6 bottles of wine if they recommend a new landlord to me. 6 bottles of wine costs about £25 - a new landlord generates about £1000 in annual fees.

4) Be different ... look different .... act different. Be able to quickly articulate to landlords what your unique selling proposition is. Tenants aren't really that important. If you can convince every landlord to let you rent out their property then you must be 100% successful because you will have a monopoly and tenants will have to rent from your business (because you will be the only person with the properties to rent). Focus on getting and keeping landlords ......

5) Build a partner channel. Estate agents don't understand this. Get handymen, plumbers, electricians, accountants, financial advisers etc etc all to recommend you to their client base. Set up a referral program so that you can share your success with your strategic partners.

6) Be honest, be open, be fair. Don't be afraid to sack a greedy landlord. After all - we usually evict troublesome tenants. A difficult landlord will not only consume large quantities of your valuable time - but they may also endanger the lives of your tenants and agents who get a reputation for killing their tenants are not usually successful!! Landlords will be paying you a fee of about £60 or so a month ..... they do not OWN YOU for that amount of money. If they are being unreasonable then give them their keys back .... and walk away ......

Good luck ..... and feel free to drop me a personal email if you want any more advice - mark@mlettings.com

Mark