Online letting agency Howsy is to be sold as part of a distressed sale after running into financial difficulty.
The agency, which bought former rival Upad out of liquidation for an undisclosed sum in 2020 and The Happy Tenant Company last year, is understood to be in the process of being sold to a major estate agency, although it is not clear at this stage which company it is.
Founded in 2016 as No Agent, a fixed-fee management service, before rebranding in 2018, the company has attracted significant sums investment from both institutional shareholders and crowdfunding.
The most recent round of funding saw the agency, which manages more than 7,000 properties, raise £800,000 from investors in March last year. But clearly more funds are now needed.
Most recent filed accounts to 31/12/20 show net liabilities of £3.378m up from £188,485 at January 2020.
In a letter sent to shareholders, the founder and CEO Calum Brennan confirmed that the company is to be sold.
Brennan said: “I am writing to you today to inform you that Howsy, its directors and its majority shareholders have agreed for the group to be acquired by a leading estate agency chain.
He continued: “This has not been an easy process or decision, but the Board believes that this acquisition is in the best interest of the business as a whole.
“This acquisition became the number one route for the board to pursue due to the speed at which the buyer could move. This was necessitated by the current cash position of the company and the fact that we had been supported during the last six months by way of shareholder loans, neither of which was sustainable.”
Big news. 7000 tenancies is a lot, and they appeared to have made the [low headline fee + pay for add-ons] model work. Plus they moved fast to make those acquisitions. But all the time losing money it seems.
So the question is, if they lose money with 7000 tenancies how on earth will that model ever make money?
This is humiliating for Howsy but they gave it a good go.
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The writing was on the wall for years. We saw this coming since they started. From having 100s of 1star reviews under ‘No Agent’ to 100s of 5star reviews under ‘Howsy’?. The issue never disappeared, they just plastered over the cracks. The concept is good, but poor management and execution are the real problems with these companies.
Word on the streets are more will go to the wall this year.
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So, from 7,000 tenancies let’s say 75% are managed at a ridiculously low and unsustainable fee and the remainder are self managed by landlords. The type of landlords that use this service use it for the cheap fees. Whoever takes over will have to increase the fees, of the self managed landlords I suspect most will not return next time they need tenants, of the “managed” landlords,of the 5,000 or so, how many will just look around again for the cheapest deal? More than 50% ? At the end of the day also, these tenancies are not all in one town, they are scattered around, so branches of a “major estate agency chain ” across the country will be gifted a few cheapskate landlords on loss making fees for a period unlikely to exceed the current tenancy? As for the investors who have lined the pockets of the directors and managers to the tune of £millions, maybe they will learn a lesson, ‘for disruptor, read tearing up £20 notes’!
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I know some major firms keen to acquire portfolios, yet none have heard of this disposal nor who the buyer is. Surely the key for all those investors is to get as much money for the business as possible.
With 7000 units they were clearly doing something right, but the value of any portfolio will obviously be affected by low fees. The add ons are generally a small one off fee.
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With 7000 units they were clearly doing something right,
You could also say that they are doing something wrong; buying in the clients, by way of low fees, is never a sustainable business.
Strikes me as another example of keeping the business going by investment, not by trading income, that keeps directors in employment and earning a decent salary.
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Confuses me how some above are saying that “clearly they were doing something right to get 7,000 tenancies”.
They weren’t doing it right in any shape or form. The reason why the number is high is because they sold the service at a price that wasn’t profitable.
Why don’t we call it for what it actually is. They spent millions of investors money to grab a portion of the market that isn’t profitable to sustain a business. This, once again, only benefits the people at the top, not the investors.
This keeps happening because we’re in a World where you can blag and crowdfund your way to the next ‘disruptive’ service and the next, without having to worry about consequences.
No doubt they’ll pop up within 12 months with the next great idea asking for millions with a write up along the lines of “We managed to get a fresh start up to 7,000 clients within X years, raised millions, we’ve got the next best disrupter and you can be part of it etc etc” with no mention of this above though.
I need coffee. Ha!
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A disruptor! an Innovator!…. another failure.
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I just don’t get it. How can you claim you have a successful business when it makes no money? Isn’t the point to be profitable?
I imagine the agents taking it over or not paying much if anything and doubt there will be a huge revenue for the 7000 tenancies – but that data is pretty worthwhile.
However, the people who use this service are after the cheapest possible. They don’t use a high street agent for a reason.
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Its hard enough to get good reviews for excellent service in lettings, let alone 5 star reviews for just organising a viewing! Do me a favour.
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I worked at Howsy until recently and am not surprised by this news.
There seems to be a lot of focus on them managing 7000 properties. Even on their website it says they were managing 8000 properties every year back in May 2020. In May 2020, they were struggling to maintain a managed portfilio of 1500 properties. Clearly Calum and the rest of Howsy have been misleading investors for years during fund raising rounds claiming the company was doing better that it really was.
Whoever is buying the company needs to do their due diligence, the portfolio, when I worked there was not legal, with properties that require licencing not being licenced, simple repairs taking several months to fix, safety certificates not being organised, clients being lied too constantly to cover up shortfalls in their service, incentivising negative reviewers to remove bad reviews and for a few years, they had no idea whose money was in their client account.
Where have all those millions gone?
It is a shame, the concept was great.
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Crikey. That’s fraud if true. And negligence. Hmm.
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I think that people are missing the key point.
I looked at the crowdfunding platform in which they raised last year, and it’s quite clear that they’ve been misleading the investors. They had no where near 7,000 managed properties (7,000 leads? DIY services via UPAD? definitely not managed).
They’ve potentially took government money based on false reports, and whoever buys the company will have to handle these liabilities.
I genuinely cannot see any reasonable “large estate agency chain” buying 800-1,500 cheap assets around the country, with DIY landlords. I’ve seen crazier things in my life, but this just doesn’t make any sense. The company’s value is sub-zero to any player doing a proper due diligence.
This leads me to the only conclusion that even this statement is not true, and the company is not really selling itself to an agency, but shutting down and trying to save face.
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