There’s no doubting that the self-employed estate agency revolution is in full swing. Any property person with a Linkedin account cannot miss the daily posts from the main players highlighting the growing volume of agents turning to the freedom that the model provides, and its financial independence.
However, have you noticed that Keller Williams, eXp, Fine & Country, Nested, Tyron Ash etc. only ever talk about sales and rarely if ever lettings? That’s odd.
It’s odd because, as we know, rental deals in the UK represent about three times the volume versus sales. And the latter is about one million transactions a year. There’s a lot of business to be had in being a letting agent and there are many famous examples of property companies that only make their living that way or earn a huge proportion of revenues from that sector – Belvoir, TPFG, Foxtons, Countrywide etc..
So why are the self-employed agencies seemingly ignoring lettings?
I could venture that in the aforementioned rush to self-promote themselves, many of the new breed of brands that work ‘with’ agents rather than making them work ‘for’ them believe it more impressive to boast about sales listings and the big commissions that relate to them.
Could it therefore be a matter of ego that dictates these regular shout-outs are focussed on selling rather than renting? Perhaps it just looks less impressive sitting on the bonnet of a borrowed Lamborghini extolling the virtues of a commission that represents one month’s rent on an average home?
Amongst the sharp-elbows vying for agency dominance and with TV production companies apparently begging to profile the UK’s freshly minted Super Agents, lettings have simply been forgotten as the poor relation.
Except that it’s not the poor relation at all. Far from it.
Let’s look at the numbers… Those three million lets are worth about £3.2bn each year in commission at today’s average rent of £1,060 per month and a typical income for the agent being one month’s rent. That’s £147,000 for every estate and lettings agency branch in Britain. In fact, that’s actually about the same as is earned in sales fees each year.
To put this further into perspective, here’s how the competition is doing:
Foxtons, perhaps not quite the business it once was, nonetheless attributed 61% of its business to lettings in 2020 and a lettings revenue of £976,000 for each of its 50 offices.
LSL, owner of Your Move, Reeds Rains and Marsh & Parsons, banked £57.7m from renting homes in their last financial year – more than the £49m they did in sales income.
Belvoir have built a business worth £100m from taking a slice of rental revenue from 313 franchised offices.
And even beleaguered Purplebricks managed £6.6m in revenue from rentals last year.
You get the gist. There’s huge income to be made here and, whilst the cheques may be smaller, they are more frequent and not subject to the lengthening transaction delays that sales pipelines increasingly are in fact you’re likely to get paid in a couple of weeks rather than the six months that it’s currently taking to get a sale through.
My prediction is that as the self-employed sector gets bigger and starts to number in the thousands of agents, some will build big entities that major in lettings. These agents will ultimately dominate the lettings space as they nurture relationships with landlords and excel at looking after them. Repeat business in the form of landlords returning and consistent management income are so much easier to achieve when the principal of the agency themselves is able to offer a more financially motivated, 24/7 approach.
Right now rental revenue in the world of the new hybrid agent is an unguarded open goal. But for how long?
Lee O’Brien is director of David Lee Estate Agents, a national hybrid agency.
Interesting article;
As a “sales only” agents it makes interesting reading.
Historically the large agents; Savills, Knight Frank etc have shied away from lettings. Too much hassle & compliance. Not enough money!
Surely now it’s only worth doing lettings if fully managed and at 15%..? The days of the “listing service” must be dead?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
4.8 million tenancies and the average tenancy is 22 months, 4.5% of 4.8 m is the number of fee opportunities available to to agents introducing tenants and landlords who don’t use agents. The sensible and stable landlords who use agents tend not to flit from agent to agent. A fully managed service is a big, 24 X 365.25 commitment so the number of agents who do that properly and well at a reasonable fee attract loyal landlords.
the total number of fee opportunities available to transient letting agents is probably less than 50,000 a month – that puts a different perspective on this pitch. Factor in how many transient agents will suddenly have a go at lettings in addition to those who are already having a dabble and suddenly it is a very competitive space.
I’m not trying to put anyone off letting and management but there is good reason why Martin and Co (TPFG) Belvoir and Dexters Thamesview to name 3 groups who’ve got lettings sussed do so well; they offer service as a service and that is hard to compete with.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
An individual cannot focus on selling as well as letting, and god help tenants that use people that think they can do both!
A different mindset is required for each activity; one is selling intensive, whilst the other is admin intensive.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Completely and totally agree, as a letting only agent who despises sales and worked in this industry for over 20 years I have never met a person good at both!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
The boat sailed years ago. Unless you have a big portfolio today, there is no money in rentals. If you do the job properly, with ever growing regulations making it so time consuming, you have to have staff.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register