Don’t resort to desperate measures
We know that the Tenant Fee Ban has cost letting agents dearly, with an estimated loss of £314.5 million paid to letting agents by tenants*. But desperate times do not always call for desperate measures …
A new research report has revealed how London letting agents could be missing out on thousands of pounds of potential income each year by not focusing on providing full property management to landlords.
Professional supplier to the lettings industry, ARPM, has developed a detailed report titled ‘Why let-only is a losing game for London letting agents’, which features commentary from leading property market expert, Kate Faulkner.
Combining various statistical and anecdotal evidence, the report reveals the downsides of let-only – a service typically favoured by agents in the city – and includes comprehensive example calculations that demonstrate how letting agents can increase their average annual income per tenancy by up to 80%.
The report investigates the current state of the Private Rented Sector, the struggle for landlords to keep up with ever-changing legislation and suggests there is an increasing need for support from professional letting agents to let properties legally and safely.
At the same time, the negatives of focusing on let-only services are highlighted, particularly the lengthening time between new tenancies, inconsistent cashflow and the fact that income from a let-only book rarely contributes to the potential sale value of a lettings business.
To demonstrate the potential significant financial benefits to letting agents, numerous calculations and scenarios have been provided using specific fee, rental income and portfolio size assumptions.
The examples show how converting let-only landlord clients to full property management can increase annual income by 29%, rising to 63% each year over an average tenancy of 20 months in London, or 80% over an average tenancy of 3.9 years nationally.
The positive impact of increasing a managed book on business value is also revealed, as well as the additional benefit of opting for higher monthly management fees that incorporate let-only services, rather than a high upfront let-only fee and lower monthly management fee.
“The property market is changing, and while many letting agents may conclude that it’s not a great time for their business, I believe the opposite is true. What this report highlights is the great opportunity available in property management which can improve financials for agents, protect landlords and raise property standards for tenants.
“Those who focus more on let-only could be missing out not only on the chance to grow their business but helping to deliver legally and safely let properties from landlords who lack the time and knowledge to do this themselves.”
For letting agents who have limited resources to deliver additional property management, the report also shows the financial impact of outsourcing such services, something which ARPM has over 11 years’ experience in.
“Having worked with many London-based agents over the past decade, we know from experience that they often favour let-only due to the large upfront cash injection they are able to secure without any ongoing commitment.
“In a fluid market where lets were often six months, tenant mobility was high and tenant fees could be charged, this was a plausible business strategy. Now that the market is slowing down and fees have been abolished, it’s a much less financially secure model to follow.
“Turning their attention to full property management is definitely something letting agents should be doing, and we wanted to highlight the potential financial benefits to them of doing so with this report.
“However, we also know that many agents lack the resources to instantly increase their service offering, so also wanted to show the healthy increase they can achieve to their bottom line by outsourcing property management. And in the financial examples we use, letting agents could instantly increase their income by 17% annually and 38% per average tenancy without any impact on their internal resources or workload.”Back to knowledge hub