There is a lot of talk on social media at present about individual landlords setting up their own lettings agencies. This is exactly what the directors of Lifeboat Lettings did four years ago, so we feel qualified to comment on this!
The first consideration – whether you are a landlord or not – is why? We will be focusing in this article more on landlords setting up their own agency, so if you are a landlord, consider why you are doing this. Is it purely an exercise to manage your own portfolio or are you looking to generate a parallel income stream? The structure and strategy of the business will be different in each scenario.
Once you have considered the type of business and the customers you wish to attract, then you should consider the how and where? Will you require staff immediately or can you run your business from home on your own? If you are initially systemizing and ringfencing the process of managing your own portfolio, then, depending on the workload and whether any staff are required, you may be able to run this from home; either temporarily or permanently. The plus to this is that costs are significantly reduced. The downside is that, particularly in the early stages, you may require a lot of face-to-face contact with everyone involved and having some kind of base will be useful. Also, if you are looking to attract the business of other landlords, then looking and ‘feeling’ like a proper lettings agency can be important and having an office, particularly a high street presence is a real bonus. At Lifeboat Lettings we opted for a hybrid model, where we have a central office, but it is not on the high street. This enables us to control our systems and have a base for our staff (so we can work together and develop the business) but avoids the high cost of maintaining a high street presence in every area we operate in. Using this model we are able to cover the whole of Kent.
The other related consideration is the commitment and workload required to set up and run any business and this includes a lettings agency. Many landlord/investors – particularly in the early stages of their journey – regard property income as a passive income stream. This is far from the truth. In particular, running a lettings agency will be a full-time job and is certainly not to be regarded as passive income. It is important that you consider carefully your time and how you value this.
So, bearing all this in mind, why would I set up a lettings agency? Whatever, the purpose, there are many synergies for a portfolio landlord, which is one of the common drivers. Landlords gaining control of their portfolios from their previous lettings agent can immediately reap benefits regarding maintenance costs. With the input of their own time (not to be underestimated), they will be able to vet more closely the works done, who does these and at what cost. For some landlords, having more control over the choice of tenant (again for significant input of their own time) is important. Depending on the size of the portfolio, there may immediately be opportunities to systemize these parts of the business and hire staff to cover this – under the supervision of the landlord/business owner of course. The other obvious benefit to setting up a lettings agency, is that whatever systems and ‘services’ you develop for your own portfolio can be packaged up as a service for other landlords e.g. a full management service.
If having an office, staff and providing goods and services to other landlords sounds awfully like a ‘business’ rather than ‘property investment’, then congratulations, you have got the point and are now a lettings agent! More importantly, you are now a ‘property business owner’ and have many other responsibilities to go along with this; more legislation (focused on lettings agencies in addition to landlords), possibly VAT as well, HR considerations (if you have employed staff), payroll, company structure and registration (probably a Ltd. company), membership of the appropriate trade organisation such as ARLA Propertymark, client money protection etc.
Starting any new business can be a very scary prospect, but if you are still up for the challenge, then the best word of advice is to leverage every relevant lead or advantage to you to get going. Obviously, you will be looking to put your own portfolio but even if you are starting from a ‘standing start’ then make sure you reach out to your network and their network, to let everyone know what you are up to. Look for opportunities early on to partner up with other companies – perhaps swapping leads (sales for lettings is a an obvious one) – or look to establish relationships with large portfolio landlords.
If this is not for you then rest assured there are others who have already done all the hard work and will therefore work hard for you and your portfolio. The advantage of choosing a lettings agency owned and run by landlords – such as Lifeboat Lettings – is that they really understand what it is like to be a landlord and will manage your portfolio with the same care that they do their own.
