How to start a property lettings franchise
We open the door on a booming sector - property letting franchises
But for a long time our European neighbours have had no problem with renting rather than buying. And, judging by healthy state of the lettings market, it would seem that in attitude we are slowly following suit.
In addition, the increasingly restless population doesn’t always find itself in a position to buy. The need for job mobility, rising divorce rates and legislation that no longer favours the tenant means that renting becoming an ever more realistic option for more people.
Basically, the property lettings market is on the up and as a franchisee you could potentially take advantage of this trend. Are homes where your heart is? Read on to find out.
What is it?
All of the featured franchises, Belvoir Property Management, Castle Estates and Martin & Co, offer both lettings and property management. If you just deal in lettings, the landlord will manage the property and be responsible for repairs while you will be paid a finder’s fee.
Property management means it is you, not the landlord, who will be the first port of call for tenants and maintenance. The former is obviously more lucrative because it is an ongoing service. As Tim Rose, franchise director at Martin & Co, explains,
“Franchisees oversee everything from tenant finding, the legal and safety aspects, through to rent collection, maintenance and property acquisition. This is a cash positive business with low overheads, no stock to buy or bad debts.”
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A letting agent advertises for landlords, one replies and an appraisal is carried out. Checks are made on the house and the agent decides whether to let it or not – if they do, it is prepared for letting. They advertise for tenants and arrange viewings. Someone accepts, credit checks are run, the tenant moves in and everyone gets paid.
At its most simplistic, that is the role of the lettings agent. It is obviously a lot more varied than that and with a hundred potential challenges along the way, it will rarely be this simple. But if you do decide to take up a property franchise this will be the bare bones of the job.
The first couple of years of the franchise will be about building up your portfolio of properties, building relationships with landlords and then filling the premises with tenants.
The aim is to build up the number of properties that you actually manage rather than just fill for landlords. But initially you will have to get what work you can make a name for yourself. Advertising in the local press and in the yellow pages is the expensive but necessary route to spreading word about your agency.
None of the franchisors stipulate that you have to have any experience in the property industry. Although several of the franchisees mentioned that they had found it advantageous when setting up.
What is insisted on is that you research the area first. You aren’t on your own – this is actually part of the recruitment process. It is designed to make sure you’re right for the franchise and vice versa Steve Rawlston in Staffordshire explains the Castle Estate process:
“I reviewed the market first, working on the area with Castle Estates. It’s a package which tells you how investigate, for instance guidelines on speaking to your competitors and finding out how their business is going.”
It can be used to prove that the area won’t support a franchise – if necessary – rather than failing once it’s underway.7
How much does it cost?
Most franchisees start from home. This cuts your overheads because you won’t be paying expensive office rent but there could be the disadvantage of having strangers in your home.
Although as Paul Vincent of Belvoir in Harlow explains, initially it isn’t necessarily about people coming into the office. “I would say that 50% of my time is spent out and about. I meet tenants and landlords in the properties and administration is done at home. Once I have 25 properties on my books, I’ll move into office premises.”
Twenty-five isn’t a magic number, it is simply the point at which he won’t be able to cope on his own and will need to take on staff – and therefore an outside office. Most move into premises after two to three years when the business will have expanded beyond the confines of the home office.
But you need to be ready because it’s a big investment. A shop in London could require working capital of £20,000 to £30,000 for premises and staff – though this is the top end.
Advertising is the most costly aspect of the property business. Barry Kalish of Martin & Co, Crawley says, “Advertising costs a fortune. I spend £4000 a month – this is expensive, but it’s something that has to be done on a big scale.”
Barry has been a franchisee for four years and now only deals in property management as his business is well established. But it demonstrates that the advertising costs are an ongoing cost.