How to set up an estate agency
Thinking of starting a letting agency? Follow this guide to starting an estate agency business and cash in on the lucrative property market...
Key things to consider when starting an estate agency are:
What is an estate agent?
An estate agent is a wide-ranging title applied to a number of specialisms.
Some estate agents specialise in the residential market, but even then, individual homes vary from studio apartments to mansions with acres of land. Some estate agents specialise in dealing with commercial properties such as office blocks, factories, shops and licensed premises.
Other estate agents deal specifically with lettings and property management, which involves letting property and dealing with all aspects of the let, which includes in many cases the responsibility for the property on behalf of the property owner.
In addition, some estate agents extend their service by offering the specialised knowledge and skills needed to carry out property auctions.
The differences between residential and commercial estate agency are explored below.
Starting an estate agency: The skills you’ll need
Estate agency is an almost unique form of selling. By starting an estate agency or letting agency, you’re not selling something which belongs to you, but something that represents your client – the property owner.
By starting a letting agency or estate agency, you will be acting as a representative or intermediary between the owner and a possible buyer, using a mixture of your skills to persuade customers to sell and buy.
One of the essential skills of an estate agent is good communication. Estate agency is a ‘people’ business – you have to communicate with many different people – potential buyers and sellers, conveyancers and solicitors for example – and you have to be able to communicate effectively.
A house sale and purchase is usually the largest single purchase that anyone undertakes and is consequently high on the list of the recognised ‘stressors’ in everyday life.
Good communication on the part of the estate agent/letting agent can reduce the stress enormously, make a sale go through more quickly and efficiently and will ensure that customers come back to the agency with more business. This communication might be face-to-face, either in the office or in people’s homes – or it might be by telephone or by letter.
So, the main qualities needed if you’re thinking of starting an estate agency are good communication and interpersonal skills; and the ability to persevere when things are moving slowly or the market is not particularly favourable.
Owning an estate agency can be challenging and rewarding, but there are also times when you’ll find it frustrating even infuriating, but as this is a people business you’ll have to keep your fury to yourself.
Long protracted delays can ensue just after you have done the bulk of your work and the process of legally transferring land and/or property starts. Sometimes cancellations can occur at a very late stage, about which little can be done, and so those to whom a career in ‘selling’ appeals may need to think twice about going into estate agency, as the final results can take some time to achieve.
It’s worth noting that you can start a letting agency from home and you don’t need an office to become a letting agent, as long as you have internet access, a laptop, phone and the ability to travel to visit clients, you can get your letting agency business off the growing.
Ready to get started? Find out everything you need to know about how to start your own business here.
Estate agency ideas: The difference between residential estate agents and commercial estate agents
Residential lettings and property management
Residential lettings and management involves letting property to a chosen tenant on behalf of the owner and dealing with all aspects of the let from then on, including the legal and financial implications.
Property management, as the word implies, means undertaking the ongoing responsibility for a property, again on behalf of the owner. If you’re considering starting a residential estate agency, then good communication and organisational skills are vital.
By starting a letting agency, your role will involve selecting responsible and reliable tenants, maintaining ongoing communication with them, and handling any problems that arise with the property. This in turn will involve you liaising with a wide range of people, such as solicitors, plumbers, cleaners, gardeners and builders.
If you find property interesting and enjoy dealing with people, a career in lettings and property management can be very rewarding and building up good relationships with property owners, tenants and others all form walks of life could be the perfect job for you.
Commercial estate agents
Commercial estate agents handle empty property used by businesses for a variety of purposes.
Traditionally, this will include shops ranging from high street stores to village stores and retail parks, offices, warehouses and factories. The work of commercial estate agents can also extend to building land, property for conversion to business use and specialised areas such as quarries, amusement parks and forests.
The opportunities for commercial estate agency is vast. Not only does a cagent act for the owner who wants to sell or let the property but can act for the buyer or tenant. In addition, agents are employed to agree adjustments to the rental or terms for a new lease for an existing tenant.
Property is a major cost to businesses and they need to make sure that accommodation is of the right size and in a suitable place for their needs. Often a commercial estate agent will be asked to provide advice on all aspects of a client’s property needs.
Commercial agents need a wide range of business skills to be able to understand the aims and objectives of a client. A thorough knowledge of Planning Law and Landlord and Tenant Law is needed to be able to guide clients successfully.
Extensions and alternatives to starting an estate agency
Business transfer is a specialised branch of estate agency that involves the sale of existing businesses. These cover a wide range of trades including high street shops, post offices, convenience stores, newsagents, public houses, restaurants and hotels. In addition, an agent may be called upon to handle the sale of much bigger businesses in engineering, manufacturing and wholesaling.
Estate agents with a specialism in business transfer will spend a lot of their time visiting clients and seeing what goes on behind the scenes. The job can be very interesting because an agent has the potential to learn something new every day.
In this case, the estate agent is responsible for arranging a sale of what could be the client’s income and home.
The transfer can involve a wide range of factors and the client will need guidance on matters such as taxation, employment law and property law. A good working relationship can develop and the resulting sale allow an owner to retire or move on to another business.
The sale by auction of property is an extension of the role of the estate agent. Many firms of estate agents do not undertake property auctions themselves, but in most regions there are firms who offer this specialised service to those wishing to sell.
For many the lasting impression of the auctioneer will have been formed by a fleeting visit to a general salesroom or a livestock market or from a clip on television. Those who have become property auctioneers have discovered that the challenge of organising and masterminding an auction sale is not only highly rewarding for the auctioneer but also, and more importantly, for the vendor client.
A substantial and steadily increasing number of homes, commercial, industrial and investment lots are routinely sold by auction today.
As an auctioneer you will be asked to advise on the disposal of a wide range of property. The first task is to decide whether or not that particular lot is a suitable subject to offer under the gavel and at the same time to explain in detail to the seller the complete process of auction. This involves not only a detailed knowledge of the market place but also the law procedure and process.
Start a property letting franchise
Franchising is a popular route for budding estate agents and there are a number of estate agency and lettings franchisors that offer franchise packages to enable you to set up an estate agency affordably and flexibly.
Popular property lettings franchises include Peach Lettings, which offers the chance to start a letting agency from home for £2,495, Belvoir Lettings and Martin & Co. These brands can give you the training you need to become a property expert – so you don’t need to have a background in residential lettings.
The minimum investment to start a property letting franchise varies but it will typically cost you up to £15,000 to operate a high street outlet.
Becoming a franchisee means taking fewer risks than going it alone as you’re supported by an established brand and have the benefit of leveraging a well-known name, alongside access to marketing materials, training, resources and more. For more information on the benefits of franchising, click here.
Whatever type of estate agency you decide on starting, you need to have:
- Buckets of personality…
- Followed by patience
- And the ability to make a person or company see the potential of a property you’re selling.
Qualifications and legal requirements to open an estate agency
While you don’t legally need to have qualifications in the field to start an estate agency, it’s recommended and a number of professional estate agents have gained qualifications in their area of specialism. Increasing legislation means that estate agents require a good knowledge of the relevant law.
If you’re thinking of starting a letting agency, then you must comply with, and keep to date with all legislation relevant to the lettings market and you need to be thorough in the preparation of important documents such as tenancy agreements or inventories.
The National Association of Estate Agents also offers details on relevant qualifications if you want to start an estate agency.
New laws and regulations are often coming into play, especially within the private rented sector, so make sure you stay informed.
For instance, in the Autumn Statement 2016 the government announced plans to ban letting agents fees for tenants. While no date has been set for the new law needed to stop tenants being charged, you should keep abreast of the situation.
Whilst academic qualifications are always helpful and applicable, personal qualities and abilities are a vital element of starting an estate agency. The ability to deal successfully with all sorts of people while handling someone else’s valuable asset is vital. You will also need to be numerate and literate, and, preferably, computer literate.
It’s important to highlight that in the property market, problems do arise and usually you will be working under pressure.
Consequently, running an estate agency can be very challenging and starting an estate agency is certainly not a good business idea for those who want a predictable or sedentary business.
Costs of starting a letting agency
Arguably the most expensive aspect of starting a letting agency is finding the office space – if you don’t want to start a letting agency from home.
Finding business premises
Established estate agents will often quote the three most important qualities of a good property as “location, location and location”so if you want to be a successful estate agent then you have to get as many people as possible to notice you exist and should find business premises in an area with high footfall.
Most estate agents will pick busy – and, therefore, often expensive – high-street locations.
Jonathan Burnand, manager Wild & Lye, Bath suggests that budding entrepreneurs looking into starting an estate agency should “get an office that’s as big as you can afford”, although he also notes that “you can do everything by phone and the net and […] meets clients in the local café or hotel.”
Cast about to determine the average rents of high street properties in the area. As well as calculating your annual rent, you will need to determine staff pay and your annual running costs.
Marketing your estate agency business
The next biggest cost for starting an estate agency is publicity and marketing. An estate agent needs to advertise their houses, auctions or lets, so pages of colour or black and white ads in the local property pages are a regular weekly expense:
Burnand says “Advertising costs a few hundred pounds per a page in a local newspaper – if you commit to 52 times a year”. Burnand cautions that “those estate agents that choose to do a half page one week, and two pages one week – because it eases the pain – are heading for trouble.
“Clients like to see the same size ads every week. Plus you have to advertise every week, you don’t sell houses off your advertising but it is the way you get new customers.”
You will also want to bring internet marketing into the mix and advertise your properties through your own website and through external property networks such as RightMove, Zoopla, and, depending on your niche, sites like University Cribs and Uniplaces.
Additional costs relating to marketing your estate agency business are printing, mailings and phone costs. View our guides to marketing your new business for help with promoting your estate agency.
Mobile and land line phone bills can be high so shop around for a service and use these guides to business phones to get a quote. You should also invest in a franking machine, a good database or contacts management package, and a printer to speed the time it takes to get your details out.
Door-drop marketing, while often incorrectly perceived as being old-hat, should be implemented too to promote your estate agency, and you should ensure you have a solid presence across social media so that prospects can easily find you online. Analysis shows that 92% of people read door drops that are delivered to their home.
The dawn of proptech and online estate agencies
With the rise and rise of property technology (proptech) and a whole host of innovative proptech start-ups now operating in the UK, from Purplebricks to Settled and Property Moose, the market has shown that it’s possible to move away from print and you could choose to advertise your business purely online.
However, if you choose to take the online advertising route, you will need to invest money and resource into Search Engine Optimisation (SEO) to make sure prospective customers can find you. These guides show you how to create successful SEO campaigns without spending a lot of money.
For online estate agencies, TV advertising is proving to be a popular marketing channel – used by the likes of Sarah Beeny’s Tepilo and fast-growth companies like YOPA and Purplebricks but the costs can be steep.
If you want to start a bricks-and-mortar estate agency, a local print advertising focus is likely to generate far greater returns on a smaller budget. You should also look to get your estate agency business listed on Google Maps and Apple Maps; this article shows you how to do this.
Tips for starting a letting agency
- Hire good staff – Staff need to be enthusiastic and excited about what they do. We will always hire people who don’t ask about car and salary first.
- Conduct market research – Identify the market you’re in, if it’s expensive properties then stick to that area. A good estate agent can’t straddle two camps.
- Have a memorable brand image – Make your company stand out – for instance your office could be covered in plants, the adverts are green and our lorries are green.
- Focus on office location – Get a central location and make it as big as you can afford. Although a central location is not so important now that we have websites.
- Diversify – You cant’ t just be an estate agent these days, we’re the only one in the district that does removals, plus we also do commercial property and we give advice on finance.
- Co-operate: You have to talk to other estate agents, you can’t be a cuckoo in the nest. You will need your competitors at some point.
Useful contacts and resources for starting a letting agency
- The National Association of Estate Agents: This has in the region of 10,000 members, is the leading – and by far the largest – professional body in estate agency and is represented through its members in more than 60% of estate agency offices in the UK. To start a letting agency, no qualifications are necessary but setting up a letting agency without qualifications would be exceedingly dangerous and it’s strongly discouraged. You should approach the NAEA for more details of relevant qualifications. Website: www.naea.co.uk
- The Property Ombudsman: www.tpos.co.uk