It is absolutely crucial to review and make sure your lettings and property management business is fit for purpose, given the challenges ahead.
Many estate agents would not have survived if it had not been for their lettings and property management income. Yet it is still seen as an add-on, or a cash cow to be relied upon when the sales side is weak. This approach is dangerous given that the whole lettings market climate and Government attitude to the private rented sector (PRS) is radically changing. Companies with a clear understanding of this are using the current period to overhaul and update their whole approach to give their lettings business a profitable long-term future. Staying the same is not an option.
Lettings and management agents need to build deeper, long-term relationships with clients. They need to ensure that their fees reflect the work they are actually doing for the client and replace those lost by the ban on charging tenant fees.
Lettings is still seen as an add-on, a cash cow when the sales side is weak. This approach is dangerous… the PRS is radically changing.
It is time to review the efficiency of your business to see where cost savings can be made or processes streamlined. It is critical to ensure that all staff have the necessary knowledge and influencing skills to build new client relationships.
NOW… AND SOON
The PRS has been a godsend to agents. Cheap funding for buy to let, mortgage costs offset against tax, pension funds released to allow further buy to let purchases by the over 55s, little regulation of landlords or property condition, flexible Assured Shorthold Tenancy terms. All this is about to be significantly altered.
Many agents have yet to face up to this, many landlords are behind the curve in realising they need help to make successful investments in a changed market.
It is said that, “Great companies don’t just meet the needs customers know they have, they create and highlight new needs and then satisfy them”; that should now be a key approach for agents.
When our training company works on improving businesses, we use the 4 Ps model to analyse the current situation and provide suggestions for improvement:
Process: Are the processes and systems that your lettings business employs effective and creating positive ‘moments of truth’ for the client/customer every time they interact with the business concerned? This may be as simple as considering how sales staff deal with lettings customers, or is your IT system effective and efficient for the current situation you face? Are there necessary changes within the ‘Process’ component of the 4 Ps? An example would be to move from standard six monthly tenancies to one, two and even three-year tenancies.
Proposition: Is your proposition to landlords clear and appealing in comparison to the alternatives? Many lettings agents are adopting a comprehensive choice of management options (up to five or six) to clients rather than the one: ‘Full Management’.
This shows client why you charge ‘slightly more’ for what is clearly more comprehensive or less for a basic one. With increased competition, agents must come up with more choices for the customer. Astute agents are moving away from ‘Let only’ or ‘Tenant Find’ business almost entirely except perhaps for specific professional landlords where they can guarantee yearly repeat business.
People: Do your troops possess the required knowledge and skills to be effective in this market? Is there a need for refresher training to inform them of how the most successful lettings businesses approach current challenges? More importantly, do all staff in the company see lettings as a priority area of the business in terms of value and security?
Price: Do your fees reflect the work you undertake for clients? How do they compare with the alternatives on offer from other competitors? Do they reflect your proposition? It is particularly important to review what work you do for free and therefore need to stop doing! Crucially right now, does your pricing structure reflect how you will replace income lost when the Tenant Fee Ban is introduced?
Finally, ask yourself: How do your landlords see you? As a ‘trusted advisor’ and long-term ‘Property asset manager’ maintaining/increasing the yield on their investment? Or merely a company to have a short-term and transactional relationship with?
If you are in the latter category, you may well find 2019 a very difficult year indeed.