Change presents a significant opportunity to innovate, improve best practices and deliver added value to customers. This can only be a good thing for the lettings industry in the long term, but how are letting agents coping now?
At ARPM, we work with estate and letting agencies of all shapes and sizes, from one managed property right through to 600-plus units. As a result, we have developed a detailed and well-rounded insight into what agents are thinking, feeling and subsequently doing to remain successful in a challenging market.
Many of our letting agent clients are leading the pack where the Tenant Fee Ban is concerned and have already stopped charging fees in an effort to entice more tenants to their properties.
Their view is that this will help them position their agency as one that has more active tenants for vacant properties, building value in their operation to raise their fees. And, indeed it is working – some have reported that this approach has directly led to a very welcome increase in managed stock and landlord fees.
The critical success factor with price increases, however, is perceived value. To attract landlords at all levels, from amateur and DIY to portfolio investor, some agents are introducing a tiered management service. Inspections, rent guarantee insurance and annual rent reviews have been removed from the standard full management service, for example, but included in a more ‘premium’ service for an extra three per cent. This also facilitates the easier upselling of let-only properties to a rent collection or standard full management service, which also presents an opportunity to upsell to the more premium service later.
On the acquisition trail
We are also noticing more independent agents on the acquisition trail. They are targeting letting agents who have always charged far too much for tenant fees and will therefore struggle to mitigate the impact of the ban as well as smaller operations who are simply looking for an ‘out’. Portfolios of around 10-30 managed properties point can be absorbed into most established lettings operations relatively easily. It must be noted, however, that when looking at the value of a portfolio, the amount of income generated from tenant fees needs to be removed!
Streamlining your business
By far, most agents are looking to drastically cut their in-house costs before they’ll even consider reviewing their services or growing. Reducing overheads and streamlining can be extremely effective, so long as it’s not at the expense of service.
Proptech is assisting in some respects with administration and property management, but software rarely eliminates the need for staff, especially for agents who want to focus on growth to generate more income in future.
Aside from staff, the other major cost to letting agents is the physical premises and many are deciding that they no longer require a high street presence and are instead moving to serviced offices. This is a fantastic and flexible alternative, especially if footfall was not a huge source of their business, but letting agents must ensure they continue to invest in their local brand awareness to stay at the forefront of all those prospective customers’ minds.
Outsourcing can be very effective
Without a shadow of a doubt, those agents that find the perfect middle ground between cutting costs and maintaining service, will subsequently thrive. Outsourcing certain tasks to a specialist business that already has the skills and infrastructure in place, but only needs paying as and when they provide the service, can be extremely effective in this instance.
Again, this doesn’t have to lead to a cut in your staff levels, but outsourcing phone calls, viewings, inventories, inspections and even property management, will allow letting agents to reallocate resources to fee-earning activity – and/or it will enable businesses to provide the best service without the hassle or need for a large physical team or the space to accommodate them.