- Original Poster
- #1
Hi,
I see many posts on here regarding starting an Estate & Lettings Agency. I have recently sold my business for reasons that will become clearer through this post. I thought I would share my experiences over the last 3 years if it is of benefit to anyone considering a start up.
Firstly I would say its essential to have some experience in the industry. I do hear a lot of people wanting to start up an Estate Agency as they 'think it would be nice to look in people's houses'. Like with any business the more knowledge and experience you have before start up the better. Ideally I would recommend for someone to work for one of the corporate agents. It will teach the sales aspect of the job in terms KPI/Targets/Revenues etc. I would say these corporates mould people into the cliche Estate Agent, after some experience with a corporate I would suggest some time with an Independent or smaller agent to see how they operate. Often the customer service aspect is better and should teach better habits than the corporate.
Although contracts of employment would stipulate otherwise you will often find an Agent leaves another Agent to start up their own. Without doubt many will use data to plan for leads when they start their own business. So from day one they have business to go live with rather than waiting for the phone to ring.
Start up costs - You can start up an Estate Agency on a fairly limited budget. I went down the serviced office route to start with and later found a high street premises. There are very few barriers to entry so is a really simple process to start up. Apart from having a computer, Rightmove, Zoopla etc it can be relatively cheap. I have known people to spend six figures on a start up Agency with a flash office etc but this is high risk in my opinion. As so much is online nowadays flash offices are not impressing many in some ways it may put the public off using you.
Ongoing Costs - The ongoing costs of an Estate Agent is higher than many would expect. This is mainly driven by the cost of Rightmove. Quite simply at the moment you do need Rightmove they know it which results in them commanding high costs. Below is a simple breakdown of likely monthly costs however this is an example and can change significantly depending on location and business structure.
Rightmove (Sales & Lettings Package) £1200 min
Zoopla £400
Rent £500 (Serviced office route £1000 plus for high street)
Estate Agency Software (Didn't use this to start with but essential as you grow) £50ish per user £100
Internet/Phone System - Likely with call volumes you need a good network for a Voip system £100
Accountants - £100+
Fuel - With no company cars 45p per mile, this can really add up and the miles an Agent drives each month may surprise many - £400
Insurance/PI etc - £60
Employee Wages £20k approx depending on location/experience - £1666
Director Wage - £702 or relatively low for tax purposes, the most efficient way is to pay yourself is still through a Dividend when the business has made a profit.
Misc Marketing - Some of the old fashioned methods such as leaflets local publications etc can be of benefit £150
Misc - Stationary/Paper/Ink Cartridges £50
Professional Memberships/Subscriptions etc £40
Email/Web hosting - £40
Mobile Phones - £60
Total = £4482 monthly
This is a really basic breakdown and all costings are extremely conservative. Of course the Director salary is only listed at £702 so it is likely more will need to be drawn by way of salary.
As soon as you become slightly more established and need more staff/resource your break even point soon escalates to £8k+. A high street office can then easily be £10k plus and this is for a very small sized agency.
So in short even from day one you have £5,000 overheads per month. Of course you may not have an employee straight away but can be difficult without one.
Cashflow - From the above example you can see why cashflow is such an issue. Realistically if you sold a house on the first day you opened you would be talking 8 weeks for a smooth sale if you are lucky. You do realistically need cash reserves to last 3 months+ in order to keep afloat so in the example above you would need £15,000 to give yourself that time to make the business work. Over time if the business is successful you find you have a snowball effect with your sales pipeline, i.e always owed £40k+ in sales currently going through, even then you will find you have one month where loads complete and you get paid and others where little completes, it never seems to be an even spread which can cause problems with cashflow.
Fees - Gone are the days of Agents charging 1.25%. Now with the rise of online Agents and the competition for business it is getting normal to drop fees below 1%. Again this varies in different places. You often find someone may have valuations from three agents and it simply comes down to who will sell for the cheapest fees. A fee of 0.75% is becoming more normal. There are also many agents who offer up front fee structures mainly to improve cashflow. It can be incredibly hard to say we offer a unique service so will not sell below 1%, there are a few exceptions mainly specialists in high end bespoke properties.
Other revenue streams - You can make fees by referring to Solicitors for Conveyancing, a common fee seems to be £100 for sale and another £100 for purchase, this has to be stipulated in contracts and its an area Solicitor firms should closely monitor to ensure transparency. This could mean another £200 per sale. Mortgage referrals is another key revenue drive often 20%ish of their commission. Many corporate companies look at revenue per case which is the sales fee and the added extra.
Be prepared to work a lot for no reward - Valuations can take an age, you want time to get to know the client but there is a fine line between being there too long. You find over time some people have valuations as they want free advice for divorce purposes/personal circumstances, others are lonely, others are purely curious. When you add up all these wasted appointments over the year it is simply scary how much time is wasted. It is part of the job like most sales roles you can put in a lot of work for no reward.
You can have valuation appointments where you get on so well and know they have taken your advice. You then see their property appear on Rightmove at £50k more than you said and it sits there for 6 months, then eventually sells for the price you told them. Many corporate agents are targeted on new listings, how do you win a listing? Tell someone their property is worth more than it is or offer a very cheap fee. This can make things incredibly frustrating when you know you are being honest and transparent.
From the outside some people think an Agent gets a nice slice of commission without putting in the work, as a rough example lets say you sell a house for £2,500 fee the time spent may be as follows:
Booking of Valuation - 10 mins
Initial Valuation - 1.5-2 hours
Valuation Report/Letter admin time - 30 mins
Follow up call/Visit - 30 mins
Take on appointment (contract/photos etc) - 1 hour
Office time editing photos, wording, upload to systems etc - 1 hour
Viewing Inquiries/calls/emails booking admin time - 1 hour (depending on interest and viewings)
Viewings - Depending on when it sells 10 x viewings 30 mins each - 5 hours
Buyers back round to view/measure up - 1 hour
After sales, sales chasing with Solcitors etc depending on details - 30 mins weekly until completion 4 hours
Total = 16+hours
The above example is representative of a very smooth sale in reality it can be a lot longer than this. On the face of it £2500 for 16 hours work sounds good but you have many sales that take much longer, and can get some that fall through which then starts the process again. Also be prepared for people not turning up for viewings, it is incredibly frustrating! I tried confirmation calls/emails/texts but still happened.
Even for a small start up the Industry is labour intensive. You need to have office cover for calls regarding viewings, valuations etc. You can spend considerable time out of the office a valuation can take 1-2 hours plus travel time and even viewings can be longer than expected. You will soon find even as a small business you have a real strain to fulfill all appointments you will need to work every Saturday and in the Summer cover many evening appointments.
Lettings - Lettings can be the most frustrating of the lot. I would say 95% of tenants and landlords are fine but the 5% can cause real problems. You would get out of hours calls about minor issues, some tenants not reporting faults and then becoming worse. In many cases as the agent you just cannot win. I think it gets worse year on year, you will need significant resource to even manage 40+ properties. For me lettings is essential as it your only real guaranteed regular income. The tenant fee ban comes into force on 1st June, this will have a real impact for revenues.
Don't get me wrong the industry can be good to work in and really rewarding. For me I came to a point where work life balance was horrendous, even on a Sunday there were always maintenance issues with lettings etc effectively you work 7 days a week. Yes I know if you run your own business it never stops but with this industry you were always on call.
I made plenty of mistakes along the way and even though I thought I did extensive research there were many issues with costings and cashflow in the early days. Hope my ramblings may be of use to someone.
I see many posts on here regarding starting an Estate & Lettings Agency. I have recently sold my business for reasons that will become clearer through this post. I thought I would share my experiences over the last 3 years if it is of benefit to anyone considering a start up.
Firstly I would say its essential to have some experience in the industry. I do hear a lot of people wanting to start up an Estate Agency as they 'think it would be nice to look in people's houses'. Like with any business the more knowledge and experience you have before start up the better. Ideally I would recommend for someone to work for one of the corporate agents. It will teach the sales aspect of the job in terms KPI/Targets/Revenues etc. I would say these corporates mould people into the cliche Estate Agent, after some experience with a corporate I would suggest some time with an Independent or smaller agent to see how they operate. Often the customer service aspect is better and should teach better habits than the corporate.
Although contracts of employment would stipulate otherwise you will often find an Agent leaves another Agent to start up their own. Without doubt many will use data to plan for leads when they start their own business. So from day one they have business to go live with rather than waiting for the phone to ring.
Start up costs - You can start up an Estate Agency on a fairly limited budget. I went down the serviced office route to start with and later found a high street premises. There are very few barriers to entry so is a really simple process to start up. Apart from having a computer, Rightmove, Zoopla etc it can be relatively cheap. I have known people to spend six figures on a start up Agency with a flash office etc but this is high risk in my opinion. As so much is online nowadays flash offices are not impressing many in some ways it may put the public off using you.
Ongoing Costs - The ongoing costs of an Estate Agent is higher than many would expect. This is mainly driven by the cost of Rightmove. Quite simply at the moment you do need Rightmove they know it which results in them commanding high costs. Below is a simple breakdown of likely monthly costs however this is an example and can change significantly depending on location and business structure.
Rightmove (Sales & Lettings Package) £1200 min
Zoopla £400
Rent £500 (Serviced office route £1000 plus for high street)
Estate Agency Software (Didn't use this to start with but essential as you grow) £50ish per user £100
Internet/Phone System - Likely with call volumes you need a good network for a Voip system £100
Accountants - £100+
Fuel - With no company cars 45p per mile, this can really add up and the miles an Agent drives each month may surprise many - £400
Insurance/PI etc - £60
Employee Wages £20k approx depending on location/experience - £1666
Director Wage - £702 or relatively low for tax purposes, the most efficient way is to pay yourself is still through a Dividend when the business has made a profit.
Misc Marketing - Some of the old fashioned methods such as leaflets local publications etc can be of benefit £150
Misc - Stationary/Paper/Ink Cartridges £50
Professional Memberships/Subscriptions etc £40
Email/Web hosting - £40
Mobile Phones - £60
Total = £4482 monthly
This is a really basic breakdown and all costings are extremely conservative. Of course the Director salary is only listed at £702 so it is likely more will need to be drawn by way of salary.
As soon as you become slightly more established and need more staff/resource your break even point soon escalates to £8k+. A high street office can then easily be £10k plus and this is for a very small sized agency.
So in short even from day one you have £5,000 overheads per month. Of course you may not have an employee straight away but can be difficult without one.
Cashflow - From the above example you can see why cashflow is such an issue. Realistically if you sold a house on the first day you opened you would be talking 8 weeks for a smooth sale if you are lucky. You do realistically need cash reserves to last 3 months+ in order to keep afloat so in the example above you would need £15,000 to give yourself that time to make the business work. Over time if the business is successful you find you have a snowball effect with your sales pipeline, i.e always owed £40k+ in sales currently going through, even then you will find you have one month where loads complete and you get paid and others where little completes, it never seems to be an even spread which can cause problems with cashflow.
Fees - Gone are the days of Agents charging 1.25%. Now with the rise of online Agents and the competition for business it is getting normal to drop fees below 1%. Again this varies in different places. You often find someone may have valuations from three agents and it simply comes down to who will sell for the cheapest fees. A fee of 0.75% is becoming more normal. There are also many agents who offer up front fee structures mainly to improve cashflow. It can be incredibly hard to say we offer a unique service so will not sell below 1%, there are a few exceptions mainly specialists in high end bespoke properties.
Other revenue streams - You can make fees by referring to Solicitors for Conveyancing, a common fee seems to be £100 for sale and another £100 for purchase, this has to be stipulated in contracts and its an area Solicitor firms should closely monitor to ensure transparency. This could mean another £200 per sale. Mortgage referrals is another key revenue drive often 20%ish of their commission. Many corporate companies look at revenue per case which is the sales fee and the added extra.
Be prepared to work a lot for no reward - Valuations can take an age, you want time to get to know the client but there is a fine line between being there too long. You find over time some people have valuations as they want free advice for divorce purposes/personal circumstances, others are lonely, others are purely curious. When you add up all these wasted appointments over the year it is simply scary how much time is wasted. It is part of the job like most sales roles you can put in a lot of work for no reward.
You can have valuation appointments where you get on so well and know they have taken your advice. You then see their property appear on Rightmove at £50k more than you said and it sits there for 6 months, then eventually sells for the price you told them. Many corporate agents are targeted on new listings, how do you win a listing? Tell someone their property is worth more than it is or offer a very cheap fee. This can make things incredibly frustrating when you know you are being honest and transparent.
From the outside some people think an Agent gets a nice slice of commission without putting in the work, as a rough example lets say you sell a house for £2,500 fee the time spent may be as follows:
Booking of Valuation - 10 mins
Initial Valuation - 1.5-2 hours
Valuation Report/Letter admin time - 30 mins
Follow up call/Visit - 30 mins
Take on appointment (contract/photos etc) - 1 hour
Office time editing photos, wording, upload to systems etc - 1 hour
Viewing Inquiries/calls/emails booking admin time - 1 hour (depending on interest and viewings)
Viewings - Depending on when it sells 10 x viewings 30 mins each - 5 hours
Buyers back round to view/measure up - 1 hour
After sales, sales chasing with Solcitors etc depending on details - 30 mins weekly until completion 4 hours
Total = 16+hours
The above example is representative of a very smooth sale in reality it can be a lot longer than this. On the face of it £2500 for 16 hours work sounds good but you have many sales that take much longer, and can get some that fall through which then starts the process again. Also be prepared for people not turning up for viewings, it is incredibly frustrating! I tried confirmation calls/emails/texts but still happened.
Even for a small start up the Industry is labour intensive. You need to have office cover for calls regarding viewings, valuations etc. You can spend considerable time out of the office a valuation can take 1-2 hours plus travel time and even viewings can be longer than expected. You will soon find even as a small business you have a real strain to fulfill all appointments you will need to work every Saturday and in the Summer cover many evening appointments.
Lettings - Lettings can be the most frustrating of the lot. I would say 95% of tenants and landlords are fine but the 5% can cause real problems. You would get out of hours calls about minor issues, some tenants not reporting faults and then becoming worse. In many cases as the agent you just cannot win. I think it gets worse year on year, you will need significant resource to even manage 40+ properties. For me lettings is essential as it your only real guaranteed regular income. The tenant fee ban comes into force on 1st June, this will have a real impact for revenues.
Don't get me wrong the industry can be good to work in and really rewarding. For me I came to a point where work life balance was horrendous, even on a Sunday there were always maintenance issues with lettings etc effectively you work 7 days a week. Yes I know if you run your own business it never stops but with this industry you were always on call.
I made plenty of mistakes along the way and even though I thought I did extensive research there were many issues with costings and cashflow in the early days. Hope my ramblings may be of use to someone.
