- Original Poster
- #1
Hello, for the past year or so my ambition has been to start my own estate agency. I will find one to work in for a few years first so that I can learn the ins and outs of it, but the only reason I want to do that is to start one up - if it was just a matter of getting a job, I'd choose a different area.
In my mind, there must be quite large profit margins, however a lot of the people around me, some of whom work in property, believe that once you account for all the overheads, you're not left with much.
The average house around me is about £500,000. If you charged 1.8% which is a common amount of commission, you would make £9,000 on commission. Plenty of independent estate agencies around me make over 50 sales a year, and a lot of those are in the 1-1.5m+ range, where the commission becomes huge, potentially £20,000+ per house.
The price to rent an appropriate retail premises to set up in is no more than £2,000 per month (£24,000 per year). To kit it out in branding, and with computers etc, say £10,000. Rightmove charge £1,750 per month per office to advertise, so that's £21,000 a year. Assuming Zoopla charge a similar amount, that adds up to £42,000 a year.
That's £66,000 per year in costs (not including the one time £10,000 office kit out).
Advertising may take up another £1,000 or so a month, to round that off to £80,000 a year. Finally, bringing in two members of staff on low basic salaries made up for by commission (the industry standard) would add about £15,000 each on wages, to be £110,000 a year. Any pension contributions etc would be on top, so just make it £120,000 a year for simplicity.
Back to the average property around me being £500,000 - selling 13 average priced properties in a year would make us break even with costs, not accounting for what could be written off as business expenses for tax etc. This does not account for me taking a salary, but fortunately I'd be in a position where I don't have to for the first couple of years.
The agencies around me as I previously mentioned can regularly sell 50+ properties a year, averaging out to one per week. If I could build up to around half that in 2-3 years, that would mean on average 13 sales, or 13 commissions, should in theory be profit - around £117,000 if the houses were all average priced, significantly more if I sold some of the more expensive properties in the area (a huge huge percentage of homes around me are over 1m, some up to 4m).
Therefore, it seems to me if I can build it up and can afford to put down the costs for the first couple of years as things get rolling, the potential for big profit is huge. I'm wondering if anyone can spot where I've gone wrong with this, or if I have? Are the numbers as huge as I'm seeing them in my mind?
All input is vastly appreciated, thank you.
In my mind, there must be quite large profit margins, however a lot of the people around me, some of whom work in property, believe that once you account for all the overheads, you're not left with much.
The average house around me is about £500,000. If you charged 1.8% which is a common amount of commission, you would make £9,000 on commission. Plenty of independent estate agencies around me make over 50 sales a year, and a lot of those are in the 1-1.5m+ range, where the commission becomes huge, potentially £20,000+ per house.
The price to rent an appropriate retail premises to set up in is no more than £2,000 per month (£24,000 per year). To kit it out in branding, and with computers etc, say £10,000. Rightmove charge £1,750 per month per office to advertise, so that's £21,000 a year. Assuming Zoopla charge a similar amount, that adds up to £42,000 a year.
That's £66,000 per year in costs (not including the one time £10,000 office kit out).
Advertising may take up another £1,000 or so a month, to round that off to £80,000 a year. Finally, bringing in two members of staff on low basic salaries made up for by commission (the industry standard) would add about £15,000 each on wages, to be £110,000 a year. Any pension contributions etc would be on top, so just make it £120,000 a year for simplicity.
Back to the average property around me being £500,000 - selling 13 average priced properties in a year would make us break even with costs, not accounting for what could be written off as business expenses for tax etc. This does not account for me taking a salary, but fortunately I'd be in a position where I don't have to for the first couple of years.
The agencies around me as I previously mentioned can regularly sell 50+ properties a year, averaging out to one per week. If I could build up to around half that in 2-3 years, that would mean on average 13 sales, or 13 commissions, should in theory be profit - around £117,000 if the houses were all average priced, significantly more if I sold some of the more expensive properties in the area (a huge huge percentage of homes around me are over 1m, some up to 4m).
Therefore, it seems to me if I can build it up and can afford to put down the costs for the first couple of years as things get rolling, the potential for big profit is huge. I'm wondering if anyone can spot where I've gone wrong with this, or if I have? Are the numbers as huge as I'm seeing them in my mind?
All input is vastly appreciated, thank you.
