By Paul Sheard National Business Development & Training Manager, Propertynest
I’ve worked in the property industry for well over 40 years and although the sector has had the odd hiccup, overall, it offers a good investment opportunity for home buyers and in-turn potential franchisees supporting the sales transaction process. According to new figures from Hamptons, based on Land Registry data, the average seller in England and Wales who sold in 2022 who bought within the last 20 years, made a record gross profit of £108,000, up from £96,220 in 2021.
The slight ‘panic’ around the increase in interest rates we saw towards the end of 2021 is starting to abate with interest rates now drifting downwards and sellers accepting realistic offers. It means as usual, even in trying economic times, the property market always demonstrates an upward curve over the long term. The challenge for estate agents is to ride out the peaks and troughs to create a balanced business.
One way to achieve this is through development of a lettings portfolio. When sales slow, volumes of lettings usually increase, and this can help smooth cashflow within the agency. When we look back at previous recessions, agents that survived and thrived often did so because of the strength of their lettings businesses which supply a reliable and recurring income.
A lettings portfolio offers the agency stability. It also futureproofs the business as a robust lettings portfolio can be sold on too. Some lettings portfolios will attract as much as 1.5x their revenue in a sales situation.
At Propertynest, this is why we encourage our franchisees to focus both on estate agency sales and also building a lettings business too. For those starting out without the support of an experienced franchisor, a lettings business can be off-putting as business owners need to deal with tenancy agreements, compliance and ongoing management. Any mistakes could result in prosecution or being fined. However, if they choose, Propertynest franchisees can benefit from a low-cost centralised lettings management package which includes listings, compliance, AML and accounting. This frees up their time to focus on sourcing new business, while our central team take over the administration associated with the properties, without any risk to the franchisee.
Building a lettings portfolio means whatever turn the economy takes franchisees can still build a profitable property business.
There are other advantages of considering an estate agency franchise in slightly more challenging economic times. The pool of customers is huge – everyone needs to live somewhere. In their lifetime everyone will have bought, sold or rented at some point and will continue to do so as life events change. Unlike other franchise opportunities there is no stock to buy. This keeps overheads low and means market entry is affordable. Similarly, at the outset there is no need to employ staff and most of our franchisees start out working from home. Remote working is now fully acceptable and offers franchisees flexibility around work and family life too.
Our franchisees tend to offer less volume of properties than some traditional agents, but because there are no premises or staff, operating costs are low so even in a challenging market, franchisees make good margins. This also means they can offer a higher quality, more bespoke and tailored service to clients and in some cases charge slightly higher fees.
In tough economic times people still need to move house, although sometimes for different reasons compared with when times are good. Combining property sales services with a lettings portfolio offers the business stability to create a successful agency.
The Propertynest franchise opportunity supplies all the technical support and training needed, delivered by our hugely experienced team, in addition to advertising on the leading property portals too. So if you are considering moving into property this year, then please see fill out the below for more information about our franchise offering. We can help you develop a thriving estate agency business whatever turn the economy takes!