With the Tenant Fee Ban costing agents more than £200 million in annual turnover, firms are naturally looking for new ways to recoup their losses and take their brands to new heights.
In June, the government banned all fees for tenants, including contract renewals, referencing, inventories, check-in and check-outs, and admin work - services that form the backbone of the lettings industry.
For small lettings businesses, that meant a significant cut in revenue.
Though we can’t promise to turn back the clock on the Tenant Fee Ban introduction, we can offer some ways to generate more revenue from your lettings agency in 2019 and beyond…
Management fees are the bread and butter of any letting agency.
Some agencies charge their clients a percentage of rents collected to landlords to cover costs like marketing, management, maintenance, customer support, tenancy agreements, disputes, and more, whilst others charge a flat fee, typically once per month.
Though some prefer a fixed fee, you’ll likely make more by charging a flat 10-20% of the rent and other monies collected.
If you’re looking for a way to generate more from your agency, consider experimenting with pricing to find the optimal management fee.
Depending on your local and national competition, you might be able to increase fees by up to 10% to recoup losses from the Tenant Fee Ban.
However, you should note that landlords will likely pass this onto tenants via increased rents, which could impact occupancy and mean you lose out on tenant management fees.
One model that’s exploded in popularity in recent years is guaranteed rent, where letting agents guarantee to pay landlords a fixed sum of money each month, whether their property has a tenant or is vacant.
On top of this, basic maintenance issues such as leaky taps are completed by the agency, without passing on the costs or headaches to the landlord, offering them peace of mind and a stable income, something the rental market can’t always promise.
Whilst letting agents typically take a 10-20% fee for standard tenancy arrangements, the guaranteed rent scheme offers landlords 60-75% of the rental market value, giving you a tidy profit month to month.
Of course, you’ll increase your level of risk in the process, but careful planning, management, and marketing will ensure you collect healthy returns without fear.
The key to succeeding in the lettings game is consistent marketing.
You can’t simply expect to send out a mailshot when you’re struggling to find new clients or tenants once in a blue moon - you need to be active on social media, build a strong presence on search engines through SEO and digital PR, and remind landlords, homeowners, and tenants that you exist.
Remember that not every landlord will be looking to switch agency immediately - in fact, many won’t be able to if they’re tied into contracts with other agencies.
But by pushing your marketing messages online and in print media, you’ll remain on their radar when they’re ready to change.
And the same goes for tenants - regularly promote offers, properties, and your personal service, and you’ll become everyone’s first choice when they’re looking for a new house.
Operate in an oversaturated market?
Rather than trying to compete with other companies, who may have bigger budgets and manpower behind them, consider repositioning yourself in the market.
High-end letting agencies, for example, can target higher-priced properties which, naturally, command higher monthly fees from landlords and property investors.
Building a premium brand may require some hard work, lots of PR and cold calling, but it’s certainly a way to differentiate in a competitive market and give your business an edge.
Alternatively, target your brand towards lower-priced properties to boost stock levels and keep income consistent.
In today’s challenging market conditions where homeowners are unable to sell, appealing to them with cheap management fees could encourage them to put their home on the rental market, helping you build your customer base and boost income.
If you always turn to the same professionals when maintenance issues arrive, consider the benefits of partnering with them for discounts.
Plumbers, joiners, electricians, photographers, handymen and decorators will jump at the chance to sign exclusivity deals with your agency if you’re able to provide high volumes of regular work - and because you’re confident in their services, you’ll be able to rely on them whenever necessary.
What’s more, you can invoice your clients in full, keeping a percentage back.
And for tenants, negotiate referral schemes with insurance and household utility companies to further bolster your average tenant return.
Finally, consider offering third-party services directly to tenants to increase your average return.
At Billing Better, for example, we help tenants to pay one monthly amount for all their household bills, whilst providing dedicated customer support throughout a tenancy to ensure all household bills are paid for.
Some agents offer all-inclusive packages to tenants, offering a fixed monthly price for all rent and bills, and others refer our services and earn £20.00 per property, per month.
What’s more, our bills experts ensure all bills are set up and paid for correctly throughout the tenancy and as tenants leave their properties, saving you and your clients time and money. Click here to find out more and book a demo with the team today.
Do you have any other tips for lettings agents? Let us know over on LinkedIn and we’ll be sure to feature them in a future blog. In the meantime, be sure to subscribe for regular tips and advice for landlords, property management companies, lettings agents, and more.