It’s interesting how perception can so often veer from reality: a mirage in the desert; the barber’s pole illusion; the idea that wealth buys taste…
Among property professionals and the general public there is often a perception that the sales market is where the champagne flows and that lettings is altogether less glamorous.
I don’t remember Selling Sunset’s ever vaunting about quarterly tenancy agreements brokered and I doubt we’ll ever see a Netflix series following the trials and tribulations of property managers in Market Deeping.
Instead, we have Stath Lets Flats, an altogether contrasting portrayal of the lettings industry when compared to the glamour of the Californian real estate sector.
[If you’ve not seen it Jamie Demetriou is ‘Stath’ – an incompetent Greek-Cypriot lettings agent, working in the family business, Michael & Eagle Lettings. Set in North London, the BAFTA-nominated comedy can be found on Channel 4 and More 4]
LETTINGS MORE VALUABLE
But in the world of acquisition, the truth is that letting businesses are far more valuable and sought-after than sales agencies. In fact, in the vast majority of cases, sales businesses are rarely even considered.
There is little interest in buying sales businesses because the revenue potential simply isn’t strong enough. You may have a decent track record, but there’s no existing portfolio of properties under management to include in an acquisition, and no guarantee of consistent ongoing revenue.
A lettings business, on the other hand, comes complete with a strong and often varied portfolio, ranging from student landlords who benefit from year after year of consistent demand, through to long-standing management contracts with major building owners or developers. This portfolio represents a revenue potential in the eyes of a would-be buyer that the sales side of things simply cannot match.
RETIREMENT DRIVER
Agency business owners are starting to understand this. Atomic Consultancy has seen a big increase in the number of clients coming our way who want our guidance on selling their lettings arm while keeping hold of their sales arm.
Previously, retirement was the key driver behind the decision to sell and, whilst it remains a significant one, there’s no doubt the landscape has shifted.
In fact, over the past 12 months, almost 20% of our clients were motivated by the goal of selling the lettings arm of their business. Over the previous two years to that, it was more like 8%.
HANDSOME PAYDAY
These are owners who understand that they can offload their lettings business for a handsome payday while maintaining control of their sales arm to keep one hand in the game. It’s a kind of semi-retirement which allows them to significantly reduce their ongoing, day to day workload, which would otherwise be dominated by the continued management of a lettings book.
And very attractive it sounds too, just ask Smart Estate Agents in Birmingham, Preston Baker in West Yorkshire and Alexander May in Bristol, just some of the deals we’ve overseen of late motivated by this very reason.
Building a successful lettings business is hard work. It’s rarely glamorous, scales slowly, and requires genuine graft and dedication. But once you’ve achieved it, you are rewarded with a fantastic valuation and a far greater degree of interest when the time does come to cash in.
In short, any owner with an exit plan must be incorporating a lettings arm into their business, otherwise dreams of an exit will remain just that: dreams.
So I’m currently writing to all of the major streaming services with a simple pitch: “We want more lettings on TV! Lettings is where the real money lies: the nitty gritty drama of hardworking professionals building a business that they can eventually sell to fund a great retirement. That’s gripping tele. Give the people what they want and let the sunset sell itself.
Lucy Noonan is Founder of Atomic Consultancy
