The buy to let market is undergoing major transformations, and there has been much speculation about whether these changes will lead to landlords selling up in droves – and what this means for the future of letting agencies. But Agent Rainmaker’s Sally Lawson says these changes present opportunities for agents to diversify their services and educate landlords about why they’re essential – in order to reverse a trend which sees only 18% currently making use of property management services.
“It’d be easy to think changes in the rental sector mean many landlords are leaving the market, but there’s no shortage of people buying into the market too – especially with an increase in direct sales or off-market property purchases.
Many see the rising opportunities being created by huge demand, the reputational boost which will come with better regulation, and shorter supply, all of which in any business market would normally result in an increase in revenue.
But a crucial issue for agents is that only around half of landlords are choosing to use an agent to help with the lettings process, and fewer than one in five are opting for full management.
Not only do agents need to embrace the new legislation, and offer more diverse services in-line with what current landlords need, they also need to be discussing with those landlords exactly how complex the regulations are.
The buy to let market has grown significantly since 1997 when specific mortgages for landlords were first released. Back then, I was helping hundreds of investors buy and refurbish properties, and they were seeing average returns in the region of 15% - well beyond that in some cases.
Property prices subsequently increased and there was an oversupply of certain types of properties, such as flats, in many towns. By 2007, returns were sometimes as low as 4% - but rather than killing the buy to let market, it simply became more diverse.
The rise of HMOs and Serviced Accommodation seems to have reached a peak, while there’s a continued growth of renters claiming housing benefits (highlighted in the recently released Fairer Private Rented Sector paper). This market hasn’t yet been tapped into by lots of agents, so this is definitely an area with potential in the next few years.
The tightening of regulations, requirement to register, and higher fines and prosecutions should drive up standards and may see some of the 82% of landlords currently self-managing turning to agents to ensure they remain compliant and avoid financial penalties.
But in order to embrace this, agents must concentrate on offering a diverse range of services, catering to landlords whose portfolio (or target portfolio) covers LHA, HMOs and short term accommodation.
Most importantly, letting agents must show their worth by educating landlords about industry regulation – this can be done through running webinars on specific topics, producing educational guides, and setting up a YouTube channel focusing on legislative update videos and other key topics.
In my experience, focusing on the legislative complexities of the industry when talking directly to landlords is much more persuasive than trying to win them over by talking about reviews, qualifications and years of experience. Focusing on your understanding of legislation shows them just how valuable your expertise is, and how it can vastly reduce their risk of a financial and reputational crisis arising out of the continued buy to let changes.
Diversifying into new markets, offering a broader spectrum of services, and educating landlords about your services and legislative know-how, will ensure letting agencies remain robust throughout all of the buy to let changes on the horizon.
About Sally:
Former ARLA president Sally Lawson set up her first letting agency aged just 18, now - more than 30 years on - she’s created the Concentric Lettings franchise, given speeches on stages across the world, and has turned her attention to supporting other agents through her mentoring and training company Agent Rainmaker.
Click here to find out how Agent Rainmaker can help your agency.
