A respected transfer agent who has been selling lettings businesses for 25 years has issued a warning that tenant-find let-only portfolios sell for lower prices than full service agencies conducting property management and rent collection.
Adam Walker says: "Following the tenant fees ban, many agents have decided that let-only landlords are unprofitable so they will not buy let-only portfolios.”
He adds that prospective business buyers tend to view let-only landlords as less loyal and future income from them as not guaranteed.
Moreover, outside London, most agents do not get renewal fees from landlords, so if the tenant stays for another year the let-only agent will not receive a further fee.
Walker also advises that let-only can also cause agents problems with landlords and tenants.
"Let-only landlords often want to be given all the services that they are not paying for and can harm your reputation with negative online reviews if you don't give them what they want.
"They are also often ignorant of the law and, as a consequence, agencies could get blamed or even fined for [landlords’] mistakes.
"Some tenants will not understand that the letting agency does not deal with repairs, and this could cause problems if the landlord refuses to carry out a repair" says Walker.
His comments come alongside comparable advice from the chief of automated lettings payment service PayProp UK.
Neil Cobbold, the PropTech firm’s chief operating officer, says a recent survey by outsourced supplier ARPM shows that agencies providing let-only could be earning 80 per cent less than full-service agencies, missing out on income from referring and cross-selling additional products.
The study also found that a full property management service could boost an agency's average income per tenancy by up to 63 per cent and its capital business valuation by 600 per cent.
"Utilising the best PropTech products to become more efficient and streamlined is an important next step for agencies to take. The extra time this creates can be used to focus on the needs of clients and put into providing a personal service” insists Cobbold.
"If your staff are fully trained as lettings experts, they can provide crucial guidance and ensure that all clients are up to date with the latest industry legislation. This can inspire confidence in landlords and position your agency as a trusted business partner for years to come" he adds.
Cobbold adds that agencies with a clear service offer can also benefit.
"By explaining to landlords all the services they’re offering in their full-service package, an agency can demonstrate the increasingly complex nature of letting a property legally and remind them of the excellent value for money they will be receiving for their management fee" he says.