Q. How is the house selling strategy going, and how many franchisees have taken it up?
A. Over half of our franchise group is now trading in estate agency – a total of 90 offices have passed our training course and PMA test and are offering a sales service. A further ten offices will launch by September.
We did not offer sales at all at the start of 2012 and in fact we have been a consistently ‘lettings only’ franchise for the past ten years, although it’s interesting that when Richard Martin, our founder, first set up 27 years ago he was an estate agent first and a letting agent second.
Our franchise owners’ principal motivation to enter sales was to protect their managed portfolio: loyal clients who would have been happy to instruct us were being forced by our lettings-only stance to instruct another estate agent, and increasingly these other agents have a lettings arm.
Research we carried out with landlords suggested 70% would instruct the agent who sold them the property to let it.
Since changing our stance a year ago, we have experienced a sales market which is gradually improving, and a small but growing number of our franchise owners have started to employ dedicated sales negotiators and are beginning to attack other agents’ unsold stock.
Given that we made no money at all from estate agency at the start of 2012, we have banked half a million in fees to date and kept a few hundred properties in our portfolio that might otherwise have leaked out to the competition. In all we have agreed just under 1,000 sales.
Q. Do you think it is still viable to be a lettings-only business?
A. We will pass 30,000 managed properties this month, and if we did not offer sales I’d be seriously concerned about the potential to lose 10% or 15% of that portfolio over the next few years as clients test the option of selling.
It must trouble our friends at Belvoir as they have an almost identical model to the one we ran. Being a letting specialist is great when the estate agents stuck to their knitting or the market favoured lettings, but we really do think that a modern property business has to be engaged in the buying, selling and letting of investment properties. Hence our amazingly catchy new strapline “Letting Sales Investment”!
The same applies to the Leaders brand – lettings has been great and the future is still bright, but investment clients are becoming more sophisticated and will trim and re-position their portfolio over time, selling lower yielding properties and buying more attractive ones in locations they favour.
Q. Why does Martin & Co belong to UKALA?
A. We are proud to be an early adopter of UKALA as an alternative standards body for the industry. Caroline Kenny at UKALA talks a lot of sense, and unlike some bodies, UKALA has its roots in the nitty gritty world of landlord members (of the National Landlords Association) who are managing letting portfolios in the real world to achieve a financial return.
Q. What is Martin & Co doing in respect of the Advertising Standards Authority ruling on letting agent fees being shown in listings?
A. We are sitting on the fence so far as publishing tenancy fees is concerned. I can’t see that there is an early mover advantage, so we will comply with the law, but we won’t be first in the queue.
I do think the industry needs to set up a fighting fund to give a legal challenge to Shelter. If 50 other businesses promised to do the same we would put £1,000 into the fund straightaway.
Shelter is a charity and it benefits from tax advantages because of its charitable status. It has to expend its efforts on its charitable aims and if t strays into other political activities such as helping teachers, doctors, and journalists reduce their household bills by avoiding paying letting agents’ fees, then it should be reported to the Charity Commissioner and tied up in legal action through the courts.
As an industry we have the cash to pay for the best and most aggressive commercial lawyers to take Shelter on, but we have to act collectively. Tenant fees are probably worth £200m to us all, maybe much more, so it’s a fight worth having.
Q. How many lettings offices has Martin & Co now bought back, and how many is it now running directly from head office?
A. Having bought back four of our franchises last year, we have just sold three of them back to franchise owners and the fourth is up for sale and I’m expecting that deal to go through quickly.
That’s because we are sticking to a pure franchise model and we are using the proceeds of sale and other funds we have raised to assist our franchisees buying competitors businesses and portfolios.
Recruitment of new franchisees without industry experience and who are prepared to set up a new business is much slower than we have experienced in the past.
People are very wary of risk-taking and if you look at Google trends the number of people generally searching for franchise opportunities, and not just in the property sector, has declined markedly in the last few years. However, the appetite for established businesses with proven income streams is very strong and we could sell £1.25m and £1.5m businesses all day long.