One proven way to make money over the last couple of decades has been to lift business ideas from the bricks and mortar or “real” world and transplant them to the online or “virtual” world.
Many people have gotten very rich by doing it. For example… all those far-sighted entrepreneurs who first thought of selling holidays or car insurance, to name just a few.
Go back a couple of decades and if you wanted to go on holiday you’d usually need to go down to your local travel agency. You’d often need to wait in a queue until a travel agent was free. And then wait even longer while they used the phone or a slow, very basic computer to see if your flight or hotel was available. Today most travel is bought on a self-service basis, online.
Now, you might be of the opinion that there are no opportunities left to make money by moving goods and services from the offline to the online world. But I think I’ve found one for you… thanks to my connections in the property industry. (And it’s a whole lot easier and less risky than setting up a package holiday company or insurance company!)
It is… property letting
Let me explain. You see, although there are quite a few property websites around now there are still very few online letting agents about as yet (check for yourself and see). People who want to let out their house or flat, or rent one, mostly still go to an office-based letting agent on the high street or wherever to do it. (It’s almost as if, so far as property letting is concerned, the Internet has only just been invented!)
But the word on the streets in property (if you’ll pardon the pun) is that over the next couple of years there’ll be a bit of an explosion of property letting on the Internet. Most landlords and most tenants will let/rent properties online. (I also happen to know that one of the newest online letting agencies grew 300% last year alone, which tells its own story.)
So I really do think this could be an opportunity to get in on the ground floor of something – that is online lettings – which could be a big growth area over the next few years. Before the market gets saturated with online letting services.
In this blueprint, I’m going to outline exactly how I think such a business might work.
Three good reasons why NOW is a great time to start in online lettings
One. The economy may be down and house sales may be slow, but there’s a lettings boom going on at the moment in most parts of the country. It’s busier than it’s ever been for years. The lettings market grew by 10% last year alone. Experian figures show an additional 58,000 properties being marketed to rent in 2011 compared to the same period in 2010. (By contrast the number of properties for sale dropped by approximately 12,000 in 2011.)
Two. But… rents and overheads are high and rising. And so both landlords and tenants are looking to reduce the costs of the letting process itself. ‘Online lettings’ delivers on this perfectly.
Three. Although there are some online letting agents there are still relatively few… especially compared to the large numbers of offline agents. Now is the time to get a foot in the door before most entrepreneurs even discover the idea.
If you’re interested, take a look at Upad (www.upad. com) and Make Ur Move (www.makeurmove.co.uk). I think they are a couple of the most exciting names in online letting at the moment.
What you need to start up in online lettings
You won’t need years of experience in property. Because it’s basically just a matching service – linking up landlord and tenant.
This is a business you really can set up from home, on a part-time basis if you like. Though it certainly has potential to be full-time if you want to.
As it’s almost 100% online you will need a PC and a good Internet connection (obviously). It does need a website. But it is a simple kind of website you can do yourself – more details of how to do this coming up.
Start-up costs are fairly low. But – you will need some cash for marketing. (A lot of this can be done online though, keeping costs down.)
Tip: Finding a lettings niche
Here’s a good idea. One that has been used successfully in lots of online businesses. Go for a niche within the lettings market. Rather than creating an online lettings agency to deal with every type of property going, choose just a small sector of it.
Your niche could be… city flats, student properties, family homes, rural properties, luxury properties, budget properties, shared houses, holiday properties, even commercial properties if you want.
You might think operating in a niche restricts the potential of your business, but chances are it will actually boost it. As, in time, you will be seen as a specialist amongst landlords who operate in that niche.
Setting up your lettings website
So let’s get started on this business proper, and get going with setting up a simple online lettings website.
Don’t be out off by the need to set up a website. It’s a lot easier than it used to be. I’d suggest you use the WordPress system to create a basic website. Word- Press is a FREE tool you can use to create a smart- looking website with minimal technical knowledge. Details here: www.wordpress.org
With WordPress you use what are known as “plug ins” to customise it into the type of website you want it to be. And the good news is there are now plug ins available which are purposely designed to turn your website into a property site where people can list and search for property – more details coming up.
You’ll also need to choose and register a domain name or www address. Try and choose something short and simple with a lettings-related theme. You’ll need hosting too. Go for a hosting provider like GoDaddy or Easily – that’ll cost about £50 for a year’s hosting.
Property plug-ins. As I said, you can use plug-ins to turn your WordPress site into a lettings agency site. Here are ones I suggest you take a look at. (New ones are being created all the time, by the way. So have a look. You might even find some better ones.)
Finding landlords to use your online lettings agency
Your customers for this service are going to be land- lords – people or companies who own flats, houses and so on that they rent out. Because it is they not the tenants who will be paying your fees.
One slight thing. There is a bit of a chicken-and-egg situation here, because until you’ve signed up some properties you won’t be able to find any tenants. Until you’ve got some tenants you won’t be able to fill any properties. So you need to allow for this when starting up.
Should you find landlords and then try to find them tenants? Or should you find some potential tenants and then try and find them properties? You could do either, but I think it will be a little easier to sign the landlords up first. Here’s how…
Who will your best customers be? Your landlords might own just one property which they rent out as a sideline. Or they might have a large portfolio of properties. Obviously, these are the best customers but you can serve any and all landlords.
Why will they come to you? Make no mistake about it that this is a service that you are going to sell on competitive pricing. The main reason online agents seem to be gaining in popularity at the moment is that they charge much less than high street, premises-based agents.
These conventional agents charge 10% or 15% of the monthly rental of a property. Which can add up to a lot of money over the year. For example, on a property with a monthly rent of £800 the landlord would pay £1,440 over the year – a lot of money if they have several properties.
Online letting agents, on the other hand, tend to charge a flat fee around £100-£350 depending on the depth of the service provided. That’s a great saving for the landlord – and very attractive to them. Yet still pretty profitable for the agent, bearing in mind everything is done online. (There’s no fancy high street branch office or staff to pay.)
Approaching your customers. There are a few different ways of reaching out to agents who might be interested in using your service:
• Promote your website. Use pay-per-click advertising, banner ads on property websites, and so on.
• Press advertising. You can still use good old-fashioned press advertising in newspapers and magazines, especially ones that appeal to landlords and property investors.
• Direct approach to landlords. Start in your area and work out. Do some local research. Look in the Yellow Pages (under “Property Investment” and “Property Owners”) where you will find some (but by no means all) of your local landlords.
Also contact landlords’ associations and ask if they will put you in touch with their members. These are national and regional groups who represent landlords – collectively their members have thousands of properties.
Get in touch with landlords with an offer of a better, more competitive letting service than their existing agent. (Remember, big landlords have lots of properties each of which may be let several times a year – so this can be a source of lots of regular business for your agency.)
• Finally, try networking – great cheap publicity for any new business. Contact all your local estate agents (the ones who don’t let properties themselves), surveyors, solicitors who do house conveyancing and mortgage companies. Ask them to introduce your service to buy-to-let investors – perhaps in return for a commission.
For some useful marketing contacts and suggested ad copy I’ve put together a handy information pack for you – see later for details on downloading it.
Handling online property lettings
You’ll need to keep promoting your agency until interested landlords get in touch – be aware that probably won’t happen overnight. Next, here’s what happens when a landlord signs up to use your service:
Your landlord submits a form containing all the details of the property they wish to let. (The exact details of this form will depend on the plug in you use.)
You can collect payment either online by setting up a card merchant account. Or if you don’t want to do that get them to send you a cheque or make a bank transfer.
Then you’ll need to process the property particulars and upload them to your website. Once there, would-be tenants will be able to browse the details. (There is a bit more to it than that… more info coming up.)
Here are a couple of important points:
Property particulars need to be top-notch. This is another area where you can beat the high street competition by going the extra mile. By coming up with some really attractive, persuasive particulars. Have a list of every room with dimensions (in metres and feet). But don’t just leave it at that. Descriptions of features and benefits, e.g. a nice view, real fireplace, fitted wardrobes, appliances in the kitchen, etc., help make a property sound a lot more desirable. Also, adding some information about the local area – transport links, closeness for commuting, local shops/services and schools, etc., – makes a real difference.
The property particulars on your website help would-be tenants decide whether to view a property or not so this really can make a difference. The interesting thing is, although high street agents have to spend a fortune on printed particulars, your online ones can be as comprehensive as you like, and it will cost hardly anything extra.
Property photographs need to be top notch. A picture paints a thousand words, as they say. And good photographs are really important in the property business nowadays. It’s essential that you stress to your landlords they must have good photography of their properties – of all the main rooms and the exterior including the garden if the property has one.
If the landlord has their own photographs then you can upload those. Alternatively, you could find a local photographer in that area to do this and charge a fee for arranging it. (Remember photographs can be re-used when the property is re-let.)
One more minor thing… signboards. Although most traditional letting agents identify property for let with a sign board this isn’t strictly necessary for an online service. Since the whole point is that tenants use the Internet to search for property.
If the landlord particularly wants one you can arrange this for them with a local agency signboard service.
Promoting the properties on your books
This is one of the most important parts of this opportunity – promoting the properties on your books extensively so that your agency pulls in a good response for your landlords.
Here’s why. Because once your properties are uploaded to your website they’ll get some exposure to would-be tenants who find your site. But this in itself probably won’t be sufficient to attract lots of enquiries for your landlords.
So here’s what you need to do: Set up links to some or all of the various property portals that are available so that when would-be tenants use these portals to search for property they will find the properties listed on your site in those searches.
What is a property portal? A property portal is basically a directory site. When a would-be tenant searches they can find details of all properties from all agents in any given area, or any property type. Portals aren’t agents themselves. They just list properties from agents. So they complement your agency, they aren’t in competition with it.
Which property portals should you submit to? Here are some details of the main portals to use. You can use some or all of these. However, I suggest you use as many as possible. The more you upload details to the more potential tenants will see them.
In most cases creating a link or uploading details is easy and is solely PC-based work. You’ll just be cutting and pasting information supplied by your landlords to each portal. Just follow the instructions provided by each portal. (You will need to register with them first.)
Important: Most of these sites charge for listings, sometimes depending on the size of your business and the number of enquiries they generate for you. But there is at least one portal that is FREE. So, you can always start with that and move on to the charged-for ones later. Worth knowing: Landlords cannot list their property on most of these sites themselves – only agents can use them – so they cannot cut you out of the loop.
Claims to have more listings for property for sale and rent than any other site and 1.5m searchers a month. Has a very advanced search tool allowing users to find a specific property. It’s free to list your properties here (although you will probably be invited to upgrade to premium listings).
Claims to have 900,000 for sale/to let listings. It is heavily focused towards generating clicks and email/phone enquiries for your properties.
A very well-known site. They claim to be in the “top ten” of the busiest websites in the UK. They say that, in a survey, 95% of home movers said that they had previously seen or heard of Rightmove and that 75% said Rightmove was the property site they turn to first.
Primelocation promotes itself as the leading portal for quality property and agents, and the site definitely has a “high end” feel about it. It is perhaps more suitable for more expensive properties that are located in more affluent areas, especially London, major cities and affluent rural areas. Also overseas property.
With over 5m visits a month Zoopla say they are the UK’s fastest-growing and one of the most-visited property portals. With this one you can pay either a fixed fee for unlimited leads, or pay per lead. They also supply their content to other property websites including Propertyfinder.com and HotProperty.co.uk, plus the property search for the following websites: Yahoo!, Virgin Media, UpMyStreet and MSN.
This is one of my favourite sites, as it is really easy to use for the tenant or buyer.
Other sites you can use… for free! As well as the property portals there are a number of other, general classified ads sites you can promote your properties on. These aren’t as powerful as the main portals but can bring valuable extra traffic for nothing. Try these: Gumtree, Craigslist, Vivastreet.
Tips for promoting your website. As I said, you shouldn’t rely on your own website to attract enquiries alone. However, it is worth spending some time promoting it as you won’t have to pay for any leads it generates. Social media is great for promoting this kind of site – especially as more people are searching for rental property using a phone these days. Try: Facebook, Twitter, setting up a blog.
An extra you can offer – rental property management
This is one of the most interesting things to know about online letting agency: Most high street letting agents also offer property management, which is why their service is very inexpensive in comparison. But as an online agent you do not have to offer property management.
You see, a majority of landlords are quite capable and willing to deal with the “real world” aspects of letting their property themselves – especially if it results in a saving. Such as handling viewings, dealing with tenancies and sending a plumber to fix a dripping tap and so on. They really don’t need a letting agent to charge them thousands of pounds for all these unnecessary frills (and quite often do it badly too) when they can do it themselves for almost nothing. They’re mostly interested in a letting service that can find them tenants.
However, if you wish, you can offer a property management service. This will mainly be for properties in your local area of course and will be at extra cost to your normal range of fees.
What services does property management involve? Help with references, and setting up the tenancy. Collecting rent. Taking an inventory. Dealing with repairs. Dealing with tenant enquiries, complaints and other problems.
Useful things to know about property letting
In this section, I’ll run through a few of the things you need to know about property letting.
Actually, you won’t necessarily be involved with these as they are the responsibility of the landlord not the agent. If you wish you can offer to arrange these for the landlord for an extra charge as part of your property management service. (The easy way to do this is to find a local service to do them and add a margin on top.)
Tenancies. A landlord doesn’t have to have a written tenancy agreement with their tenant. However, it is usual practice to have one (and would be reckless of a landlord not to). The usual kind of tenancy used is an Assured Shorthold Tenancy (or AST) for a fixed period of time (such as 6 or 12 months).
EPCs. Properties which are rented out must have an EPC or Energy Performance Certificate which has been prepared by a qualified Energy Assessor. An EPC is valid for 10 years.
Gas Safety. If the property being let has gas appliances then by law – under the Gas Safety (Installation and Use) Regulations – these must be inspected by a Gas Safe registered engineer every 12 months.
HMOs. Landlords who let out houses in multiple occupation (HMOs) – such as shared houses let to several tenants separately and bedsits – usually need a licence from their local council to do this.
Deposits. Landlords who take a deposit from the tenants (which most do) must protect the deposit under a recognised tenancy deposit scheme. This formally protects the tenant’s deposit money. You can get more info from the Department for Communities and Local Government website.
Inventories. An inventory lists the condition of the property and its contents at the start of the tenancy. The purpose of it is so that any loss or damage caused by the tenant during the tenancy can be identified. At the end of the tenancy another inspection is made. Any damage, other than fair wear and tear, must be paid for by the Tenant.
Landlords can compile this inventory themselves if they wish. Or you can find an inventory service to do this for them at an extra cost. (Compiling inventories can also be a separate business opportunity you might like to consider.)
How much could you make as an online letting agent?
As this is a fairly new opportunity it’s pretty much untested. So I can’t make any promises. But I’ll just offer a few thoughts.
There are a couple of important points to bear in mind…
Firstly, this is pretty much a pile-em-high-sell-em-cheap type business model. You’ll be looking to get lots of sign-ups at a competitive low price – rather than a few sign-ups at a high price which is what traditional agents do.
Secondly, you can operate regionally or even nationally unlike the traditional agents who only operate (mostly) in one town. So it should be easier than you think to get that large number of sign-ups. Where traditional agents often only have 10 or 20 properties on their books an online agency could have several hundred at any one time.
So let’s talk a few figures. Let’s assume you charge £250 for your comprehensive service.
- If you handled just two lettings a week you would take £500.
- If you handled just two lettings a day (or 10 a week) you would take £2,500. And that would probably still be for a part-time business.
- If you handled, say, 30 lettings a week – which by now would probably be a full-time business – you would take £7,500 a week.
Now even £7,500 a week or £375,000 turnover a year is not a massive amount of money by traditional letting agents’ standards. And of course you would have expenses to pay out of that. But think of it this way: You’re operating on ultra low overheads. You’ve no fancy high street premises. No staff. You’re running everything from a computer. Put in those terms it’s actually pretty impressive.
As I said, it’s really difficult to call actual figures on this one. But certainly as a low priced, low overhead business model I really do think it’s worth a look.
Final thoughts
Do I think online letting agencies will ever take over completely from traditional high street letting agencies?
Probably not. There will always be a few people who prefer to trudge round the shops looking for a house or flat to let. Just in the same way as some people prefer to trudge round the travel agents looking for a holiday.
But… it’s estimated that almost 90% of travel is now arranged online compared to, currently, only a few percent of property rentals. If, over the next few years, 90% of all properties come to be rented through online letting agents then that’s a truly massive new market which you can get started in – virtually on the “ground floor” so to speak!
On that basis, I think this is an opportunity that is well worth a look at.
P.S. Don’t forget to download the free Information Pack I’ve put together – it contains contacts and suggested ad copy you’ll find useful for this opportunity.