Your charges will depend on rental levels in your local area, which vary across the UK; however typically speaking, the average monthly commission charged by a letting agency is between 10 and 15% of the monthly rent for a fully managed service, 75% of the first month’s rent for a “let only service” and £100-150.00 fixed fee for simply listing a rental property and forwarding rental enquiries to Landlords.
One of the greatest benefits of running a letting agency is that with each property added to your management portfolio, your income will grow on a residual basis, providing business security and consistent reliable cashflow. You can rely on guaranteed income before each working month begins. Also, start up costs are very low in comparison to other industries, especially when starting from home. Tenants pay their rent consistently by standing order each month allowing you to deduct your fees before forwarding any remaining balance to Landlords which removes the risk of non-payment, saving on time and administration costs.
The figures below demonstrate how management income can grow during your initial 12 months and during the course of 5 years, by adding just one property a week to your managed portfolio and based on charging a modest 12% of the UK average rent of £900 per month. This doesn’t include other income streams such as “let only”, renewal fees and referral based income, therefore allowing for even higher earnings potential.
Even in the early stages with a small client base, you can quickly benefit from good fee income. Remember that the figures above don't include other revenue streams you'll benefit from. Please see below how when adding more revenue streams your income can grow. Again, we've based the figures on an average rental of £900 per calendar month and a let only fee of 75% of the first month's rent.
TOTAL INCOME: £6270
We will advise you on how and when to charge fees. It’s also important to consider that by achieving between one and two new lettings instructions a week; you will be sure to see the financial benefits from setting up a letting agency. Options on various fee structures can be found in our training package.
A recent survey by ARLA established that the average landlord owns 8 properties. This means you wouldn't necessarily need a large client base to enjoy a great income. With just 6 Landlords, you could potentially manage up to 48 properties. As it isn’t uncommon for a single branch letting agency to manage up to 500 properties, it can be seen why owning a letting agency is so financially appealing.
The value of your letting agency and in particular your management portfolio can be measured easily due to its consistent monthly revenue, meaning that upon retirement or acquisition, your business would be valued between 1.5 time to 2 times its annual turnover. For example, with sales of just £150k per annum, your business could be valued at up to £300,000.
The majority of agents work on a "No Sale No Fee" basis, charging between 1 and 1.5% of an agreed sale price. Based on average property values, this would equate to £3375 per sale. Selling just 2 properties per month will generate an income of £6750. Your fees are normally paid by your vendors solicitors upon completion of sale unless you've agreed separate terms with your client. By building a large and consistent pipeline of sales, this can be very lucrative, particularly when added to an already lucrative and solid residual income from your lettings portfolio.
Learn more about how to start and run your own independent letting or estate agency, and what's included in our packages.
As we've demonstrated, even a modest number of properties can produce an excellent income in what is a lucrative market. It is why so many letting agents are managing office accounts worth tens of thousands on a daily basis. Added to sales commissions and with the help of our proven start up packages with ongoing support, the opportunities are limitless. Through working in sales, tenant find and property management disciplines, you will effectively have three businesses in one. The lettings market has a reputation for being recession proof due to further growth in times of a slower sales market, whereas the sales market improves in times of economic growth – the perfect hedge. Call us today for some free and friendly advice.
