22 ways to generate lettings revenue
On a recent Rightmove webinar, we welcomed Simon Thompson, Lettings Director at Miles & Barr, to share his advice on creating lettings revenue.
As Group Director of the lettings department of a leading independent agency with over 2,500 managed properties, Simon was able to share a wealth of experience. You can watch the webinar replay via this link, including Simon’s expert answers to 15 minutes’ worth of live questions in the Q&A at the end.
In this article, we’ve summarised 22 ways to drive lettings revenue covered in the webinar. You’re sure to be doing a lot of them already, but we hope you find one or two new ideas to explore.
Starting a new tenancy
Whether a landlord uses your agency for full management, rent collect, or tenant find, this is your first opportunity to generate income.
The basics
- Set-up fees
You might choose to charge a finder’s fee and then separately for the tenancy agreement, inventory, checkout, referencing and all the other elements of the moving in process. Or you could decide to encompass all chargeable elements in one fee, like Miles & Barr.
- Ongoing commission
By persuading landlords to use your rent collect or fully managed service instead of Let Only, you’ll receive a reoccurring monthly income that will form the foundation of the value of your lettings business.
Additional revenue opportunities
- Rent Guarantee
Offering Rent Guarantee insurance can not only provide the opportunity to generate income, but it can be a cost saver. You’re not only ensuring that the landlord receives their rent but you’re strengthening your position to receive the agreed commission. In addition, it makes managing the property less problematic if maintenance issues arise with no rental income. Some agents choose to include this within their management commission, but we sell it as an independent service on top of the managed commission. This then helps us separate the value of our management service and this crucial rent and legal protection cover from any discussions about our core fees.
- Contents insurance, broadband, TV and utilities
By introducing these services to tenants, you have the opportunity to earn a commission from the providers, so long as you have consent from your tenant under GDPR. Whilst you cannot sell these services you can ensure potential applicants are aware of them. Some contents insurance can also provide a policy for covering the cost of damage to the landlord’s property and ensuring the tenant receives their deposit back.
During the tenancy
Core revenue opportunities
- Rent reviews
Naturally, you need to be mindful and respectful of a tenant’s situation in the current market with the cost of living increasing.
Discuss the options available and perhaps steer your landlord towards smaller annual increases that brings the rent more in line with the market and still helps you to service your landlord clients.
- Section 13
As part of the rent review, there’s the opportunity to charge your landlord for the required Section 13 notice to be served when increasing the rent.
- Renewals
To renew the tenancy on a new contract, you’re eligible to charge your landlord an admin fee. This is at your discretion and will depend on your relationship with the landlord.
- Increasing your management fees
To reflect increasing costs and the added value you deliver, I’d recommend reviewing your fees at least every 2 years. Your Property Manager is vital in helping prove the value of this to your landlords, by keeping in touch with them regularly and reminding them of everything you’re doing on their behalf.
Even a modest increase of 0.25% can deliver a solid income increase on larger portfolios.
Additional revenue opportunities
Beyond the basics, you can unlock extra revenue by keeping in close contact with your landlords and asking them key questions at the appropriate time.
- Current landlords’ other properties
Don’t assume that all of the properties your landlord rents out are managed by your agency. Rightmove’s data shows that 39% of landlords use more than one agent to manage their properties. When did you last ask your landlord about their other properties? We offer multi-discounts to take on additional properties. Always weigh up the opportunities that additional properties may bring to decide if they are the right business decision.
You could also ask your landlord if they have friends or relatives who might have a property to rent, and would they be happy to use your agency. You then may consider a small reduction in fee for a landlord introducing more properties.
- Landlords’ future plans
Ask your landlords about what their intentions are over the next 12 months. If they’re interested in increasing their portfolio, that could be an opportunity for you to add another buy-to-let to your managed book. Or they might be looking to release equity. That presents a financial services opportunity and/or an opportunity for your sales team.
- Turn upcoming legislative changes to your advantage
With changes to minimum EPC requirements on the horizon, a lesson we’ve learnt is to ask for a longer-term commitment from your landlord in exchange for your support in helping them comply with the legislation.
Agents undertook a lot of additional work for landlords to ensure their properties were EICR compliant, but then some of those landlords exited the market shortly after. By securing a landlord for a fixed term you will balance the time spent helping them become compliant.
The work required to upgrade the property to the right level is going to return investment over the next 3 to 5 years so your contract with your landlord should reflect that. I know a couple of agents offering 5-year deals, where the first year is free and the cost is back-loaded to the other 4 years. That’s a good way to make sure you’re going to see a return on the time and effort you’ve invested to support the compliance upgrades.
Don’t forget about your Let Only landlords. Approach them in the same way. Do they have additional properties, do they require a sales valuation, remortgaging, or do they have friends or relatives who might also consider using your services?
Working with your sales department
If your company has a sales department, you can generate lots of opportunities for the business by working closely together.
- Spotting new buy-to-let opportunities
Every sales memorandum should clearly state whether the property is tenanted already, managed by an agent and what the purchaser’s intentions are for the property. We feed all of this into our software so our lettings team can jump on any opportunities that come in. The aim is to get our lettings department in as early as possible to discuss the investor’s objectives and see where we can help.
We also offer a discount for anyone that buys a property through us that we then go on to manage.
- Tenants already in-situ
If you’re instructed on a property to sell that comes with tenants in occupation, offer it exclusively to your landlord database first. There are plenty of landlords still looking to invest and this can help maintain your lettings book.
- Landlords selling up
If your landlord is adamant on selling, make sure you speak to them regularly to understand their plans. There’s no excuse for your sales team not to have the first opportunity to list and sell that property. In an ideal world, you’d complete the circle by selling the property back to one of your current landlords. And if you’re able to secure a mortgage commission from the new buyer, that’s an extra win.
Referral opportunities through complementary businesses
There are lots of opportunities to expand your business to deliver adjacent services to home moving. Some agents bring these in-house, but more commonly there’s an opportunity to find partners and earn a referral fee.
- Financial services
We have our own financial services business, but you can link up with financial services companies to offer leads to them for a referral fee. By helping with remortgaging, we can often identify opportunities to work with landlords to release equity to buy additional properties.
- Contractors
Whether you charge a referral fee or a commission is up to you. A lot of agents choose to add a percentage to the contractor’s invoice. We choose to include some works, like boiler replacement, within our management fee. We charge for arranging refurbishment and larger works only. For instance, if a landlord wishes to add a conservatory, we charge 10% of the value of the work for arranging the contractor. All fees and commission must be transparent within your terms of business.
- Accountancy
With tax going digital, there’s a group of landlords that will need additional support. That’s where you can help. Refer them to an accountancy firm and earn a referral fee.
- Solicitors
If a landlord needs to evict a tenant and doesn’t have Rent Guarantee, they’ll need a solicitor if they’re looking to seek repossession. This could provide a referral opportunity.
- Block management
If you’re managing a property in a block where your landlord is dissatisfied with the current management company, there might be an opportunity for you to provide a referral to another block management company – especially if your landlord is one of the directors of the block. Seek relationships with Block Management companies if you do not provide this service yourself.
- Commercial
Quite often we’ve found ourselves managing a flat for a landlord above a shop that they also own. That creates a leasing opportunity for our commercial team at the same time. If you don’t look after commercial property yourself, you can pass the lead on to another agent creating a further referral fee opportunity.
- Wealth management
In times of economic uncertainty, people have a greater need than ever to plan for their future and are open to the opportunity of speaking to someone qualified to provide that advice. Build a relationship with a wealth management company to pass referrals between once another.
The great thing about these referral opportunities is the quid-pro-quo opportunities they can offer you in return. All of these businesses will in turn have people speaking to them who are landlords that they can refer to you as a new instruction opportunity. Setting up a referral arrangement can be mutually beneficial.
Don’t forget about your tenants
- See the long-term opportunities in your tenants
Remember that your tenants could be the landlords of your future. In the more immediate term, a tenant could soon have plans to buy. Introduce them to your sales team to discuss their mortgage and by helping them to move they’re likely to become the vendors or landlords of the future. By building good relationships with them from the very beginning, you’ll benefit in the long term.
When contacting your landlords or tenants to discuss any of the suggestions above, make sure you’re doing it in a GDPR compliant way. Your terms of business and tenancy agreements should include the ways that you’re able to use your landlords’ and tenants’ data to contact them.
