Quite recently on the forums there have been quite a few threads on setting up a letting agent and to be honest it’s not as easy as everyone might think. I thought that it would be a good idea to write a mini series of articles as how we set up our lettings group and the mistakes we made, it will a full insight into how we have grown to the size we are and also what I would do different if given the chance again.

Anyone can set up a lettings agency but it takes a certain kind of some one to make it successful. Its not a case of I’ve got nothing to do or I fancy a stab at that. To be successful in lettings, as with any business, you have to be knowledgeable on not only the practical side of property management but also the legal side. It can be a minefield and if not correctly handled a very expensive learning curve.

Why set up a Lettings Agency
There are many reasons why you could set up an agency, some better than others and believe me I’ve heard them all. I would suggest sitting down and analysing the reasons why you want to set up an agency and what qualities you possess as a person.

To run a successful agency some of the skill set you need, are:
• Good communicator – speak to investors and landlords as well as tenants
• Customer orientated –both your landlords AND your tenants are your customers, so you need to find a happy balance
• Analytical – especially if your dealing with the rents
• Systematic – follow systems and deals with problems
• Sales – you need to sell your services to prospective landlords and tenants

Unless you are in the fortunate position of being able to employ staff from day one and outsource the skill sets needed to them, you will need to be master of all of these or at least be competent other wise your failings in an area will lose you business.

As a portfolio landlord I was very hands on and getting phone calls at late hours or on week ends was normal. It’s very hard to start and run a business effectively, when you get out of hours phone calls. To be honest I didn’t like managing my properties, it was a necessary evil for me so setting up Castledene was a life saver that allowed me to spend more time on other things.

Had to change my strategy
After the mortgage companies essentially stopped lending, I couldn’t get a mortgage so I was forced to stop buying property. I wanted something that if done correctly could provide me with a healthy income but if and when I decided to sell, would give me a reasonable amount of cash that I could wither purchase properties outright or pay my existing debt down.

Pick a Niche
There are thousands of letting agents out there managing billions of pounds worth of property, what separates you from them? Why should landlords choose you instead of any one else? Are you a HMO specialist, do you manage top end properties? Do you deal with LHA tenants?

As everyone knows we picked LHA tenants or LHA tenants picked me as I tell myself. My portfolio is in the middle of an area dominated by LHA tenants so from the national introduction of the LHA system in April 2008 this was mostly the only type of tenant I had dealt with. I have been through and seen pretty much every problem that can occur with LHA tenants and also the problems dealing with the council, which can be a much bigger problem than any tenant, they included;

• Paying the tenant direct
• Overpayments
• Taking too long to pay
• Not enough information
• Wouldn’t deal with Landlord
• Lost information
• Wrong advice

Because of the problems I experienced personally on my portfolio, I was in a position that when I decided to set up the letting agency, landlords could benefit from my mistakes and experiences. It seemed logical that even before I decided to go into the lettings game, my experiences and knowledge could be monetised in some way, whether it is consultancy or lettings or mentoring.

Another thing to mention here is that monetising your skills or knowledge is not a crime. As the saying goes, “it’s nice to be nice, but nice doesn’t pay the bills” I enjoy helping people but it comes to a point where you need to take advantage of your skills and make money from them.

Having knowledge and experience is key to a successful lettings agency. Having the odd property and waking up one day with the attitude “I think Ill get into lettings today” is not a sustainable attitude to have.

We all fancy giving things a go in life, but we need to seriously sit down and decide whether our life experiences and knowledge (which can be improved) are suitable for the business we are about to undertake.

Now this is easier said than done, but now I have an overall aim or objective i can break it down into smaller aims, such as how many properties do I need to manage in a certain area before I can open up an office or how much revenue I need to produce? How do I aim to get these properties etc?

Now to some people they will see blind ambition and boasting but to me I call it goal setting and objectifying the aims of the business, which is a must for any successful business, no matter how small they are. As Rudy Giuliani the former mayor of New York said “change is not a destination, just as hope is not a strategy”

I have this written down in detail in my top drawer and I constantly look at it. We all need reminding now and again and it spurs us on to achieve our goals.

Knowledge is power
Now you have picked your niche and come up with aims and objectives you need to become as knowledgeable as possible on your subject. Your probably an investor or have partnered up with some one who has dabbled in property before but that doesn’t mean you’re the oracle on all things letting.

When I set up, I joined property associations and bought as many books on property management as I could find. You need to be up to date as possible on the legal aspect of property management as soon as possible; otherwise it could be a costly mistake.

Ill be honest I cheated…… bit of a sweeping remark, but I did. Instead of learning everything about everything which is impossible, I realised where my knowledge was lacking and plugged the holes with employees or other members of my support network, such as solicitors, insurance brokers, mortgage advisor, builders etc

I knew the basics and understood them, but in my opinion taking a night course in the correct way to evict someone or dealing with selective licensing issues is not going to make me a success, so I either employed some one who was great at that sort of thing or started worked closely with a solicitor with the experience I was looking for.

I think many people fall down when they are afraid to let go, I don’t mean delegate everything out, just delegate the majority of things that don’t make you money directly. Do not try and be all things to all people, you can’t. Accept this and use other people and acknowledge your lack of experience.

Accreditations
Another great way to get help is to join a professional letting group of some sorts. The two main ones at the moment are the National Approves Letting Scheme (NALS) and the Association of Residential Letting Agents (ARLA). There are others but these are by far the two heavy weights of the industry. As members of both I am in a unique position to comment on both of them from an unbiased point of view.

NALS
NALS is easier to join to be honest; it’s more like a best practice guide. You need the usual professional indemnity cover, company insurance, separate bank accounts but essentially any one can join. I think it’s aimed at people new in the industry, those with little or no lettings experience but recognise by joining an association it will give your business a professional advantage over the competition.

The back up service from NALS is small but quite good. You can have access to their legal service and they are always willing to help. They stay in contact with you quite regularly through e-mails and leaflets.

ARLA
Is the largest and most widely recognised. It’s a bigger organisation than NALS and has a bimonthly member magazine that contains very useful updates on legislation and best practice.

The joining of ARLA is a bit more complicated. There are a few routes in to ARLA such as being an existing member of RICS but the most common entry route is once you pass the Technical award in residential sales and lettings, which is a four part multi choice exam, but well worth doing.

National Landlord Association
Whether you’re a single landlord or a chain of letting agents I can’t recommend joining the NLA highly enough. The advice line on its own is worth the joining fee on its own, which is a very reasonable £98 for the first year.

You get access to so much more, such as Courses, development manual, special rates for lenders, and as mentioned before the advice line is invaluable. In the early days of Castledene the NLA helped me with more sound advice than I care to remember.

Next months article I will be talking about systemising the letting agent and what most people want to here, how to get those landlords