Are you looking to start your own letting agency in the UK?
If so, you’ve got a challenging and rewarding path ahead of you…and you might also be wondering where you should begin with it all.
In this guide, we will walk you through 10 critical steps to set up a successful letting agency business from scratch – from your initial business plan to kickstarting your marketing efforts.
1 Research and create a business plan
You’ll need to create a business plan that outlines your agency’s mission, goals, and strategies. This will define how you will start your business, finance it, and continue to run it to make a profit. While it’s not mandatory to have a business plan, all banks and lenders will require one if you seek a loan to kickstart your business.
Before diving into the world of letting agencies, thorough research is vital. You’ll need to understand the local property market, demand for rental properties, and your competition. For example, if you’re starting a letting agency near London (or another large city), you’ll be facing lots of competition from established agencies – so you’ll need to position yourself carefully in the market.
2. Consider the team you need to build
Depending on your background and situation, you may have a small team to start off with. It’s critical to fill any gaps as soon as possible so that your operations run smoothly and satisfy clients.
When you create your business plan, you’ll need a clear idea of what you can and can’t do – and anticipate the help you’ll need and the kind of team you’ll need to build.
As a letting agency owner, you will need to have:
- A strong personality – to handle demanding clients, make complex decisions and interact with many people.
- Patience – It can take time to bring landlords and tenants on board. Even if you’re organised, you must bear with their slower pace and maintain consistent contact.
- Persistence – You must intentionally chase tenants, landlords, solicitors, guarantors and more – even when they fail to respond.
- Sales intelligence – You need to be good at selling. You must convince landlords and tenants that your services are better than your competitors.
3. Decide on the direction of your letting agency
You’ll have to decide: Residential lettings, commercial lettings, or both? These options are substantially different and will affect the way your business operates and the services you offer. Depending upon your experience and your team, one may suit you better than the other.
Starting a residential lettings agency
Residential estate agents let properties on behalf of landlords and manage communication with tenants, compliance admin and maintenance tasks.
Depending upon your service, this can be more or less ‘hands-off’. Your responsibilities will usually include finding and vetting tenants, providing them with crucial information, continued communication – and handling any issues which arise during the tenancy. You must be exceptionally organised and people-oriented to succeed since you’ll interact with many people daily – from troublesome tenants to solicitors and guarantors.
Starting a commercial lettings agency
As a commercial letting agent, you’ll deal with commercial properties on behalf of landlords and renters.
Commercial estate agents have a wide range of responsibilities, depending upon their properties – this could include the management of buildings being converted into business premises to unusual letting opportunities such as forests or theme parks. Equally, commercial letting agents must be well-versed in property, planning and tenancy laws. This is because they’re expected to give clients extensive and accurate advice.
4. Register your agency with the Companies House
Once you’ve put your business plan together and decided on your direction, register your business with Companies House. This is an online hub created by the government to manage different aspects of business compliance – including business registration.
When you do this, you must be confident about the legal regulations and rules for starting a letting agency. For example, you’ll need to prepare a memorandum of association and select a guarantor if you’re setting it up as a limited company. Equally, you’ll need to take advice on the best company type to set up from a qualified solicitor.
5. Join letting agent professional bodies
Joining a professional body is more than just an inconvenience or tick-box exercise. They lend credibility to your letting agency and signal that you stick to a trusted code of practice when dealing with tenants and landlords. It’s a good idea to see if you can sign up with one (or more) of them as you start up your letting agency.
You can then display their logos on your marketing materials and website to signal this partnership and share their credibility.
Here are three prominent organisations you can join:
- Propertymark’s ARLA membership – This professional body provides training, qualifications, HR support and a code of conduct to follow.
- Safe Agent’s NALS membership – this independent licensing scheme ensures members adhere to a code of practice and meet specific criteria. For example, members must provide client money protection and possess professional indemnity insurance.
- The Property Ombudsman – The Property Ombudsman is another independent organisation which offers free and impartial dispute resolution services. Members must follow a code of practice and meet various requirements (e.g. having purchased professional indemnity insurance).
Finally, you must look at the local rules for letting agencies. Some councils require agents to join a particular body before setting up shop, ensuring they deliver a high-quality, regulated service.
6. Choose your letting agency premises
If you haven’t already, you’ll need to rent an office for your business. This should be strategically placed where many people can pop in and view available properties in the shop window.
Out of all your start-up costs, this is the most expensive. Many letting agents feel the need to set up in a prime location to get more footfall and increase brand awareness – this is a costly undertaking. For this reason, you’ll need to pick the spot carefully and be prepared to invest a lot of money into it.
It’s entirely impossible to start a letting agency online – the question is whether you want to. If you do, you’ll only need a computer, an internet connection and (ideally) a vehicle to visit clients.
The most significant benefit is eliminating office rental costs, which can be an enormous kick to your finances when you start a letting agency. While you can’t start a letting agency for free just because it’s online, you will reduce many of the typical costs.
However, there are several other challenges you will face: you eliminate any visibility on the high street, you need to invest lots more money in online marketing, plus the service is less face-to-face and personal.
8. Invest in letting agency insurance
There are several forms of insurance you’ll want to consider. This will protect you and your business from legal claims and costs.
The three big ones are:
- Public Liability Insurance – This protects your finances from a range of compensation claims made by the public. The insurer will pay compensation or court expenses if necessary.
- Professional Indemnity Insurance – This covers situations where your actions damage a client’s business, for example, if you provide incorrect advice.
- Employers’ Liability Insurance – This covers you if an employee gets ill or injured because of your business operations.
There are many, many more forms of insurance you can take out according to your business needs. For example, Business Interruption Insurance and Building Insurance – take a look at the options and select the ones that suit you.
9. Set up critical software
At the bare minimum, you’ll need to select a Customer Relationship Management software (CRM) that helps you keep track of everything going on in your business.
Letting agency work involves many moving parts – landlords, tenants, solicitors, new legislation, inspections, EPCs…and more! For this reason, it’s critical to choose the best possible property management software for letting agents.
Our advice is to choose the CRM software that suits you best – not just the cheapest or most expensive. Different companies aim their services at different business sizes, so pick the one that suits you. This requires balance. The better you can predict your business growth and goals, the easier it is to select a CRM that’s small enough to handle but big enough to grow into.
For example, you may pay for features you won’t ever use if you choose an oversized CRM. There is no use sinking stacks of money into corporate-level management software meant for thousands of properties when you’re only letting a few!
10. Set up your letting agency marketing
This is a critical step. Your business can only get off the ground once people know it exists. So, this means investing in various marketing techniques and strategies.
Before you do this, you’ll need to have some design work done to create your branding materials. For example, colour schemes, logos, letterheads, business cards, leaflets etc. After this, you can begin to decide on your core marketing activities.
Depending on your requirements, you might need to invest in a web design agency, marketing company or graphic designer to kickstart your marketing.
For example, you might want to:
- Create an SEO-optimised website to increase visibility and leads
- Consider Pay Per Click (PPC) ads on Google
- Consider Facebook, Twitter, Instagram and Tiktok advertising
- Research PR promotions in local newspapers and magazines
- Consider radio or TV advertising
- Consider doing a promotional leaflet drop in your local area
Leafletting is one of the cheapest and easiest ways to promote yourself at the beginning, and is far less complex (and costly) than the other options available. This is an ideal solution if you want to raise your profile within the local area at short notice.
Is this all there is to starting a letting agency? Yes – and no. Each step will require a significant investment of time, money and energy. So, while this is a simple process, there’s no doubt that each of these steps requires much consideration before you begin your adventures as a letting agency owner.
But if you’re determined to follow the process – then yes – you’ll come out the other side as a brand-new letting agency, ready to hit the rental market.