PropTech Today: Opportunities for agents if they adopt ‘systems and tech’

Automated rental payment specialists PayProp recently held a high-profile event in London - PayProp Connect - which included a number of speeches about the role tech and automation has to play in the lettings sector. Here is a selection of the main highlights from the day.

The key to growth for letting agents is to offer more services while cutting the time spent on unprofitable admin, according to business optimisation specialist, Sally Lawson.

Lawson, a former president of the Association of Residential Lettings Agents (ARLA) and founder of estate and lettings industry coaching firm Agent Rainmaker, believes that too many letting agents concentrate on lettings and management instead of being business owners.

Speaking at the PayProp Connect conference at One Moorgate Place, London, she said: “One of the things I’ve been focusing on is profitability. The top 1,000 letting agents in the UK have an average profit margin of 11.9%.

“When you think of the liability and the hassle and the risk that we take, I believe we have to make more profit.”

Lawson told the conference that she set herself the challenge of increasing the profit margins of the agencies she works with to 50%.

“I set that target about four years ago and in March 2021 we got our first letting agency to that level of profit. Then we got another one; then another and now we’ve got dozens of letting agencies at that level of profit.”

When landlords want to sell

Sally explained that the key to hitting 50% is to get agency staff out of unprofitable activities by automating them or outsourcing them to external partners, giving them more time to sell more services to more landlords.

“The average earnings ratio per staff member in a traditional lettings agency is £50,000 in revenue. In lots of my letting agencies, the ratio is £100,000 per staff member. It’s not just about lettings and management, it’s about all the other things that we can offer – things that landlords are already paying somebody for.

“What about refurbishment? We can charge 10 or 20% for managing that. Supplying furniture packs is another one.

“What about when landlords are wanting to sell? What we need to do is to help other landlords to buy their property. It’s about changing the way that we work. If we can replace landlords leaving the market by getting other landlords to buy, we’ve got ourselves an acquisition fee of between 2 and 5%. And maybe they want a refurbishment as well? We’ve made thousands of pounds before we’ve even put a tenant in the property.”

Sally emphasised that it comes down to “systems, processes and tech”. If letting agents are spending hours every week on non-profit-making administration, it’s very difficult for them to find the time to offer those additional services – but if they grab the opportunities given to them by new systems and technologies, a 50% profit margin is totally achievable.

A threat or an opportunity?

The theme of the importance of technology in the lettings business was also highlighted by another speaker, Robert Bolwell, Senior Partner at law firm Dutton Gregory, who addressed the audience consisting mostly of letting agents.

“From April 2024, landlords who have a projected rental income of £10,000 a year gross, will have to enter the new digital tax system whether they like it or not.

“Every quarter, a landlord is going to have to file what their income is and what their expenditure has been. This has to be done digitally using HMRC-compatible software.

“The issue for our industry is that 47% of landlords have got just one property. If you tell them they are going to have to file four times a year and then do a fifth one at year end, they are going to panic.”

As Robert explained, they’re going to need to turn to experts to help them through the process – and letting agents backed by rental payment technology will have a chance to shine.

“That’s where you guys come in. You can see this as a threat or an opportunity.

“Because who has all the information about rental income? You do. Who has all the information about expenditure to go on the return? You do.

“And the great thing about automated systems like PayProp, is that they have the software platforms that, by April 2024, will seamlessly send all that information from the landlords to [HMRC]. This is an incredible opportunity to generate another income – because landlords will say ‘I’m sorry, I can’t do this, it’s too much for me.’ “

After a well-attended event, which also saw the handing out of the UK’s first-ever PayProp Awards to the most successful and innovative agents on the platform, PayProp is looking forward to hosting more lettings industry thought leadership events in the new year.

“It was great to meet face to face with so many letting agents again for the first time since the pandemic,” says PayProp UK’s Managing Director Neil Cobbold.

“Events like PayProp Connect are a vital opportunity to discuss the issues affecting us as an industry and share best practices for the future.”