Is now a good time to buy a letting agency?

Is now a good time to buy a letting agency?

I don’t think that there has ever been a better time to buy a letting agency than right now.  The income from a good quality letting agency is absolutely secure and so long as you don’t do anything stupid to upset the landlords such as forgetting to pay their rent, the vast majority of them will stick with the business.

If you add a letting book onto an existing business, you will get considerable economies of scale and many other savings on premises, marketing, IT, HR and compliance.  As a consequence, you will make around 50% net profit on the additional turnover and at current prices, you should get a return on capital of 25-30%.  In other words, you should get your money back in between three and four years.  Compare this with the other places that you could invest your money.  Buy to let properties typically give a yield of about 4%.  There will be very little capital growth in addition to this for the foreseeable future.  The stock market produces similar returns and is very risky at a time of such economic volatility.

If a 25-30% return on capital is still not enough to tempt you, then you might consider gearing your investment, i.e. borrowing part of the purchase price in order to achieve even higher returns.  Another option would be to buy a let-only business which can give you a return of 50% or more.  It is far more risky and you will need to work hard to persuade the landlords to upgrade to a managed or part-managed service but if you know what you are doing, the returns can be phenomenal.

If you are feeling really brave, you should consider buying a residential sales business.  The returns on these are often 100%, i.e. you get your money back in just one year.  If you believe that we are now near the bottom of the housing cycle, this could be a fantastic investment.

For further details of the businesses that we have for sale, visit www.adamjwalker.co.uk or phone us on 0845 226 9053.  We look forward to hearing from you.

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