How to set up and run your own letting agency.
A letting agency is a very good way to start out in property. That’s how I personally started in Marbella and London back in the late 80s along with many other fellow agents, and some of us became successful and moved on to other major areas in the property business such as property development or building.
Letting agencies act on behalf of landlords, and their prime duty is to find the right tenants for residential property like flats or houses as well as commercial property including shops, garages or industrial estates. When starting a letting agency you normally get paid by the landlord who could pay you 15% to 20% on short holiday lets, and a fixed fee for long term lettings which is normally one month. In the old days in mainland UK it was illegal to charge the tenant for a fee but that rule may possibly be different nowadays. Across the border in Spain and Portugal letting agents often charge both parties involved. I personally never made double fees but it seems to be fairly common today.
A letting agent should always act professionally when finding suitable tenants for the landlord. One cannot be careful enough, and each client must be thoroughly checked once they view the relevant property and decide to go ahead and rent. We used to ask for proof of income, letters of reference from previous landlords, check references with their bankers, and all the necessary due diligence. If the tenant is not a good one and he does not pay his rent in due form, the landlord will blame the agent to start with and a good letting track record for the agency could vanish in weeks when it actually takes years to build a solid business. On top of all this the Landlord & Tenant and Rent Acts are virtual minefields, and dubious tenants two a penny. The way we worked it out with an unknown tenant was simple: a bank guarantee covering at least six months’ rent or payment of six to twelve months in advance. This was a zero-risk business. Naturally we as agents offered better rates if we got paid in advance, but it was worth it.
A letting agency will have the last and best letting contracts ready to use and carefully checked by a good local lawyer. These contracts will be of different types and will be used for residential, commercial or industrial property. If the contract is drafted for residential property there will be two different types: one for holiday lettings and a second one for long term lettings.
The agent can charge a small fee to the landlord for supplying the contract forms or have them included in their agreed commission fees, which is probably more professional. In addition, one must remember that a top class letting agent must have an excellent knowledge of the local law, and the Rent Acts in particular.
The letting agency gets its clientele from different sources and this has changed to a degree over the last decades. Shop front adverts still work rather well, and “To Let” signs with the agent’s contact details still bring good business. Local paper adverts still bring leads. Letter box drops can help to bring new stock into the agency. Letting via your own websites or using other general letting websites bring a good number of clients.
Another good source used to be to make agreements with large sales-only estate agents who are happy to pass on their letting leads to you in exchange for a part of your fees (normally one third), but this is not always the case since most estate agents have someone in charge of lettings and do not need to share their spoils with any third party.
When running a letting agency, the overheads should be minimal. With all the modern technology at hand this can be greatly reduced and one can obtain a healthy stream of income if properly done. The basics are to be extremely consistent and to be able to obtain both property stock and the right tenants to occupy the flats or shops. The successful agent is a state of the art salesman, will normally be fluent in several languages and will never cease trying to find his clients. During office hours, in a luncheon break, or at the local tennis or golf club. Business can come up any time – and it can be tremendous fun as well.
Gibraltar is a small jurisdiction with a healthy property market and high demand for residential and commercial property. There are a large number of foreign proprietors who are absent from Gibraltar and therefore they rely totally on the services of the right agency who will find them the tenants and manage the property for the right fee. Management is time consuming for the letting agent but it can make a significant difference when a landlord is located abroad. He will pick up the agents that do all the work for him and will secure a tenant as well.
A good agent will always be out there looking for new prospects: hospitals, universities, and large companies who need accommodation. This in a small place like Gibraltar is of paramount importance where demand can often be much larger than supply.
The better the service you offer to both landlords and tenants, the larger your clientele will be. This can bring you steady income for years to come, with the added bonus that quite often a reliable tenant can become a buyer in the future with much better fees to be made out of a sale.