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The Perfect Business Opportunity for the Property Investor

by | Mar 17, 2016 | Property Investors

If you are a property investor, you are probably experiencing a few things:

  • Difficulty finding great property deals that stack up
  • Never having enough free cash to buy the deals you want
  • A headache building, with all the properties you have bought that need managing

This is where running a letting agency could solve all of these issues AND be a great asset in its own right (Leverage FREE too) plus it’s a load more tax efficient.

A letting agency builds healthy, continuous monthly income from the property management margins, and for an established business in the Midlands this would be around 30k per month, every month (before you open the doors).

This is why letting agencies are reaching the highest levels we have ever seen in the industry at the moment, and why the big boys are buying agencies as fast as they can to build their residual income.

You also get to utilise other people’s time and property to build yourself a valuable asset – the true definition of a business.

We are all aware of the new breed of Gazelle-type business that are experiencing never seen before.

These are not ASSET-based companies, they are SERVICE based, which means they have no limits, can service everyone and just keep growing and growing, and they are.

Think of the following examples:

  • Alibaba, the largest worldwide warehouse that owns no stock,
  • Facebook, the largest content machine that creates no content
  • Uber, the largest taxi firm that owns no cabs…
  • Rightmove, owns no estate agency but valued at £95million

Slightly different but along the same lines, it’s like the Gold Mine Rush in California of 1855, where everyone rushed to pan for gold. They wanted to make it rich, but quietly behind the scenes, it was the it was the suppliers of the buckets and spades that made all the money.

The problem is that relying on asset-building alone as a business model is too restrictive, because you either run out of leads of great properties to buy, you get short of cash to secure the ones you want, or in the end give up through lack of motivation.

Monetising other people’s assets

The difference with building a “service-based” business is that you are monetising other people’s assets. This means there are no restrictions. You can keep growing indefinitely with no barriers and no mortgage restrictions. The sky is the limit.

It’s no surprise that, at the moment, well-run and systemised letting agencies are achieving 2x turnover when sold. This means if you build your business in 5 years to a £750k turnover, then your business would be worth up to £1.5million if sold.

The real bonus is that, unlike property, it would be cash that’s free of any debts or leverage in most cases, with entitlement to entrepreneur’s relief for taxation purposes too (as opposed to capital gains tax).

Another real bonus for a property investor of running a letting agency is that you will get a never ending source of leads driven into your hands of people wanting to sell their properties, the continuous residual income to fund them, and a property letting and management solution right under your nose for everything that you buy too.

The Truth is…

When I was asked last week during an interview, “What properties are you investing in right now?” I answered that, in truth, I’m not.

I confess that I have been a very active property investor. I was buying 4 per month at one point for clients and myself. At 27 years old, I owned over 2.7 million pounds worth of property assets and I personally had purchases for rental, refurbishment, holiday lets and re-sale on the go continuously throughout the 90s and early 2000s. But not now. It doesn’t stack up for me.

You see I would prefer to buy property agency stock. I can buy 100 properties under management for around £100k. This will generate over 60k income every year with no additional expenses, because I have the management team in place already… 60% return!

It’s a no brainer. While I accept this is not for everyone, we are currently handling enquiries regularly from people buying agencies that then need a “system” to put in place to handle them, and of course we are happy to help. All in all, it’s definitely catching on.

To summarise, to build a Gazelle-type business, utilise other people’s assets and other peoples time. This will release the cash you need and the opportunities to carry on investing in fixed assets, with a letting and property management solution built in (if you still wish to invest in property, that is).

We run one-day Intensive workshops that go into the ins-and-outs of running a letting agenct. It’s a great opportunity for investors to explore what’s involved if they are considering entering the industry. You can fnd out more at www.propertyagentscircle.co.uk/intensive-pi

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