Starting up an estate agency

chucknorris

I realise that most of the public love to hate estate agents, yet I find myself thinking about at least investigating the possibility of starting up an estate agents. Why?

1. Most importantly I like property dealings and would not find it tedious or boring I would find it interesting and stimulating, I couldn't just do something simply for the money if I didn't like it.

2. I think they over charge, I think there is plenty scope to be far more competitive on fees than estate agents tend to be. I would like to explore the possibility of testing the profitability of a 1% fee. I know a lot of internet only agents offer this, but I would also want a high street presence too.

3. Further down the line possibly I would like to look at having an in house solicitor who could offer reduced legal fees, again reducing the overall fees.

4. I think I could bring some professionalism to the business.

Many might say now is not the right time,and I tend to agree but there is no hurry, possibly 2-3 years time might be the best time to start. Does anyone have any comments? I would be interested in peoples comments and experiences with estate agents.

ILW

Do you own a cheap suit and a tanker of hair gel?

stebiz

chucknorris wrote: »

I realise that most of the public love to hate estate agents, yet I find myself thinking about at least investigating the possibility of starting up an estate agents. Why?

1. Most importantly I like property dealings and would not find it tedious or boring I would find it interesting and stimulating, I couldn't just do something simply for the money if I didn't like it.

2. I think they over charge, I think there is plenty scope to be far more competitive on fees than estate agents tend to be. I would like to explore the possibility of testing the profitability of a 1% fee. I know a lot of internet only agents offer this, but I would also want a high street presence too.

3. Further down the line possibly I would like to look at having an in house solicitor who could offer reduced legal fees, again reducing the overall fees.

4. I think I could bring some professionalism to the business.

Many might say now is not the right time,and I tend to agree but there is no hurry, possibly 2-3 years time might be the best time to start. Does anyone have any comments? I would be interested in peoples comments and experiences with estate agents.

I've owned an Estate Agents before, and run it for 10 years or more. Here are a few thoughts.

You will need to pay at least one member of staff, along with yourself to cover viewings, lunch hours, valuations etc
Assuming you both take minimum - that is £500 a week

Plus Rent - Say another £100 a week

Plus Rates - Say another £50 a week

Plus Electricity etc - Say another £20 a wek

Plus Car - Say another £50 a week (just for Petrol)

Plus Advertising - (this can be a killer - another £200 a week)

Printing Paper etc - £50 a week

Insurance - £20 a week

There is lots more. So you are talking about turning over 50k before YOU even make the minimum wage.

I wasted far too much money propping up my EA for far too long. Fortunately I also had the foresight to buy some properties, which have done well. But ask yourself why national chains are being sold for a £1 ???

Good Luck whatever you decide!!

chucknorris

stebiz wrote: »

I've owned an Estate Agents before, and run it for 10 years or more. Here are a few thoughts.

You will need to pay at least one member of staff, along with yourself to cover viewings, lunch hours, valuations etc
Assuming you both take minimum - that is £500 a week

Plus Rent - Say another £100 a week

Plus Rates - Say another £50 a week

Plus Electricity etc - Say another £20 a wek

Plus Car - Say another £50 a week (just for Petrol)

Plus Advertising - (this can be a killer - another £200 a week)

Printing Paper etc - £50 a week

Insurance - £20 a week

There is lots more. So you are talking about turning over 50k before YOU even make the minimum wage.

I wasted far too much money propping up my EA for far too long. Fortunately I also had the foresight to buy some properties, which have done well. But ask yourself why national chains are being sold for a £1 ???

Good Luck whatever you decide!!

Thanks for your input, it's good to get a response from someone who isn't an idiot. I did a very amatuerish business plan on a spreadsheet this moring but used much higher costs than you and my costs totalled 112k. Copmared to your's it seems i grossly over estimated advertising, rent and rates

If it's not too intrusive why do you think your business failed, I mean struggled over the 10 year period you mentioned, obviously the crash is disaster but I am more interested in this 10 year period of low profitability.

I would imagine that national chains are selling for £1 (I was unaware about this0 because they have long lease reantal agreements negotiated during the boom times that make it almost impossible to genreate profit for the remainder of the lease. Personally as a property investor I would almost certainly end up owning the building rather than renting (although it would be sensible to start off renting of course).

chucknorris

ILW wrote: »

Do you own a cheap suit and a tanker of hair gel?

I can't think of a response that would show you up more than your own post on this thread.

stebiz

Estate Agents didn't help themselves. Instead of acting like professionals, they would do anything to get a house on the market.

Initially I would go around giving correct valuations, only for a rival to say they could get £5k more. The rival would get the sale, but 6 months on would have reduced it by £5k. A persons greed would often follow the highest price!! So in the end you have a lot of properties overpriced, and having to advertise them.

The amount of grief I used to get from sellers about advertising was unreal. I would have a set budget, but many vendors were actually quite bullying in their way.

Then you'd get those removing the house of the market, because they'd agreed a private sale - often with somebody you had sent round.

The only advantages I had was when I bought a few properties. Modernised them, and sold them back on. Obviously I would push mine the most. But in the end it was a case of keeping the Estate Agents open, just for this purpose!!

As for the staff. I ended up getting a Mortgage Advisor in (although I was qualified in mortgages too) to just keep the shop open, whilst I went on valuations.

Holidays were a big issue too!

So now I have some properties, little mortgages, and work from home. Less hassle!

googler

Have you run a business before?

Start writing up your business plan - hopefully it will be longer than the 5 paragraphs here. Review it with someone who has started up a business successfully recently, or somone who is a suitable business 'mentor'.

You want a High Street presence - have you investigated business rates, etc in your High Street?

You want a High Street presence - how many competing EAs will you have? How many sales are there per mth in and around your chosen High Street/Village/Town/City......? You can get this from Zoopla.

If you divide the average number of sales per mth among the existing agents at 1.00% or 1.50% of the average sale value, what gross income does this suggest per mth for each agent at the moment? If you add yourself to the number of agents, what gross income (before expenses) would this suggest for you? (This assumes that you breeze into your market as a new-start and pull at least an average market share AWAY from the current agents, and also assumes that no-one else joins your chosen high-street as another EA at the same time as you)

What's left from the above gross income when you deduct your projected expenses? This will effectively be your 'salary' ..... can you afford to live on this?

Point 2 - you actually WANT to start up a business where you deliberately reduce your profit margin? I wonder how this would go down in the Dragon's Den....... Would they invest in your business model? How would you 'sell' this business to an investor? Would anyone invest in your business?

What's the basis for your assertion that the existing EA's 'overcharge'?

Have you established for certain what agents tend to charge in your area? If their average is 1.50% or 2.00%, then don't you think there might be a REASON for this?

What would be the incentive for a solicitor to come work within your office for LESS than they could charge elsewhere?

lfc321

These costs all sound very low to me and they don't include any start-up costs at all. What about things like fitting out your shop; computers and all the other office equipment you'll need; stationary; signage; large-scale advertising so that people know you exist; telephone and mobile bills etc etc etc.

You need to think really carefully about your business model. You seem to think you could be much cheaper than existing agents. There are three main ways of doing this:

1. Have lower overheads (this is what the online agencies do - a high-street presence costs serious money)
2. Have high a volume of sales (not easy to achieve from a standing start - at the very least it will take time)
3. Not make any profit (and eventually go bust).

I'm not saying it's impossible to undercut but you might find that you have an uncomfortably low profit margin.

How have you gone about estimating your turnover?

stebiz

lfc321 wrote: »

These costs all sound very low to me and they don't include any start-up costs at all.

I agree 100%. I was just giving the extreme basics. Ideally an Estate Agents would have at least 3 staff, on higher salaries. Add to this the start up costs.

googler

Would you have a USP that would pull business away from the competition?

If so, what would that be? (Low fees are not a USP)

chucknorris

googler wrote: »

Have you run a business before?

Start writing up your business plan - hopefully it will be longer than the 5 paragraphs here. Review it with someone who has started up a business successfully recently, or somone who is a suitable business 'mentor'.

You want a High Street presence - have you investigated business rates, etc in your High Street?

You want a High Street presence - how many competing EAs will you have? How many sales are there per mth in and around your chosen High Street/Village/Town/City......? You can get this from Zoopla.

If you divide the average number of sales per mth among the existing agents at 1.00% or 1.50% of the average sale value, what gross income does this suggest per mth for each agent at the moment? If you add yourself to the number of agents, what gross income (before expenses) would this suggest for you? (This assumes that you breeze into your market as a new-start and pull at least an average market share AWAY from the current agents, and also assumes that no-one else joins your chosen high-street as another EA at the same time as you)

What's left from the above gross income when you deduct your projected expenses? This will effectively be your 'salary' ..... can you afford to live on this?

Point 2 - you actually WANT to start up a business where you deliberately reduce your profit margin? I wonder how this would go down in the Dragon's Den....... Would they invest in your business model? How would you 'sell' this business to an investor? Would anyone invest in your business?

What's the basis for your assertion that the existing EA's 'overcharge'?

Have you established for certain what agents tend to charge in your area? If their average is 1.50% or 2.00%, then don't you think there might be a REASON for this?

What would be the incentive for a solicitor to come work within your office for LESS than they could charge elsewhere?

Yes although my background is that I am a chartered surveyor I have ran businesses before (and still do run a business).

I am financially independant and early retired about 10 years ago. I do not actually need to make any profit to live, however I do have so much time on my hands and at only 52 it is too young to just carry on doing as little as I am doing.