How much does setting up an estate agency cost?

23 August 2010

What a busy couple of weeks. It was good to get away and catch a bit of sunshine, but the one week break for the blog quickly turned into two with the length of the to-do list I returned to.

Catching up on my mail, Harry Hill's article in the latest Negotiator Magazine made interesting reading - particularly for those considering starting up an estate agency.

He suggests that the average estate agent who sells 60 properties a year and turns over £120,000 is struggling to do any better than breaking even. And that as a result, agents must increase commission rates to survive.

It's an interesting perspective when there's a small but significant trend towards fixed price agency at around half that price.

Harry isn't overestimating costs either - simply listing on Rightmove will take almost all of the £8,000 budget allocated for advertising for new agents.

Many start-ups would be grateful to win 60 instructions in their first year, nevermind complete on them. Likewise, some will have little choice but to compete on price to build market share.

The lesson is to do the sums properly:

  • Don't overestimate the number of instructions or sales you're going to complete on, particularly in smaller local markets.
  • Don't expect to earn anything in the first 6 months, it will take time to win your first instructions, tie up the deals and complete on them.
  • If you can't afford Rightmove, come up with a strong justification for not listing with them. Vendors will challenge you on this, but it is possible to be successful without Rightmove.

Leave your comment:



What you said:

23 August 2010 09:22:57
might make an interesting topic for a blog - on how to survive and explain away why not be on rightmove
23 August 2010 09:37:11
It's like you can read my mind :o)

Martin
23 August 2010 19:54:28
very valid article, and why any start up buiness must look at different income streams as well as selling houses. Lettings I feel is paramount to any estate agency business, along with generating income from financial services and conveyancing
24 August 2010 11:04:30
Thanks for the comment Matthew.

Done well, with the right niche, good marketing and controlled costs, agents can still be successful with a sales service alone. Several customers at PropertyADD are still doing well this way.

That said, having a lettings income as well can certainly smooth out the peaks and troughs!

Martin
25 August 2010 09:37:12
I agree that having a lettings department with manangement income does very much help smooth out the peaks and troughs but I also think that too few start ups look at running an auction.

This does not need to be monthly maybe only two a year but certainly for a start up they will bring in fees quickly. Potentially without the delays of forming chains etc via the traditional sales route.

Biased as I am towards auctions I am suprised by the lack of local actions available and the public's obvious interest in all things auction like based purely on the amount of TV shows etc.

Start ups can hire in the auctioneer expertise on an auction by auction basis or become part of a joint auction with others in a geographic area.

Worth looking at I think.
25 August 2010 12:26:34
Thanks for the comment Harry - an interesting suggestion.

I've emailed you privately to follow up in more detail.

Martin
18 November 2010 16:59:31
Hi. Some interesting comments. I wonder if someone could offer me a word of advice though. I have actually been trading as a letting agency for around 7 years now. I have a City Centre office and shop, employ 3 full time members of staff, and it has to date been reasonably successful. I have considered selling properties for at least my existing clients for many years. The main thing that has stopped me doing this is my almost complete ignornace of the sales process.

Can anyone offer me some advice on how to develop the sales side of my business, and where to find detailed info on the sales process and what exactly happens from offer to completion. As I work in the property industry, Im sure many people would expect me know this, but to be honest I dont.

I am really keen to develop this, and up to now I have been basically turning sales business away.

Any help or advice would be gratefully recieved.

Many thanks,

Mark
19 November 2010 19:47:30
Hi Mark,

Thanks for taking the time to comment.

I suspect that most agents would be more concerned going from sales to lettings rather than vice versa.

As you suggest, up until the point of offer the process is essentially the same appraisal and marketing task.

After offer and memo of sale, the real skill is to be a true peacekeeper and negotiator, to keep the sale on track to exchange/completion. Keeping everyone happy and informed, smoothing out the bumps, etc.

We've had clients sign up with us on the exact basis you mention - a feeling that they were missing out on easy business from existing landlords. Not only that, but potentially also the opportunity to move a property from one landlord to another to keep it within your managed stock.

If you'd like to have a chat next week, I'd be more than happy to. Give me a call on 01293 888075.

Martin
Anonymous
22 July 2011 13:48:05
Hi
I'm not an estate agent, actulaay I'm the CEO of a Charity but I am helping someone with a business plan to set up a new agency. Looking at the figures that Harry Hill quotes my big question is this, why, if he this is about setting up a new business is he proposing spending £83,000 on staff? surely as a new business you are doing the work yourself. A secretary/administrator in the office yes but the rest is up to you. On this basis 60 sales a year will keep you going quite well. just an observation from someone who constantly struggles to keep his organisation afloat.
Regards
Daniel Brookbank
29 September 2011 09:41:42
These are wise words. The market is particularly competitive in the UK, whereas, here in France there are many more niche markets. I recently set up my estate agency for 2600 euros - about £2200. But then I'm on my own and working from home. Is this not an option in the UK?
sam
01 April 2013 20:03:51
Hi can someone please help me with my question? I've some experience of working in an estate agency (a good ten years ago) mainly admin. I've been thinking for a while if i can open my own estate agency (i've no qualifications). My question is who would value peoples properties? could i do it or would i need to employ someone who has done the RICS qualification?
15 April 2013 12:23:57
Hi Sam,

You'll find that the majority of agents aren't RICS qualified valuers, but that doesn't make it a bad idea.

Any badge that helps give you credibility is a good thing to help win valuations.

The most important thing when starting any business is the ability to engage with and sell to your customers.

Best,

Martin
16 April 2013 22:50:59
I all,

I am a new start up looking for advice! I am in the middle of setting up my online estate agents business and I just have a few questions,

For me to act as a lettings agent do I need to register with the omnibusman? And also far the sales?

I'm also looking to use the power of Facebook instead of rightmove because obviously Facebook is free!

I'm trying to set up as cheap as possible maybe on a few hundred £££ do you think it's possible as I'm not going to have the cost of an office and shop to run which will give me chance to grow into an office and work part time to keep the money coming in?
17 April 2013 08:08:37
Thanks for your comment Ashley.

In our experience start-up agents who are looking to operate on a shoe-string budget will almost certainly change their strategy after realising that they can't succeed without a sufficient marketing budget - or (having not realised in time) will fail as a business inside of the first year.

Portals alone will cost £5,000-10,000 in the first year and you will also need a decent sized marketing budget to reach out to your potential client base and spread the word of the service you offer.

Home owners are a suspicious lot and if you only have a few instructions after several months of operation, they will become nervous of using you.

You'll need to have sufficient marketing clout to grow quickly enough to avoid this.

Landlords are similarly cautious - property letting is their livelihood and typically a big investment.

Sorry not to be more positive!

Martin
17 April 2013 22:09:48
I thanks, I would prefer if you where blunt with me.
Today I have been away and got some prices for leaflets with I would get around 10000 of them for around £550 which I would post in doors In the area a would hope to gain clients, I can get 50 posters for £80 which I have asked about and can have them put up in town and several shops and billboards are £2-3 a week, and I have looked a "my online estate agent" which I could use to advertise on the portals with out the large costs of becoming a member I till I have a stronger client base? I would carry on working in a nearby town in a clothing retailer so I will be able to leave leaflets in local shops for customers to pick up and ask them to just drop on in there customers bags to spred the word do you think my day of research is getting my any nearer?

Thanks for the comment again!
18 April 2013 08:51:37
Hi Ashley,

It's not as easy targeting letting properties with leaflets as it is sales. Plus, a good leaflet campaign would hit the same properties perhaps every 4-6 weeks for a period of 6 months (and ideally with a variety of marketing messages).

Agency is too competitive an industry to be the cheapest option. If you win any landlords, they'll probably come with all of the hassles and challenges that low end rentals bring.

We think start-up agents need a portal and marketing budget of at least £20,000 in year one if they are to be successful.

Martin
Brogen
20 June 2013 09:47:29
Helli great article however can anybody help on actually telling me how I go about actually setting up an estate/letting agency from start to finish with average annual costs on marketing, premises, etc I need an annual figure and target to aim for also how many staff would you suggest for a start up would I need web designers to eBay me to put houses, rentals on my website etc please can somebody take the time to help me out in this
Very much appreciated
Regards
Brogen
Danny
23 September 2013 22:26:51
You could start out with £15k-£20k and budget for your initial 6 months then use the profits you make in them 6 months to pay for your next 6 months and so on. Im setting up an online agency that offers a traditional agents service. my budget for everything is £20k.
26 January 2014 23:12:26
hi
i am looking for the advice to advertise
new eastate agency in Nw london
can you help
regards
sam
Dan
10 October 2014 14:13:08
Hi, I have recently set up my own agency in a high street location with very low overheads. I am 2 months in and I am winning instructions. Firstly, it is important to get out and show your face, knock on doors and also leaflet drop. I have won all of my instructions by knocking on doors and dropping leaflets.

No business is easy, if it was no one would be employed, but the sheer determination and hard work, will help to move the business forward.

Look at kick backs from Solicitors, mortgage advisors and auction teams.

I am also looking at the lettings market now and would appreciate any guidance on this, as my property experience only comes from property sales.

As far as advertising goes, I am on Rightmove and Zoopla. No newspaper advertising is being done, although I am contemplating one advert every quarter for potential vendors to see.

I have helped my cash flow by including an upfront fee.


I would really appreciate any guidance on sales or lettings.

Thank You

Dan
Danny
09 May 2015 12:50:38
Hello, I am in the process of setting up an Online Estate Agency. I will cover Sales, Lettings & Renovations. I have fixed fees with a small fee to be paid upfront, along with low finders fees and full management %. Over the last 13 years I have been in the property game buying, selling, renting and fully renovating property and I have decided to remortgage a property to fund my new business venture. I am currently studying the ARLA & NAEA courses and will become a member of the TPO. I plan to advertise on rightmove along with 40,000 fly distribution monthly in the area, website, car signage and high street fly distribution along with all social media advertisement. All the above will be funded and in place before I launch my business and I will have an extra 20k (approx.)to keep me in operation for approx. a year without a penny coming in. Can anyone give me an idea if this is enough of a float to get me started/established along with all my advertisement? I also have renovations bulked onto my business and have a tradesmen in almost every field of property renovation and charge them 10% of the work I get them through my advertisement, which should keep me going for a longer period, incase I have a bad start up with sales & lettings. We also have insurances, solicitors, mortgage advise added on a referral bases. any feedback would be much appreciated Danny
21 May 2015 21:50:31
Was looking a buying a franchise in my local area as we own a online marketing company so we can create our own sites to place houses on. Do you think this would work?
06 November 2015 11:48:40
Interesting post, the figures are a perhaps a little depressing but people interested in the business shouldn't give up. I think you're right that it's important to keep a level head and be realistic about the number of sales because overestimation and too-high expectations can be hugely demoralising. Also, as you say, rightmove isn't the be all and end all. As other people have mentioned lettings and auctions, as well as a top marketing strategy can all get you well on your way to success.