The ban on tenant fees is fast approaching in Wales and, as in England, is set to have a major impact on agency revenues.
Ninety-nine per cent of Welsh letting agencies are currently charging tenants fees, at an average of £181.15 in fees per tenancy. Come September 1st, it will be against the law to charge tenants any fees other than those which have been made permitted payments as a condition of the grant, renewal or continuance of a standard occupation contract.
Permitted payments under the Tenant Fee Ban are:
- refundable security deposits;
- refundable holding deposits (capped at one week’s rent);
- a payment in default (when a tenant breaches a contract); and
- payments such as council tax, utilities, a television licence, or communication services.
This means it will be vital for Welsh agencies to learn from their English counterparts and investigate opportunities to create new revenue streams. In doing so, it will be possible for agencies to not only plug the gap caused by the Tenant Fee Ban but actually increase their profits. Landlords and tenants both offer agents valuable opportunities to create new revenue.
Resist the temptation to reduce your management fees
It’s become commonplace for letting agents to discount their management fees in order to beat their competition, but if you can demonstrate the value your agency provides landlords over your competitors, you shouldn’t need to.
Think about how you articulate your agency’s value proposition to both your current and prospective landlords. It’s important that you’re spelling out every single service you provide landlords, from compliance to inventories, and what they would be missing out on if you were to reduce their fees. “Lettings agents have got to become more proactive and demonstrate their professionalism,” says Ian Crampton of Ferndown Estates in Birmingham. “Make sure your agents are aware of the level of work and diligence that goes into protecting them from worst-case scenarios.”
You can also look at bolstering your offering to your landlords even further by offering extra services, such as insurances, which not only provide your landlords properties with more protection but could earn you additional revenue.
You can still charge tenants for optional services
Don’t make the mistake of thinking that the ban on tenant fees means that tenants will no longer be a valuable customer for your agency. You can still charge tenants for additional services, as long as the decision to take up these services is entirely up to the tenant and isn’t a condition of granting, renewing or continuing their tenancy.
A survey by renter engagement platform Vaboo found that 70% of renters would be happy to pay more rent for particular service add-ons. This included paying more for access to discounts that would help reduce their overall day-to-day spending. 79.2% of renters who participated in the survey wanted to save money on household bills.
There are a number of services you can start offering your tenants right now, if you’re not already doing so - services that will make moving into their new home easier, by helping them set up their utilities, TV or broadband or by taking out insurance that will protect their contents and the property. There’s no reason why you can’t sell these services to your tenants, as long as they’re optional, and, if you’re offering services your tenants want and need, there’s no reason why they won’t buy them from you.
Increase your conversion rates
Once you have a good understanding of the extra services that your landlords and tenants want to pay for, you’ll need to identify frictionless ways to offer these services in order to increase conversion rates. “A lot of the extra revenue streams you might be able to make money out of are quite time-consuming for a relatively small profit, so a lot of agencies struggle to sell any extra products,” David Thomas of Liberty Gate in Nottingham told Goodlord.
Technology can make it easier for letting agents to offer services to their landlords and tenants while they’re in the right mindset, says Thomas, for example, after they’ve both signed a new tenancy agreement online. “It can support us by introducing products to the client after they've just signed a new tenancy agreement. They can just click a button whenever they want - that would then become an extra revenue stream that we wouldn’t have had.”
A guest post by Goodlord