Singing Pig

hi all

recently i have thought about looking into estate agent franchise i see certain company are mainly internet based has anyone here on SP any thoughts or advice on becoming a EA or a franchises of a EA

 i have considered setting up on my own but lack the required paperwork and agreement forms anyway i could find this

it would save me on franchise fee ect

 i have good knowledge of my local property market

please advice

kind regards

max

Hello Max,if your interested in and enjoy property investing it could be a good idea especially if your building your portfolio,If you have no experience of working/running an estate agency a franchise can be a good way to learn check what support and back office systems they offer shop around and look at the other franchises before making a decission,one thing is cashflow in the first year there may not be much to live on so to be safe cut the franchisors estimates by a good margin.Ultimately though you should make a decent income whilst building your portfolio and can sell off a profitable business in 5-10 years expect long hours building things up though

Offer a good quality service lettings and landlords will flock to your door as we are sorely let down in this area,ie tradesmen recommended at double the cost we would source ourselves also regular useof tradesmen should ensure quality work this is what a letting agent should offer

hi - I am thinking about setting up a big online agents - I have been in the business 10 years and definately wouldnt pay for a franchise - why pay good money to be taught to suck eggs - give me a call I think we might be able to do something 07872 963979  Baz

Setting up an estate agency is not easy nor cheap. I started mine 2.5 years ago with no previous background in the industry although I have always run my own businesses and through my main design business, had worked with over 200 estate and letting agent clients so had learnt alot about the business through supporting them with all design and marketing etc.

My first shop opened with a couple of staff and before I knew it I had spent about £40k. Rent and rates is cheap compared to wages and advertising in local property press. It took several months before I got first cheque from first sale and it was a good year to build up decent property numbers. A year on and I realised the shop which was just off the main street was both too small and in wrong location, so even though I had 2 year lease, I moved to double fronted shop on main street. Within 2 months we doubled staff numbers and numbers of properties on the books. Within 6 months of the move our monthly turnover had doubled and now have 7 staff and second branch opening. By this time I had personally invested though over £100k.

My point is to build a succesful estate agency business takes alot of money, even without the franchise route. I looked at franchises such as Remax and many others but did not want to part with any hard earned profit. Knowing the value of strong brand, I believe I have managed to build the business quicker than I could have by going down the franchise route anyway. I also still own the design company (staff run), and we have many clients still who years after starting their businesses are still plodding along with 1 or 2 staff, and this is usually because, in my opinion, they do not invest enough into the brand building and marketing materials, and are not prepared to take enough risk. Business is all about risk - he who dares and all that. Same applies to lettings agents. I have seen over 150 of our lettings clients go out of business because all they wanted from us was a very cheap basic website and weren't even prepared to spend £2-3k on a decent logo, website and marketing materials. £2-3k is nothing and if spent with the right design company will be priceless.

My advice in a nutshell - forget a franchise, forget online only agency (I see them fail every week), commit at least £2-3k to initial design, marketing materials, website, logo etc, and get a shop in prime main street location if possible (remember estate or lettings agents business must have A2 planning consent from council as it's classed as a professional service and not a retails outlet).

Duncan

dbreo - I have PM'd you.

 

Yalan.

Yalan - pm'd you back

Duncan

Great post Duncan,

It' interesting you have to date invested £100k which is similar to the franchises estimate (including their fee!). I too have had look at most of the EA franchises available and I really can't see the value for their fee and 8% of T/O plus some sort of monthly admin fee. And in most cases you have to pay the fee again in five years time!

Some of the EA franchisors are claiming most EAs only make around 5% profit. Would you say this was a true across the industry?

Michael

 

For the last 6 months I have been receiving back director loan repayments of around £5k per month as the business is now in a position to do so. As this business for me is like my other design business (staff run), I am not in it yet for a salary - I could easily work in it myself more and take a salary and have one less staff member as a result but that is not what I want to do - for me business is about automating it as soon as possible to give me time freedom to do other things. I have 2 other businesses now starting which i have worked on over last 16 months or so. When the initial £100k investment is paid back to me with suitable interest, then I will draw nominal Directors salary and of course the more tax sensible dividends. This year (year 3) we will make first annual profit but as year 1 and 2 were operated at annual loss I will be able to offset the previous years losses against future profits and so don't expect to pay any corporation tax until year 4. From my latest projections I think annual profit is likely to be around 20-25% which is what my target was and is. I have clients who are apparently running at around 25-30% profit but I understand an average estate agency to run at around 15% annual profit.

Most independent EA's run at around £250k annual turnover (my target is twice that - we have already hit that target) so there is little point in doing the business if you just get 5% profit. Bear in mind that the profits made or potential profit, will dictate the potential sale price of the business when you come to sell it on. I had 2 offers for my business last year (during year 2) when we were just turning the corner - going from monthly loss to monthly profit. I started out doing residential sales only. We now do lettings (small margins but instant cashflow), and also just opening huge overseas property centre in city centre. This type of business is not going to make you rich and that has never been my intention, I'm not that naive, but it can, if done right, bring in a good passive income and that is my intention.

Why work in your business for money, when if done right the business can work for you even if you're not there. A franchise will just eat into your earning potential, will restrict your ideas, and more importantly, you will ultimately have to answer to them - it may seem like you are your own boss but answering to the master franchise company is not much different to being an employee.

Duncan