As a real estate/letting agent, you are required by definition to act in the landlord’s best interest. You provide housing for tenants while facilitating the livable environment to turn their house into a home.
This value is realised in the rent that they pay to you and ultimately to the property owner. As an agent, you must tread the line of the middleman, adding value, mitigating costs, and fundamentally identifying a delicate equilibrium between obligations and profits.
Squaring out a margin sandwiched between both entities is a balancing act of efficiency. How you spend your time and resources are of critical importance to your bottom line. You are required to provide a minimum standard of care to your tenant that remains profitable within your 6.5% – 10% share of the landlord’s earnings (Estate Agents, Let.ie, 2021). Today we will share key potential costs that can be leveraged to maximise these returns.
What is Required?
To be a letting agent in Ireland involves a base number of costs. A seemingly endless number of license fees, brokerage fees, and of course membership fees to be paid to the Property Services Regulatory Authority including:
– €1,000 for a company, partnership or sole trader
– €100 for principal officers or employees
As an estate agent, in order to coordinate a successful business, you must incur a number of overheads. They grow in tandem with your success and unless effectively managed can cause mounting concerns for your eroding profit margin.
Office supplies, utilities, continuing professional development, and internet charges are all par for the course and should be carefully monitored on an annual basis. These costs, in addition to your own rental charges, will need to be absorbed by your immediate profits.
You may be utilising project management software to rightfully monitor and maximise efficiencies. Teamwork.com (from €9 per user per month) is an excellent third-party project management software that will help you to keep on top of your copious list of actions for each and every one of your clients.
How your staff’s time is spent, and in turn how your wage bill is spent is the most pivotal variable for your profits (or otherwise). With an average cost of €30,334 (payscale.com, Average Real Estate Agent Salary in Ireland, 2021) annually per estate agent, we are going to outline a number of ways that you can maximise your return on this investment.
The Interview Process
From the moment you upload the property advertisement your letting agent’s time and inbox will be consumed by emails, attachments, and questions from both suitable and unsuitable applications. Demand has never been higher with reports indicating up to 25,000 units are needed annually to keep up with the demographic changes alone (Ahrens, Martinez-Cillero, O’Toole, Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland, 2019). Serious questions, therefore, need to be asked around how you filter these applicants and how long is invested in this stage? With hundreds of potential tenants to choose from, how do you know that you are getting the very best for you and the landlord?
An open house provides some opportunity to shake the hands of the hundred or so people that can show up on any one day. A day (or more) can be spent fielding repetitive questions and partaking in conversations that are most likely being leveraged to engage in semi-memorable face time (and who could blame them thronged amongst the masses?).
Much like when interviewing for a new employee, the interview process is the most critical factor for what the next number of months or years will look like. Your ideal tenant will provide little interaction besides their monthly rent paid on time for years to come. However, without a rigorous examination of every applicant’s references, bank statements, proof of employment, proof of address, identification, and specific requirements, you will be throwing caution to the wind and could end up with a couple of month’s filled with arduous issues before the property is vacant again (voluntarily or otherwise). How many of your tenants fall above the average tenancy length of 10 – 12 months (Ahrens, et al. Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland, 2019)?
In addition to safety checks, installations, rent reviews, and pre-letting expenses to ensure the property is in a suitable condition, your letting agent’s time is the most valuable cost suffered.
When the contracts have been drawn up, negotiated, and hopefully signed by your first choice (or else it’s back to the drawing board), the work can begin. If your interview process has been performed to an optimal level, you will have secured a tenant who is imbued with appreciation and respect for their new home.
A happy tenant is dependent on a number of factors:
- How long is their commute to work?
- How close by are friends and family?
- Can they keep their bicycle indoors?
- Can they have friends over?
A happy tenant is an engaged tenant that will invest their time and effort into making their house a home, even adding value to the property with painting, sanding or varnishing.
However, disputes do typically occur around the (pre-agreed) terms & conditions of said property. Months can be spent pre and post-departure arguing over damage incurred by claw marks, pet smell, parties, or carelessly manoeuvring a bicycle indoors.
Repairs & Maintenance
The vast majority of time spent on tenants is around repairs & maintenance. Happy tenants will happily complete smaller repairs and maintenance tasks to save the hassle of waiting for a handyman to screw in the hinge of a press for example.
Your dedicated handyman is best focused on larger projects rather than spending his time visiting multiple properties for minute-long jobs. Your tenant and their respect for their home will directly impact the property depreciation and post-letting expenses.
The Irish letting market is awash with demand and finding any tenant will not be an issue. Finding the right tenant, however, is another thing. Property sites such as Daft.ie, Moovingo, or rent.ie (to name but a fraction) will provide you with a full inbox of applicants for costs ranging from €5 up to €2,500 (Irish Times, Selling a home is expensive, but we offer a way to cut down the costs, 2020). This marketing expense could be the tip of the wedge of time-consuming evaluating costs.
At the end of the year, you will be faced with one of two realities, a loss, or else taxable profits. A large number of expenses can be tax-deductible for landlords, however, the most significant variables will not only impact your bottom line through costs, but they will also prevent you from reaching your upper revenue potential.
The time you spend on managing tenants is already incurred in the interview process, and are then realised throughout their tenancy. From the influx of emails to the days spent meeting and greeting the waves of potential candidates, these are where the most hours are sunk and the least value gained. With efficient sifting and prioritising from the onset, your agents’ time can be focused on analysing the select number of clients that tick every single box for you and the landlord in question. Allowing you to negotiate a more comfortable equilibrium nestled between a content tenant and a satisfied landlord.
- Estate Agents., Let.ie., 2021
- payscale.com, Average Real Estate Agent Salary in Ireland, 2021
- Ahrens, Martinez-Cillero, O’Toole, Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland, 2019
- Irish Times, Selling a home is expensive, but we offer a way to cut down the costs, 2020