As a topic of public interest, the state of the UK property market often vies with the weather for top billing. And like the weather itself, the extremes make the headlines.
Those considering entering the estate agency and lettings business – and even those already in the market – should consider the merits of a real estate franchise: proven business model; security of an umbrella organisation; help with training, marketing and admin; and business mentor support, to list just a few.
- Demand is huge and growing: everyone needs a home and demand is set to exceed supply for years to come
- A 1,836% real-term rise in house prices since 1975 has propelled growing commissions
- Rentals have a growing share of the housing market and the average renter moves frequently: after less than two years in a property
- 45 million square feet of commercial property, which represents 10% of the UK’s net wealth, is built every year
- Franchises offer a low-risk path into the sector and a route to faster growth for established independents
Estate agency franchises have benefited from the seemingly unstoppable rise in UK house prices.
Of course, house prices don’t rise uniformly, with prices contracting during the 2007-2009 financial crisis, for instance, and (at the time of writing) Brexit blamed for a sharp slowdown.
But the long-term trend is clear. Adjusted for inflation house prices have soared from £10,846 in 1975 to £209,971 in 2018 – a rise of 1,836%. That’s good news for estate agents, who take a percentage of the sale price in commission.
But a key driver for this upward trajectory – demand outstripping supply – benefits the lettings market too. With home ownership increasingly beyond the financial reach of young people, a quarter of homes are expected to be privately rented by 2021.
Fortunately, most real estate franchises operate as both estate and lettings agents. If there’s a slowdown in sales, the rental segment can pick up the slack.
Whether sales or lettings are in the ascendant, the property market seems perennially buoyant.
However, some franchises do specialise in lettings alone, benefitting from the fact that the average renter moves on after less than two years in
Others specialise in commercial property, which can be a particularly lucrative segment since values at the top of the market dwarf those in residential.
Is a real estate franchise for me?
Experience in real estate is not often a pre-requisite for aspiring franchisees. That said, commercial property franchise SVN does favour candidates with “a proven track record” within the industry.
Earnings are potentially high. Everyone needs a home and commissions rise in line with house prices.
The fundamentals of commercial property are sound too, with 45 million square feet of commercial space built every year.
Successful franchisees are outgoing and amiable; possess sales, negotiation, marketing, IT and customer service skills; and have a sound understanding of the property market.
The structure of real estate franchises
Your role as an estate agency franchisee will include marketing properties for sale, advising clients and helping buyers reach decisions, handling negotiations, liaising with solicitors, surveyors and mortgage brokers, and keeping abreast of the property market.
Commercial real estate has many similarities, but might offer higher earnings and mean you can finish earlier midweek and avoid working weekends.
Lettings agents generally offer a two-tier service. A 'let-only' agreement involves screening tenants, completing paperwork and collecting the deposit and first rental payment. A 'full management' agreement also means collecting rent and managing the property on an ongoing basis.
Established in 1992 and franchised since 2005, Hunters is now the UK’s sixth largest estate agency in a crowded UK market with more than 150 offices.
It attributes its success to excellence in marketing, technology, training, communication and customer service.
Pennylane Homes, an estate agency and lettings franchise, offers income from property sales, insurance products and mortgages, among other sources. Available for as little as £1,995 plus VAT, a franchise entitles you to an exclusive territory, two-week training programme, marketing and field support, and a 24-hour, dedicated franchise support manager.
The Property Franchise Group is a property franchise specialist with around 300 UK high street offices operating under estate agency and lettings brands CJ Hole, Ellis & Co, Ewemove, Martin & Co, Parkers and Whitegates.
There are five routes
The founders of Go Direct Lettings have been in the sector for more than 25 years. In an enormous and growing
If you have an existing commercial real estate or residential practice then SVN says you can grow your revenues through its support, brand and business model. The franchisor promises repeat business, referrals and high commissions.
Founded in 1987, SVN has more than 200 offices worldwide and was involved in more than $10 billion worth of transactions in 2015.