5 tips for increasing the value of your Letting / Estate Agency:
1. Don’t be heavily reliant on property sales. The most value in your business comes from your lettings portfolio with buyers basing their offer on your lettings income rather than your sales income.
2. Work on improving your landlord to property ratio. If a large percentage of your portfolio is owned by small number of landlords, it introduces risk, and a buyer will either make a lower offer OR introduce some deferred consideration into a deal
3. Convert let only / tenant find landlords into fully managed landlords. The biggest part of a valuation comes from the recurring income your business receives. One off income is accounted for in a valuation, however, doesn’t hold the same value that a monthly management fee does.
4. Work out if you’re looking to sell your portfolio only OR sell your business as a going concern. Generally, if a buyer can purchase your lettings portfolio with minimal overhead attached to it, it will help you achieve a higher valuation. However, there are instances when a buyer will have to acquire your business as a going concern and will retain most or all of your overheads. In this instance, your profit / EBITDA will play a factor in the valuation vs a multiple of your turnover.
5. Be prepared – make sure you can provide your last 2-3 years accounts and ensure you have management accounts since your last year end. A buyer will also want to see a breakdown of your lettings income, therefore it’s vital to be able to show that x% of your turnover came from management fees, x% let only, x% landlord fees etc.
There are numerous factors that need to be considered when valuing a lettings business, unfortunately it’s not a case of simply applying a multiple of turnover to your overall turnover. If you’d like to have a chat about selling your lettings agency, would like a free valuation or just want some advice, feel free to call us on 01529 404035
