Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Let me provide a bit of context. We've been researching Rightmove in the industry for years now. With the new potential entry of OnTheMarket, we just want to go back and review what's going on. Specifically, I'm interested in the lettings side of the business. I'm just looking to learn more about how the lettings business works and all the different software solutions that are out there, like and others that have popped up. That's the context. But I'd love to learn a bit about you and your background in lettings. Maybe that's a good place to start.

Yes, of course. Well, as I say, thanks for having me on. I'm the lettings manager for a leading independent agency. I live in Worcestershire, and I've traveled around in the lettings industry for about 12 to 13 years. I started as an apprentice at a company called Ludlow Thompson, which was a London-based firm, but they had an outsourced property management office in Worcester. It was an unusual setup because we never really saw the properties. However, I was dealing with London clients, which opened my eyes to quite a market over a very short period of time. After a couple of years there, I wanted to really give it a go at actually negotiating deals and going out on viewings and doing all those sorts of things. So, I moved into lettings for a local agent in Worcester, who at the time was Town & Country Property Services. They don't exist anymore; they were bought by Leaders in 2015.

I've jumped around a few times since then. I worked in Cheltenham for a company called Andrews and in Cobb Amos in Hereford. But it's nice to be back local again. Commuting for seven years was not particularly enjoyable. So, yes, I'm in a great spot now. That's a bit of background. I've been writing a book on the industry, sort of a guidebook for landlords, which I think is something that's needed at the moment. It's been something that I've had in the back of my mind for some time, and it's come together where I'll be ready to publish in the next couple of months. We're combining that with a lot of landlord seminars at the moment and just having a lot of conversations with landlords about what are rates doing, what's going on with the market, what.

What are the key pieces of regulation that are changing, that will impact the market?

I think this is a much wider question about what's going on with supply and demand. But essentially, the problems in the market over the last couple of years have been primarily due to landlord costs. The government introduced a tax as part of Section 24 of the Finance Act, which indicated that certain costs associated with rental income couldn't be deducted when filing the final tax return. This primarily related to interest on mortgages. For many landlords with high-level mortgages who were individual sole traders, this was quite costly. This obviously changed the dynamics of where they needed their rent to be and where they needed certain things to occur. At the other end of the market, with actual investors purchasing, the government imposed a 3% stamp duty surcharge in addition to the normal stamp duty. These two issues have been in place for some time and have certainly impacted landlords' decision-making. In our seminars, we highlight some methods to buy property to rent. However, for many landlords, setting up a limited company, for example, involves a lot of complications and unknown territory.

So they move from sole traders to a limited company to be able to get the interest back.

Yes, exactly. All the rules and regulations change. Suddenly, if you're a limited company, many of those rules don't apply, which makes a big difference. However, it's about whether a limited company is beneficial based on your income tax. There are so many gray areas at the moment, and that's one of the big things our regulators are keen to resolve. This is combined with the Renters Reform Bill as well, which was a significant parliamentary bill floated at the start of the year and will likely come out in some form, possibly before the election. It's all about the actual regulations on tenancy agreements and the service of notices.

And what are the major changes that could happen that could impact the market?

A Section 21 notice is currently a form of notice served to a tenant to end the tenancy, requiring two months' notice. At present, a landlord can serve this notice without providing a specific reason. If they want the property back, they issue this notice and must attach certain documents to demonstrate that the property is safe, compliant, and has met all legal obligations necessary to legally terminate a tenancy agreement. This two months' notice to end the tenancy can be issued at any time, as long as it is not within a fixed term. The plan is to abolish this and replace it with what is currently an alternative notice, the Section 8 notice, which requires specific grounds for possession of the house.

This change is concerning for some landlords, but generally, there are plenty of solutions as long as the grounds are correctly established and well thought out. The main two reasons being discussed for eviction are if the landlord plans to sell or move back in. However, other areas need strengthening, such as addressing antisocial behavior, which is currently a vague reason for issuing a notice.

Regarding tenancy agreements, you can currently establish a fixed-term tenancy agreement for a minimum of six months, and it can be set for two to three years if desired. Most tenancies are twelve-month fixed terms. The government aims to abolish fixed terms, promoting a system where if Section 21 is removed - meaning a landlord must provide a specific reason for eviction - tenants could enjoy more flexible tenancies. For instance, if a tenant wishes to leave after six months, they would be able to do so without being locked into a longer term. This is intended to create a more flexible and fluid housing system.

However, for landlords, this is currently a headache, especially combined with the removal of certain financial incentives, making it challenging. Looking at the market, there has been a significant number of landlords leaving the sector, roughly equivalent to the increase in demand. I recently saw an interesting graph from our regulators showing that private house building has not increased in volume since the 1960s. Back then, there was also a significant amount of council, local authority, and social housing being built, effectively doubling the number of houses compared to now.

Funding issues and the lack of incentives for sales are contributing to fewer houses being available in the social sector, pushing more tenants into the private sector. This has increased demand in the private sector, which needs more properties to balance out. Even people who should be able to comfortably rent, for example, a two-bedroom house in central Worcester, are struggling due to intense competition.

My aim with this book and all our initiatives is to show landlords that there are still viable investment opportunities, especially given the current rental yields resulting from this supply and demand issue. Eventually, something has to give, and the government will likely adjust one of these incentives to allow more properties into the market. It's just a matter of when.

How have the rental yields changed over the last decade or so?

If we examine the supply and demand issues we currently face, let's consider March. We listed 23 houses across our areas, including Droitwich and Worcester, with 23 houses available to let. We received 730 inquiries for these houses, averaging 31 leads per listing. The numbers are quite staggering, indicating that landlords can be quite assertive with their rent.

What are they asking for? What's the yield today?

Last year, we adjusted rents based on the retail price index during our tenancy renewals. At one point last year, the retail price index had increased by 11%. Asking prices on Rightmove were also up by 11%. They've plateaued a bit since then. Currently, the year-on-year increase is more between 5% and 6% compared to last year. The early part of last year and 2022 saw particularly hot markets. Since Covid, there has been a lot of movement, especially demographic shifts. People moved from cities to suburbs for more flexible work arrangements, then some found it unsuitable or had changes in employment circumstances and moved back to the cities, causing fluctuations in demand and supply in various locations.

What is that yield, though? What's the landlord's yield on the asset?

It depends on whether you're purchasing a freehold or leasehold property, as the costs differ. For a typical freehold house, the gross yield is currently between 5% and 6%. Three to four years ago, it was more around 4% to 5%. For leasehold properties, which typically have higher costs but lower purchase prices, the yield can be around 7% in some cases.

And that's the gross rental income over the total cost of the property, correct?

Yes, but it's important to note that yields can be a gray area in investment terms because there are many variables. You might choose a property with a balanced rental yield of 4% to 5% but achieve excellent capital returns, making the overall yield since purchase much stronger. Conversely, a leasehold property might offer a 7% monthly yield but not appreciate as much in sale price. From 2000 to 2020, a 20-year period, warehouse prices and rents both increased. The average rental yield was around 5%, and the average capital growth was also around 5%, totaling about a 10% overall yield.

But that's also leveraged, right? Because you're getting a mortgage on the capital.

Exactly, yes. It clearly shows that tax changes and political fluctuations can strain investments at certain points. However, if you are committed for the long haul, say a 20-year period, or investing for a pension pot or buying with cash, there is still profit to be made and you are significantly helping others. Those are the two main points, really.

Yes, on that note, how do you see landlords changing in terms of their thoughts on yields and their targets, and how has this changed over the last five years?

They are asking us a lot more about where the demand is because, as I've mentioned, we've seen fluctuations in supply and demand. They want to avoid purchasing properties that don't attract tenants quickly or don't move at a desirable pace. What is the required deposit now?

For a buy-to-let, whether it's a freehold or a leasehold, what is the typical deposit required and the mortgage rate you can get?

Typically, the deposit is about 25%, which is usually the minimum. This is because you need to demonstrate that your rent exceeds your mortgage repayments. I don't have the rates available at the moment, which would be a better question for a broker. Rates can vary, especially depending on whether you buy in a limited company or as a sole trader.

How much change have you observed around these regulatory changes? How has it affected the mix between hobbyist landlords and professionals?

Those with substantial equity in their property have been relatively unaffected by legislative and financial changes. It's those who may have previously taken chances, possibly building up multiple investments through lines of credit, who are now finding that this could become problematic. They need to offload some assets to stabilize. The distinction between professional and hobbyist landlords might not be the right focus. It really depends on whether their approach is short-term or long-term, and how they manage in both the short and long term. Long-term thinking is essential, as having reasonable equity in the property will likely outlast other issues.

Another question, more specifically. If you consider 100% of the landlords in the UK, what percentage would you say only owns one or two properties, versus those who own more than two? What would you estimate the mix to be?

I'm not exactly sure of the estimate, but as a guide, if I consider our portfolio of landlords, it's almost like an 80-20 split. 80% of them are single pension pot landlords. These are individuals who own one property, which they've either invested in because they had spare funds accumulated over time or they've inherited and decided to let out. In our portfolio, that's about 80%. However, it also depends on the location in the country. For instance, in Worcester, from an employment perspective, this demographic fits those who may have built a long-term career locally or towards Birmingham with a good pension pot and have funds to invest. This is a separate item that I can work with.

In contrast, in Hereford, where I previously worked, most of the landlords were portfolio landlords. This was mainly because many were farming landlords who owned a lot of land in the local area. So, locality significantly influences this as well. In London, it's primarily foreign investors, likely portfolio landlords again.

I think it's 1.1 million rental units per year around the UK, roughly. So, how many of those do you think, roughly on average, are your single pension pot landlords, like you mentioned, versus the portfolios?

I would still argue that if you took the whole market, there is a larger lean towards single landlords.

An 80-20 split?

Yes, maybe not quite 80, maybe more like 70-30. But I think the build-to-rent sector, because of the changes in costs and other factors, is changing the landscape for landlords. There are more and more professional landlords buying up where they can.

There are a lot of single pension pot landlords, which I think is very different from the US, where there is a lot more institutional ownership.

Yes, I agree. It really depends on whether build-to-rent excels. We've got one or two plots in Worcestershire that build-to-rent investors are looking at, where they could be investing in around 200 units to rent out. This is a very different model compared to someone who has just inherited a house and is deciding what to do with it. I think it's had a bigger impact on the larger cities. So, I would expect in London, Birmingham, Bristol, you would see that split more directed towards the institutional or professional arrangement than towards single landlords.

Can we walk through the lettings flow now? As someone running lettings at an estate agency, firstly, how do you source landlords? How do you get new landlords?

Yes, it's not easy. There are various different ways that we work around it. Obviously, being in the business I am in, the company has built a brilliant name, locally, over time, which has just built up gradually. Originally, this business started as a selling agency. My understanding is that when they discovered there was a demand for lettings and some of his clients asked if that was something he offered, he was then able to begin exploring it.

Which clients do you mean?

These would be individual selling clients or developers that he might have worked with over time, which then gave them the opportunity to look into that dynamic. It's about pinpointing landlords and how you work with them. For example, we'll talk about the portals, which I think is one way and one method you can use, but you also have to understand where landlords are coming from. The likelihood is that the houses landlords are letting out aren't the ones that tenants are going to be living in. So, you have to think outside the box. We've mainly done campaigns online. Social media is a big presence where we can look at information. How can we address critical issues that landlords might have? You build up conversations, register people on the database, and before you know it, you've got a few parties to work with that you can then move forward with. But it's about long-term relationship building most of the time.

What do you mean by database? What CRM do you use?

We use Reapit. I don't know if that's something you've heard of before.

Yes. Do you use anything else? Is that your main core system that your firm uses?

That's our core database. One of the things I think you're going to ask me about is the tenant referencing side of things later on. With that in mind, the other element that we use is Goodlord, which is a company that's not really for landlord searching, but more for tenancy refining. That's something else that we work on. Reapit is our main database for both sales and lettings, and they integrate well, which means they communicate with each other effectively and allow us to refer clients. I would argue, actually, that our biggest client is our sales department, because of the amount they refer over to us from conversations they've had. There could be a buyer who is buying a property for investment purposes or a client that has a house on the market for sale. It's vacant, they've already moved out, and it's not sold for whatever reason. Oh, we'll let it for six months. Those arrangements come about quite often.

Let's say I'm a new landlord. I come to you with two properties I want to let. You've got Reapit. What do you do? What's the first thing you do? Do you put my data into Reapit? What's the kind of user flow then?

Yes, we need to ensure that you're registered for two reasons. One is to have a contact point; we need your contact information to keep in touch with you. We can set a date tracker, for instance. From our conversation, we've agreed to speak in a couple of weeks, so I can note this in Reapit to contact you again and continue our discussion. It's also a safety measure. We can book appointments in the diary with a full name and address attached, which lets us know where our staff are at any given time. This is critical to ensuring our team's safety.

And Reapit is for both sales and lettings, right? You don't have a separate system for each?

That's correct. We have a group diary, so we can highlight just lettings if we want to look at the lettings diary, for example. But it means that anyone within the business should be able to find out where anyone is at any time, which is really useful.

How often do you use it? Every day, or multiple times a day?

Yes, it's pretty much on my desktop permanently.

Let's say I have these rental units. You put my data into Reapit. How do you then list my units? How does it work? How do the commercials work? Do we agree on a fee upfront, or what's the kind of commercial relationship we have?

First, I'd appraise and give you an idea of the rental value. We would then pitch our services. It's important for me to understand your key drivers for letting and your pain points, so we can tailor and deliver a service that works for you. We have three tiers of service levels in lettings. Our full management service includes setting up the tenancy, collecting rent, handling maintenance and repairs, discussing any damages or rent arrears with the tenant, and providing an income and expenditure statement for the landlord, which is beneficial for their tax return. Our second tier is the rent collection service, which is a lighter touch, excluding maintenance and repairs. Alternatively, we offer a let-only agreement where we market the property, find and reference the tenant, handle the tenancy agreement, register the tenancy deposit, and move them in. The landlord then manages the day-to-day activities. We discuss these options with you. Typically, our service is almost a no let, no fee arrangement, where you wouldn't pay anything until the tenant has moved in, we've issued the first statement, and obtained the moving monies. That's generally how the process operates.

How much is each tier priced? For a property with £1,000 rent per month, how would you price the full management?

It depends on the circumstances, unit numbers, and similar factors. Typically, our management fee is around 12% plus VAT per month. We also charge an initial setup fee, which is roughly half of the first month's rent plus VAT. This fee covers marketing, tenancy agreements, referencing, deposit registration, and the initial inventory, among other things. From there, our fees are tiered. Rent collection costs about 8% plus VAT, and our let-only service has an initial setup fee that, once VAT is included, amounts to nearly the full rent. After that first payment, the rent goes directly to the landlord.

What type of landlords typically afford the full management fee of 12% per month?

It depends on the circumstances for landlords. Inexperienced landlords, those facing difficulties, or those traveling overseas might find value in this service. I recently listened to a podcast indicating that only about 20% of landlords nationwide opt for a fully managed service. Most choose an alternative service option, primarily due to cost. They evaluate their margins after considering their gross yield and decide whether it makes sense financially. Like taking out a mortgage, life insurance, and critical illness cover, the costs add up significantly. Often, landlords initially opt for a let-only service, then encounter issues they aren't prepared to handle. With increasing legislation and complexities, more landlords are starting with let-only and later realizing they might need additional help or support.

Let's say, for argument's sake, the rent is £1,000 a month, and my mortgage is nearly the same. If I'm paying £120 as a management fee, I need a significant difference between my mortgage and rental income to afford it. Otherwise, I'm essentially financing the management from my own pocket and relying more on the capital growth of the asset rather than the yield.

Yes, indeed. I think this is where we return to the issue of mortgages. As rates have increased over the last year, it really matters when it comes to your overall tax return. For example, you can claim management fees off your overall tax bill. So, if you're paying a 10% management fee, it could effectively be reduced to about 8% after your tax return because you can deduct some of it. However, things like interest cannot be deducted. We have been to a couple of appraisals recently. At one, the client asked us what we thought it was worth. We estimated the rent at about £1,200. He mentioned his mortgage was £1,300, putting him in a difficult position. This is something to consider as rates climb. Landlords who are succeeding currently are those with substantial equity and sustainability. If the government makes changes to the Section 24 Finance Act or stamp duty, there might be incentives for landlords to invest in the market. These changes aren't here yet, but if you're in a position to buy now, you might overcome these issues. If you can endure this period, it will be worthwhile in the long run if rates change again or your equity improves.

Let's say you have these units, costing a couple of thousand a month for two or three units, £1,000 each, and they are under full management, for example. How do you then use the portal? You put my details into Reapit. How do you market my property?

We have a data feed from Reapit to Rightmove. We set up the advert through Reapit, and it pulls through to Rightmove upon our action. We ensure all the legal aspects are correct and that the photos are good.

And Zoopla and OnTheMarket as well? Everything?

Yes, we partner with Rightmove and more recently OnTheMarket. We do not partner with Zoopla. Rightmove is a platform we are more accustomed to as a business because OnTheMarket was introduced this year at the turn of the year. We are still in a trial period with it. It has its own positives. The feed is pulled through from Reapit onto the system. We have developed a slightly unusual marketing strategy for lettings because of the volume of leads we manage. If we were to discuss individual circumstances and moving times with each person, we wouldn't have time to manage properties as it would take up the entire day. Our approach involves a funnel system and a live stream that occurs two days after launch. Currently, we are using technology developed in Australia called Gavl, which streams onto Facebook.

It's a live stream platform where people can register to view the house via live stream. First, we advertise this on our streaming platform and direct every inquiry there, stating that it's the first touch point for the property. We conduct the live stream and invite preliminary application forms. This covers important details we need to nail down later, such as their move-in date, if they have pets, if they are smokers, the number of people moving, rough earnings, credit history, and so on, followed by that.

Do they fill this out on Gavl, or on Reapit or Rightmove, or where?

We've recently developed our own platform, which hasn't been released yet but will be very soon. Interestingly, I think Rightmove has just introduced a very similar application form. I've had a brief look at it and have a demo scheduled next week to see if it rivals what we're currently doing. One interesting thing Rightmove is doing with that application form is soft print credit checking, which is quite intriguing if a tenant can do this.

Is this Lead to Keys that you're talking about?

Yes, that seems really interesting to me. The only concern for us is whether it interferes with our live streaming, because the live streaming is very effective for us. It's almost like a funnel system, which is extremely important. Without that funnel system, we're still dealing with a high volume of leads.

You're qualifying the leads via live stream. But when you say live stream, you mean you've got my rental property, and you're filming the property live and streaming it to people who are watching it. To engage with that property, they need to fill out this application form that you've designed?

Yes, anyone can tune into the live stream itself. If they're further interested beyond that, they complete the form then. We know they've committed to the live stream and completed the form, which shows they're serious about the house. They've already had a virtual walk around and had the opportunity to comment as we've gone around, like asking about specific spaces or features.

When you mentioned you've got these 20-odd properties, 30-odd leads per property on the rental side, how many of those are from Rightmove, roughly?

At the moment, the majority of the leads I mentioned, specifically the 730 from the 23 listings, are from Rightmove. I don't have the first quarter stats yet, so I can't provide real-time data on the differences between Rightmove and OnTheMarket. From an applicant inquiry perspective, there are plenty of people looking on OnTheMarket, but fewer agents use it in the local area, which means there's less stock available. It's about finding the right balance to realistically compare how we are performing, especially in terms of listings against other agents.

Are you getting leads from OnTheMarket?

Yes, we are getting leads from OnTheMarket. At the moment, I haven't fully pinpointed the demographic. One thing I find very beneficial about OnTheMarket is the reports for landlords. They partner with a company called Sprift. If you type in a postcode and a full address of a property, Sprift pulls together a report on the land registry boundary, flood risk, council tax band, the EPC certificate, and any other relevant data. OnTheMarket has a link-up with them and also with Hometrack, which provides nationwide house price data.

That is for the valuation. They can create what's called a Sprift report with all that data just by typing in the postcode, which is excellent for us to present to our landlords. The way OnTheMarket compiles this information is extremely useful.

Let's say you've got these 730 leads from Rightmove. What does that lead look like? Where does it come from? What data does Rightmove actually provide in that lead?

We use a software called Homeflow, which connects Rightmove and us. I'm not entirely sure how it's set up. It's great because it manages everything on a timed service level agreement. When we receive a lead from Rightmove, it comes as a notification with the registered information from Rightmove and includes a color chart. It indicates whether we have contacted the lead, and it remains a certain color within a specific timeframe. We can set these timeframes as we wish. Our company SLA requires all leads to be contacted within the hour they are received. If this SLA is breached, we are alerted.

That's a separate database from Reapit.

Indeed, it is.

How do you get that data into Reapit, then?

The data for our sales department is transferable, so the two sides communicate. We don't put all of our applicants for lettings into Reapit because of the volume.

There are too many.

Yes. We separate them out with the view that we will input the ones with whom we are proceeding with a tenancy, if that makes sense.

So, when you receive a lead from Rightmove through Homeflow, what information do you get? You mentioned the name, the property they clicked on, the email, and the phone. What other data? How does Rightmove qualify that lead for you?

This is all about to change depending on whether or not you've got this Lead to Keys system, because they've got a new set of details they want to start asking. But at the moment, it's phone number, email address, current address, timeline to move, total occupants, whether or not they have pets, furnishing requirements, budget. And then from there, they have a comments box to say a bit about their situation or anything they might want to ask us, if you see what I mean.

How could Rightmove really help you more with that? You receive a ton of leads. How could they really qualify these leads for you?

I'm interested to see what the demo brings up next week because it looks like the credit checker is a big one for me. I think for us, this funnel system really works. I don't think Rightmove can do anything to manage that volume. There are certain things they can do to make that volume slightly easier to manage, but the volume is still too high. whichever way you spin it, I don't think Rightmove alone is the solution to that. But what they can do, I think the credit checking arrangement that they're introducing could potentially be very successful if tenants agree to it. Because if tenants say, yes, okay, run a soft print credit check on me, we already know before we've been out to a viewing whether or not this person is going to meet the necessary referencing criteria.

What's the biggest cost to you in the process or time? What's the biggest amount of time in that process? You mentioned credit checking is a big thing. So what do you think is the biggest pain point for you that could save you a lot of time?

The referencing is okay. I think it's the information, and it's because it can come through scrambled. Whose fault that is, I'm not sure. You can sometimes find that data is only as good as how it's entered, isn't it? And the thing is, obviously, in all of these instances, by default, you've got to rely on the other person to enter the data. Admittedly, the rental market is such that there are a lot of language barriers. A lot of the time, the people we're dealing with don't fully understand the process and what certain things mean. Unfortunately, the industry is still, as much as we try to do everything in plain language, riddled with a bit of jargon from time to time. Sometimes we get forms both through Rightmove and through our own application forms that we have to go back to them and say, not sure what you mean by this or this doesn't make any sense. And in some instances, that could be the difference between someone making a decision whether or not they're happy to proceed with an applicant or not.

Let's say we've sent you these 700 leads. If they could all undergo a soft credit check, how would that impact your time and productivity in terms of whom you call, whom you take to view, etc.?

Because we developed the system we have, we're in a bit of an isolated situation because the conversations we have are brief. We move the conversation along to the live stream. I've worked for businesses where that live stream and process were not in place beforehand. It was a living nightmare because you'd spend the day pre-qualifying people on the phone, registering them individually on a database, among other things.

What are the main questions in that pre-qualification you ask?

They're similar items that come up on the Rightmove form. These include employment status, pets, tenancy length, when you're looking to move, who is moving with you, whether you have any kids, if you are a smoker, and if you are aware of any adverse credit history, such as county court judgments or if you have been declared bankrupt. Then, you move on to more criteria-based queries like what's your budget and what's the ideal house. But we've reached a point in the market now where those questions are secondary, which is a bit sad, really. Generally speaking, people are renting what they can get rather than what they want.

How do you measure the quality of the lead with this live stream? Obviously, if someone goes on the live stream, that's great, but anyone can go on the live stream. If they've shown intent to watch it, I guess it's good. Then they go through and fill out the form, and what do you do then?

Then, we have to rely somewhat on judgment. This is where Rightmove could come in handy. If Rightmove could perform a soft credit check at that stage, that would be ideal. If they did that, we would be in a situation where we've got a landlord who is confident about the applicants going to see it, and we've got confidence that the applicants are credit checked and halfway ready to go. At the moment, as it stands, we rely on the information we've taken down until the point at which the viewing has been completed, we've agreed on a deal, taken a holding fee, and started referencing. So, if they then fail a credit check because they've not been truthful on their application, we won't know until a few more days down the line.

Do you use Rightmove Enquiry Manager or the Tenancy Manager, anything to do with that?

Today, we just started exploring it, so I've got a price for it. We've got the demo booked in next week, so we're really going to just have a look.

How much is it roughly? You mentioned like £75 to £150 per branch per month or something?

Yes, that was roughly the quote they gave me, about £75 a month. So that's what I'm expecting. Obviously, it will depend on portfolio size and depending on how many listings we put on, but that's the rough guide they've given me.

So right now, you only use Homeflow, and then you put it into Reapit. You don't actually use anything to do with Rightmove apart from the listings for the tenancy side?

Yes, the inquiries come from Rightmove to Homeflow. That's how we're managing it at the moment. We obviously use Rightmove's other tools for our landlords, such as the best price guides. There are also a lot of searching tools on the sales side for finding other properties.

What do you do on the letting side? I mean, historically as well, not just today, but how do you see letting agencies measure conversion? Let's say you've got all of your leads from Rightmove, so it's obviously easier. But typically, if you're using Rightmove, Zoopla, or OnTheMarket, and you rent a unit, do you then go back internally and check where that lead came from? Do you measure that, or do you not really care because you've let it anyway? So you just get paid. Do you measure the conversion of where the lead came from?

It's something that if we were to nail it down quarter by quarter, we would look at it and review it. We used to spend a lot of time on the viewing-to-let ratio, which again, before the volume we're dealing with now, was much easier to measure.

But not viewing for let for Rightmove. Viewing for let for Zoopla, OnTheMarket, just your whole company viewing to let?

Yes, yes. But I suppose, as a business up until recently as well, because we were only solely on Rightmove, 90% of our leads were coming from there.

What about other firms? Do you think the agencies really go and try to calculate how much they're paying per lead for Rightmove much or not?

Really, they might want to if they're comparing with other platforms. I've worked for platforms where we've been on OnTheMarket, Rightmove, and Zoopla. Those sorts of things are much more important because they want to determine where the leads are coming from. But what I do know is that when we were on Zoopla, one of the reasons we're no longer on Zoopla was because we determined that of all the leads that were being generated on Zoopla, they were the lowest proportion of end results by comparison.

How did you calculate that, though? Were you checking on Homeflow for that, or what were you doing?

It wasn't myself that did it. I don't know how it was calculated. But, I mean, we can still go on to the individual sites and we can still sort of get a background summary of what leads we've had.

It's a lot of work, right? You really have to want to go and do that. And I know, most people probably can't be bothered. But I'm curious, in your opinion, given that you know these people, how many of the agencies do you think are using some lead generation tool like Homeflow or something else? How many are going to go into Homeflow, see where the lead comes from, and then tag it into Reapit or their CRM to then see how many of those actual converted tenancies come from Rightmove? How effective do you think Rightmove is as a lead generation tool? You have to kind of calculate that to understand it, but I'm not sure how many people actually do that.

Yes, indeed. It's difficult to judge. If you look at other agencies, everyone has a different methodology about what platform they're going to use. For example, they might use Rightmove, but they might also spend on Zoopla, and they might also spend on OnTheMarket. Then there are others who think Rightmove is too expensive for what it offers. They will come off Rightmove and just use one of the others. So, I think it depends on how many platforms you're working with. If you're working on one platform, you can comfortably know that you're getting a large proportion of the leads through that system. But breaking it down, as you say, you're going to have to take individual measurements because you need to know what you're paying for. And that's something we will see, with OnTheMarket, over the next six months to a year, how much it is costing us.

How do you think that's going so far, just anecdotally, with OnTheMarket? Do you think it's worth it?

I think that the landlord reporting is an excellent showpiece, which from the point of view of taking that out as a report is quite impressive. It has so much to it that it could be an instruction-winning tool if they like what you're offering.

What does it have on there, on the landlord report? What is it going back to that?

The landlord report with that data is kind of summarized for you. Whereas with Rightmove, what you have instead is just a best price guide. You pull together your comparable evidence of similar properties that have let in the area and you put it together in a summary report of that. The OnTheMarket report has that, but it also includes the plot, the flood risk zone, the energy efficiency, the council tax band, and it has a summary. So, you're going out with a lot of data and knowledge on the property in a summary view that you can present to the client.

It makes you look better; as if you've really looked at multiple different variables?

Yes, and I think overall it just looks better. So, instead of thinking about the value in OnTheMarket in terms of how many leads we are generating, we should consider how many instructions we have won as a result of something that we've pulled through from OnTheMarket. From a lead perspective, as I say, I wish I had the measurements for you. If I had the measurements, I could be more precise. But I would say that from a lead perspective, we've seen fewer so far than we do from Rightmove. However, as a business, we have only been on Rightmove for so long. I don't know how much of that is possibly slightly falsified because we need to give it the opportunity to sink in. OnTheMarket, on the whole, is a less visited platform, to my understanding, than Rightmove, particularly for buyers and people looking to rent, because it's just not as well known in the public eye.

Let's say that I want to rent a unit, I come through the process, agree to a price, and am willing to pay, how does the referencing work?

We partner with a company called Goodlord. Goodlord was built by an ex-estate agent. It's a really interesting platform, slightly different from many others that are available. This is certainly a point of difference with Rightmove as well. Essentially, it's a full CRM system that covers tenancy guides. It includes the draft tenancy agreement that can be pulled through for online signature. It almost sometimes feels like you're operating with an additional member of staff who's handling a lot of the digital operations for you.

The arduous task for a prospective tenant, if you like, is that we have a conversation with them where we say, "Right, okay, the next step is we've got an initial holding deposit we need to take from you. It's equivalent to one week's rent. That secures it as yours, subject to referencing." There's a little form for you to sign to say you agree to the terms and conditions surrounding that. We've got another interactive form for you to complete online. The premise of this one is that this is the cross-checked information.

The frustration for a prospective tenant, to some degree - not that we get that much of a complaint, we don't get any complaints from it - but the frustration, if you like, is that there is a bit more form filling. From a customer experience point of view, I imagine that's a bit of an annoyance. What happens is you upload your passport, your bank statements, your proof of address, those sorts of things, and your pay slips if they're applicable. Or you can acknowledge open banking now on Goodlord, so you can determine your income that way. They basically do an income check and that might be contacting your employer or using open banking, whatever it might be. They'll do a fraud and identity check on your passports. They'll run your passport number through a government database. I don't know where they get the information from, but they determine whether or not the passport is fraudulent. If you've rented before and you provide your address, it will ask you to provide a landlord reference so that they can contact that previous landlord and determine whether or not the rent was paid on time and whether or not the property was damaged.

What's the most difficult part of all these different reference checks?

Sometimes the process is very easy, especially if you have someone who is relatively computer literate, eager to proceed, and wants to get it done. There's no problem unless you encounter two things. One, someone who has been untruthful in their initial application. Or, there's a complication. For example, referencing self-employed individuals can be difficult because they might declare to us that they're earning 50k, but then their tax return shows their profit was actually 12k. This discrepancy arises from how they've managed their books, putting us in a position where their earnings don't match the calculated total required for the rent. This can lead to a situation where we need to negotiate and figure out a way around it.

Why can't Rightmove handle all these tasks? I'm on Goodlord now, and it seems like they're trying to do credit checks and residential checks as well.

I think that's the next stage. The tenancy management arrangement is actually full-on referencing because they can now also offer a rent guarantee. So I think they can now do a full reference check, covering all those aspects as Goodlord does. However, the benefit we have with Goodlord is that they draft our tenancy agreements for us, and it's all built-in. We put together the template of what we want the tenancy agreement to state, and they'll compile something that is fully designed. To my knowledge, Rightmove currently doesn't have that option available.

I think they have offered that. Have you seen the Tenancy Manager that they offer?

Yes, they've got a step-by-step process; we'll get you from A to B. It looks like they can handle the move-in money and a number of other things. Again, one of the reasons I want to watch the demo is to see if they have a tenancy contract in place yet. I'm not aware of any other platform, other than Goodlord, that has done it yet, and Goodlord has been doing it for a few years.

How do tenants typically pay their rent? You mentioned, what is it, over direct debit? Is it cash? On average, where do they typically pay?

It's mainly by standing order. All of our rents are collected via standing order on a management basis. Obviously, that could vary, but we are now cash-free in the office. We don't handle cash. Yes, we provide the bank details on the tenancy agreement, and it's the tenant's responsibility to set up that standing order on a monthly basis. Direct debit can be complicated due to clawbacks and such. If a tenant pays us via direct debit and we pay it to the landlord, and they decide they want to call it back, they can, and then we've got no funds because we've already paid the landlord. So it could be messed up.

What is a standing order, exactly?

The summary between the two is that with direct debit, we take it out of their account; with a standing order, they pay it to us, if that makes sense.

But if you have the bank details and they don't pay, what happens? You don't take it?

No, we don't take it. It then becomes our responsibility to chase the money and obtain it. There are insurance policies and other options that landlords can use to recover funds in those instances. Most referencing platforms offer them. Rightmove offer it.

How does insurance work? When do you offer it?

The referencing is adequate, but it's a past reference report. From there, you can provide it to an insurer. An insurer can then see that we have a green box against that reference report, meaning it meets the criteria needed. They'll provide a guarantee that if the tenant falls into arrears, they'll repay the rent and also cover the eviction costs, the possession proceedings, and the legal costs associated with it. They then employ an underwriter, and if a tenant falls into arrears, we have a form to fill out, we provide it to them, and they initiate that process. They would employ an underwriter who would appoint a solicitor to handle the legal proceedings. So, if you think about it, looking at our portfolio, I'd say 1% or 2% are in arrears. And probably even a lesser figure than that are those that we are dealing with legal claims moving up. From an insurer's perspective, it's probably quite lucrative.

What's the attachment rate you have of insurers? Let's say you have 100 renters. How many do you get insurance for?

At the moment, I would say not enough? Probably at 10% to 20%. The thing is, it's not a cheap policy because the underwriting and the cost of dealing with a legal claim can be very expensive. So they usually cost between £20 and £30 a month to run that policy for the tenant. It's up to the landlord.

That's the landlord insurance that they're buying?


What about tenants' insurance?

Tenants might buy contents insurance and typically pay a deposit equivalent to five weeks' rent to secure the property. There are other options available now, like integrated services, where they pay a separate company to ensure that deposit value for damages. We're exploring this but haven't decided yet, as it comes with consequences. For example, it could affect a tenant's credit rating if a claim is made and they don't pay. Currently, we take a damages deposit equivalent to five weeks' rent at the start of the tenancy. Then, it's up to the tenants to obtain contents insurance. They have an option through Goodlord, a platform that offers them a contents insurance option.

Goodlord provides you with the insurance?


Do you know how many take that?

The take-up rate is low, but generally, the take-up rate for contents insurance is low for a lot of tenants.

I think that they've got minimal possessions to insure. However, it can cover you for certain things. I remember once a tenant accidentally left a candle burning, and the house burned down. Their contents insurance would have helped cover things like the carpet and elements of the kitchen, which all fell on the landlord because they didn't have any contents insurance.

And with maintenance, how do tenants request it?

They use a company we partner with called Fixflo. It's a reporting mechanism that we use. Tenants are given the login details upon moving in, and it includes a troubleshooting guide. They can report issues at any time, and we can then address them. We've listed all of our contractors on Fixflo. We can measure how many jobs we have outstanding at any time, the average time it takes to close a job, and the time from when a job is reported to when it's allocated to a contractor. It's a great piece of software. We can also track our averages on certain SLAs, like wanting jobs closed within 14 days of being opened.

Does this come into Reapit?

You access it through a completely separate piece of software called Fixflo. It's an online platform that we use.

You'll get an email or notification if something happens.

If I'm a tenant, it feeds into our Outlook. We keep our phone lines open to tenants as well, so they can report an issue over the phone if they wish. We can log it on Fixflo, and we have a 24-hour phone line. When we close, the phone line stays open and it goes through to an overflow call center. If there's a flood in the house, they call me and I deal with it, even if it's 11:00PM.

You pay a fee to them per month, per unit, it says here.

It's based on a subscription, depending on the volume of units, not exactly per unit. They set the price based on ranges of unit numbers. Forgive me, I can't remember what our last cost was to them. If you want, I could probably look into it.

I'll share my screen here. I think this is it.

Let's have a look. Yes, that looks right. Just to give you an idea, it's a really good piece of software. I don't know if you've heard of it before.

How much are you spending roughly? If you have 100 units, that's about £130ounds a month, right?

Yes, it's about a couple of hundred pounds a month. Roughly £250 a month overall, to cover what we need.

It's quite expensive.

But it's a very good platform. You could use alternatives through Reapit if you wanted. These sorts of things also integrate with Reapit.

So, let's say I'm a tenant and there's a flood in my place. You get an email from Fixflo about it. How do you then send the contractor out?

It's actionable from our end. We need to log in and assess what we've received, and from there, move to the next stage on the platform, which involves instructing the contractor.

They're not your personal contractors?

We don't use the marketplace. They have their own contractors available, but we prefer using our local tradespeople whom we know and trust.

So, you call them in the morning, tell them about the flood, they price it up, and then you charge the tenant? How does that work?

I know that most of the time, maintenance-related issues are normally the landlord's responsibility unless the tenant has done something to cause damage. So, most of the time, it's a cost covered by the landlord. If it's an emergency, we'll call the contractor that same evening and deal with it that way.

Do you send the landlord a fee that's supposed to be covered in your 12%, or would that flood be an extra fee?

It would be the contractor's charges. They are an independent contractor from us, so they would issue an invoice which we would settle against and provide them with a copy of that invoice.

You don't pay for it out of your own pocket. Obviously, it's the landlords.

That's right.

Last couple of questions. What's the biggest challenge for you in the whole lettings process? What's the biggest challenge in driving more profitability for your business?

At the moment, balancing supply and demand is something I've talked about a lot in this last hour, and I think it's still one of the biggest challenges we have. We want to be proactive as a business and keep moving in the right direction. While the stock is limited, it leads to people not being very happy. Often, we have to tell people that the house isn't available anymore or that they don't meet the referencing criteria, which are quite negative conversations to have. They come with their own challenges because they weigh on you and are very time-consuming.

Another challenge is not really knowing what to expect, especially with property management. Every day brings something unexpected, even after 12 years, I'm still surprised. Those are the two main challenges. More long-term, it's about bringing landlords into the sector and shining a positive light on being a landlord in the first place, which I think is the challenge and what needs to happen to improve the industry overall.

This has been great. Thank you very much for your time. I'll be interested also once you've had the demo with Rightmove. Let me know what you think.