The Help to Buy and Funding for Lending schemes have rejuvenated the residential property market. With interest amongst would-be homeowners rocketing, the housing market is starting to glow with health with rising prices and an increase in homebuilding.
Perhaps more encouraging is the fact that the RICS reports that every region of the country has seen transaction levels increase, further demonstration that the recovery is spreading beyond the traditional economic powerhouses of London and the south-east.
While I’m sure intermediaries are clapping their hands at the prospect of a surge in new residential property business opportunities over the coming months, I’m equally sure that most won’t be counting on the market ever returning to being the golden goose it once was.
Diversification still remains the name of the game and while many intermediaries have successfully developed their general insurance books amongst other income streams, there remains a relatively untapped market for them to explore – the lettings sector.
It’s no coincidence that the big property groups operate as strongly in the rental sector as they do in selling property. These sectors have historically been counter-cyclical but are becoming equally important.
Despite the government initiatives, it’s still a challenge for first time buyers to save up a deposit. As the market heats up, prices will increase putting further pressure on those trying to get on the bottom of the ladder. And there is still the issue of demand outstripping supply.
Our housing market has changed fundamentally over the past few years. The average age of a first-time buyer is now 37 and only 50% of 18-24 year olds feel aspiring to own a property is important. Back in 1999, 9.9% of English households rented privately. By 2011/12, the figure had risen to 17.4%. The sector is set to grow by over 25% until 2016 leading to six million privately rented homes.
There are currently some 25,000 lettings agents servicing 60% of the market. Most intermediaries have strong relationships with estate agents, and nearly every estate agent has a lettings department – but few and far between are the intermediaries who are getting leads from this side of the business.
So how can intermediaries tap into this flourishing market and generate not only an important source of new leads that could result in a strong new client base that can be cross-sold a variety of general insurance products?
The opportunity is there to be seized and tenant referencing is the starting point – but let me explain what I mean.
Many mortgage brokers have existing relationships with estate agents who typically pass the broker potential mortgage leads in return for a split of the proc fee. Most of these agents also operate a lettings arm after all you need no qualifications to set up a lettings agency.
Whilst the broker will be getting leads from the estate agency selling houses, they are unlikely to get any leads from the lettings side of the business and because these businesses are unregulated there is a significant chunk of business that is going un-serviced.
The broker needs a ‘way-in’ – a Trojan horse if you will – in order to tap into this rich seam of business, which will also ensure that when house sales are slow the broker continues to get a steady flow of leads from the lettings side and vice-versa.
Every letting agent carries some form of tenant referencing for which they typically charge between £30 and £50. This is the door opener for intermediaries and the team at the Source has the key to the door. SourceLet tenant referencing has been developed to check prospective tenants quickly but thoroughly, taking just 30 seconds to produce a detailed and accurate tenant reference which also identifies their propensity to default. And we only charge between £6 and £14 depending on the level of referencing required – a highly attractive price to lettings agents.
Once an intermediary has pushed the door open with this cost effective and efficient referencing tool, they then have the opportunity to provide the full range of regulated services with access to the full life-cycle opportunities of the tenants – not forgetting the buy-to-let requirements of the landlords themselves.
Rent Guarantee is a natural product to offer alongside the tenant referencing tool. Lettings present numerous risks to landlords. Whether they’re a sophisticated property owner or accidental landlord, none want to suffer from tenants in arrears although according to the National Landlord Association nearly 47% have experienced rental arrears in the past 12 months. Rent Guarantee protects landlords against tenants who can’t or won’t pay. And the wholesale price for Rent Guarantee from SourceLet starts at just £59 for 6 months cover.
And tenants may want their own rent protection cover in case they can’t work through accident, sickness or unemployment.
Think about the income possibilities – rent guarantee policy sales, landlord property insurance, tenant liability cover, tenant contents insurance, tenant rent protector. Having contact with the letting agent, the landlord and the tenant gives an intermediary the opportunity to cross sell other general insurance products as appropriate – something the letting agent can’t do as they’re not regulated. And looking to the future, the tenant may eventually want to buy their own home and the landlord may need to remortgage their buy-to-let portfolio. There is significant opportunity to build a long-term client base.
The lettings agent sector is ripe for intermediaries to explore and SourceLet gives them the tools to do it. What are you waiting for?