Is the low-cost online letting agency business model dead?

While the demise of Upad caught many market observers by surprise, in hindsight the signs were there last year when the company changed its pricing policy. As we mentioned in an earlier article, the disrupter has eventually been disrupted by those who crashed through the door that Upad managed to open. So, this prompts the question, is the low-cost online letting agency business model dead? 

Value for money 

Whether looking at private rental properties, services or retail, customers want to pay as little as possible for the best services. It is fair to say that recent years have seen the balance sway in terms of price over quality. The old adage “you get what you pay for” has never been more apt than in today’s online market where costs are often slashed to the bone. However, if we take a look at private rental properties there are two main groups:- 

  • Hands-on
  • Hands-off 

We could also call these two groups experienced and inexperienced which will impact the type of services they are looking for. 

Hands-on investors 

Hands-on investors take a more active approach to their property assets and rental arrangements. They will pick and choose from the array of services available but because of their own knowledge and experience they will likely look for the bare bones in a service at a rock bottom price. 

Hands-off investors 

Hands-off investors are happy to secure properties but then outsource as much of their additional requirements as possible. They will obviously look for value for money but in many ways the property management angle comes before cost considerations. 

Low-cost pricing model faces challenges 

When Upad decided to reduce its initial charge to customers, to attract more business, and depend upon premium services further down the line, alarm bells began to ring. Hands-on investors may decide to take on the most basic of services, at rock bottom prices, but are often unwilling to pay premium prices for “premium services”. Therefore, we can assume that this type of client might be potentially loss-making or at best marginally profitable under the low-cost online letting service pricing model. 

While hands-off investors would not necessarily be as aggressive when it came to pricing, they just want a simple service. They want to join, tick a few boxes and ensure that their properties are managed, rents collected and tenant issues resolved as soon as possible. It is also worth noting that this group of investors have traditionally had the smallest profit margin because of their preference for outsourcing management services. The fact that property taxes and regulations have increased of late has reduced margins significantly, leaving many struggling to make a decent return. 

You get what you pay for 

While there will always be a role for low-cost basic services, the ongoing increase in taxation and running costs for private landlords has reduced profit margins significantly. As we touched on above, a reduction in entry costs for low-cost landlord services is all good and well but paying a premium further down the line for additional services may not be possible. 

Low-cost online letting agencies have been squeezed by hands-on investors, looking for “value for money” and deciding against signing up for premium services. Then we have the hands off investors, who have historically been the “bread-and-butter” of low-cost online letting agencies, struggling to justify increasing premium service costs against shrinking profit margins. 

Summary 

The end result is that low-cost one-stop shop letting agencies have been hit on both sides, by hands-on and hands-off investors. There is also the threat of niche market players offering “better value for money” and a more focused approach to issues such as regulations and legal protections. All in all, the next few years could be challenging for low-cost letting agencies.

 

 

 

Written by Julie Hanson

Julie is passionate about property – development, investment and portfolio planning. Along with husband Alec, Julie is actively building a property portfolio while helping others to do the same.

LEGAL INFORMATION

This site is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. We are compensated for referring traffic and business to Amazon and other companies linked to on this site. We may also do this with other affiliate schemes.

Light up a north facing room x
Light up a north facing room

You May Also Like…

Change Pricing Plan

We recommend you check the details of Pricing Plans before changing. Click Here



£2030 daysPay Per Listing0 regular & 0 featured listings



£4030 daysPay Per Listing0 regular & 0 featured listings



£12030 daysPay Per Listing0 regular & 0 featured listings



£25030 daysPay Per Listing0 regular & 0 featured listings



£2500365 daysPay Per Listing1 regular & 1 featured listings



£600365 daysPay Per Listing0 regular & 0 featured listings



£220365 daysPay Per Listing0 regular & 0 featured listings



£110365 daysPay Per Listing0 regular & 0 featured listings



£1200365 daysPay Per ListingUnlimited regular & Unlimited featured listings



£440360 daysPay Per ListingUnlimited regular & Unlimited featured listings



£220365 daysPay Per ListingUnlimited regular & Unlimited featured listings



£Unlimited daysPay Per Listing1 regular & 0 featured listings