The Perfect Business Opportunity for the Property Investor
If you are a property investor, you are probably experiencing a few things:
- Difficulty finding great property deals that stack up
- Never having enough free cash to buy the deals you want
- A property management headache building with all the properties you have bought that need managing
This is where running a letting agency could solve all of these issues AND be a great asset in its own right (Leverage FREE too) plus it’s a load more tax efficient.
A Letting agency builds healthy continuous on going management monthly income from the property management margins and for an established business in the Midlands this would be around 30k per month, every month (before you open the doors).
This is why letting agencies are reaching the highest levels we have ever seen in the industry at the moment, and why the big boys are buying agencies as fast as they can to build their residual income.
You also get to utilise other people’s time and property to build yourself a valuable asset, the true definition of a business.
We are all aware of the new breed of Gazelle type business that are experiencing never seen before growth right in front of our eyes right NOW, and these are not ASSET based companies, they are “SERVICE based” which means they have no limits, they can service everyone and just keep growing and growing, and they are.
Think of the following examples:
- Alibaba, the largest worldwide warehouse but owns no stock,
- Facebook, the largest content machine that creates no content
- Uber the largest taxi firm that owns no cabs…
- Rightmove owns no estate agency but valued at £95million
Slightly different but along the same lines, it’s like the gold mine rush in California in of 1855, where everyone rushed to pan for gold, because they wanted to make it rich, but quietly behind the scenes, it was the it was the suppliers of the buckets and spades that made all the money.
The problem is that relying on asset building alone as a business model is too restrictive because you either run out of leads of great properties to buy, you get short of cash to secure the ones you want, or in the end give up through lack of motivation.
Monetising other people’s assets
The difference with building a “serviced based” business is that you are monetising other people’s assets, which means there are no restrictions, you can keep growing indefinitely, no barriers, no Mortgage restrictions, the sky is the limit.
It’s no surprise that at the moment well run and systemised letting agencies are achieving 2x turnover when sold, which means if you build your business in 5 years, to a £750k turnover then your business would be worth up to. £1.5million if sold.
The real bonus is that unlike property, it would be cash, free of any debts or leverage in most cases, as well as much more favourable than property is, with entitlement for entrepreneurs relief for taxation purposes too (as opposed to capital gains tax).
Another real bonus for a property investor of running a letting agency is that you will get a never ending source of leads driven into your hands of people wanting to sell their properties, the continuous residual income to fund them and a property letting and management solution right under your nose for everything that you buy too.
The Truth is…
Which is why when I was asked last week on an interview, “What properties are you investing in right now?” and the truth is I’m not.
Now I confess I have been a very active property investor, I was buying 4 per month at one point for clients and myself, and at 27 years old, I owned over 2.7 million pounds worth of property assets and I personally had purchases for rental, refurb, holiday lets and re-sale on the go continuously throughout the 90’s and early 2000’s but not now, it doesn’t stack up for me.
You see I would prefer to buy property agency stock, I can buy 100 properties under management for around £100k and this will generate over 60k income every year, with no additional expenses, because I have the management team in place already… 60% return!
It’s a no brainer, but I accept this is not for everyone, but we handle enquiries regularly from people buying agencies that then need a “system” to put in place to handle them and of course we are happy to help, so it’s definitely catching on.
So to summarise, to build a gazelle type business, utilise other people assets, and other peoples time, which means the sky is the limit, this will release the cash you need and the opportunities to carry on investing in fixed assets with a letting and property management solution built in (if you still wish to invest in property that is)
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