Online Letting – A flash in the pan, or a permanent shift?
Date online: 05/09/2014
However, it isn’t the technology that is upsetting the industry – the internet has been around for a while, it is the people who pursued change.
Online letting is popular with private landlords, not because of the technology, but because of the benefits it brings. Landlords want a quick, easy, smooth and cost-effective way to let their property while still receiving a quality service. They also want convenience to fit around their busy schedules – like how online banking made it easier for customers to manage their money, or how Netflix made it easier to watch films. People want to consume when they want. Online letting offers flexibility and simplicity for landlords and tenants, at a reasonable price.
Changing Value Streams
Online letting agents have a different business model to traditional agents and that’s because they looked at the process, challenged it and implemented actions that create value for landlords and tenants. The internet gives private landlords many choices at the zero moment of truth; a term coined by Google that describes the way consumers make purchasing decisions at the exact moment when they have a question or a need – in our case, how much do letting agents cost, the benefits of using an online letting agent, or average rental yields.
Therefore the consumer journey has shifted for private landlords and tenants as they research longer and shop around for the quality deals that give them top value. With the domination of online property portals such as Rightmove and Zoopla – it was only a natural shift that online letting agents would emerge to connect private landlords and tenants together through leveraging these major portals that are today’s shop windows.
Director of Lets Rent, Oliver Fitzpatrick, stated:
‘The internet has created an invaluable source of information that is easily accessible by millions, including landlords. We are increasingly seeing that many private landlords are researching on the web and realising they can fulfil many of the tasks that are traditionally performed by a high-street letting agent. Our aim is to enhance what we see as an out-dated, one-size fits all letting model by offering a flexible service for landlords, so they can pick and choose the services that they need.
Traditionally, landlords can mount up huge agent fees which impacts their return on investment, when perhaps they do not require certain services. Many online agents offer a pricing model which remedies this problem, whilst also creating a more efficient and faster service.’
Lets Rent conducted a landlord survey with a view of answering two simple questions; how many switched from traditional agents to online and for what reasons?’ 512 landlords responded and we discovered that even though the majority of landlords (67%) switched to online because of the added flexibility and cheaper service, 19% said they use a mix of online agents and local agents to see who can find tenants quicker. Interestingly, 9% of landlords from our research suggested that they had experimented with online letting, but found that they would go back to use traditional agents due to issues such as being unable to complete viewings quickly.
A Complete Shift?
High street agents do bring their benefits however, and thus the online model does not suit everyone. Firstly, they can offer landlords a more accurate valuation of a particular property, as they hold very specific local knowledge. This in turn then achieves the best return on investment for the landlord as they, are in theory, achieving maximum rental yields. However, the online agents would argue that combined with the landlord’s knowledge of their own property, due diligence can be performed on the likes of Rightmove and Zoopla to view similar properties and gain a good idea of rental values.
Furthermore, high street agents would argue that they have the sales expertise that can help landlords negotiate better rent and also have the service availability that online agents cannot tailor for. Being able to sell the benefits of a property and convert an interested potential tenant into a fully paying tenant is a skill. Again, online agents would however argue that this can be achieved exactly the same over the telephone, and many online companies have staff working in a centralised office to achieve this.
So even with the benefits of online letting agents, they do have limitations compared to traditional agents and are most definitely not a suitable for landlords who have a hands off approach to their investment - this is where traditional agents shine.
What does the future hold?
Many companies are starting to see the benefits of both sides, and ‘hybrid’ models are coming into the market which provide a mixture of cost-effective online solutions whilst also offering a more traditional service-lead solution. Martin & Co recently announced a shift to online sales alongside traditional services. However, most high street agents could be criticised of being slow to react to market changes and exhibiting protectionist behaviour.
Whatever the future holds for the letting industry, it is sure that traditional agents will not disappear, and online letting will not ‘eliminate’ them – but there will certainly be a shift towards a more open model where the consumer can pick the services that suit them at a more affordable price.