Watch: What HMO and traditional letting agencies can learn from each other

John Paul (00:04.654)

Excellent. So just quick show of hands, how many people here are HMO management companies? Quite a few. And how many are what you call the traditional management companies? A couple. So I want to get out of here alive.

So it’s not a good thing or a bad thing to notice the differences. It’s just through my career experience coaching, managing, owning agencies, there are some quite definitive differences between what you’re classed as a HMO management company and a traditional management company. And there is a lot, actually. So.

Before that, give a bit of an introduction. So I started at the Castledane Group back in 2008-9. We grew that to 12 branches, a couple of thousand houses, as we mentioned. And we had a couple of brands. So I was very big on acquiring businesses. So one of the topics I’ll talk about is how to grow and scale a business. And I found that in my research was quite difficult for HMO companies. When you’ve got a traditional agency, you can acquire other agencies in different areas.

and that’s what we did because we sort of hit our maximum amount of properties we could manage in certain villages and towns and locations so it was just a lot easier and believe it or not cheaper over a period of time to actually acquire agencies and although it’s not part of this talk it’s a very interesting subject how to acquire agencies the cheapest we acquired another agency for was one pound.

that chap was almost begging me was going to pay me to take over his agency. So the deals are out there if you know where to look.

John Paul (01:44.622)

That’s us back in 2014. We won the best agency in the UK at the Sunday Times Letting Agency Awards. We did pretty well at every award since then and we were the first agency in the UK to get investors and people gold standard. So if anybody’s gone through the whole investors and people thing, we got gold on our first attempt. we’re a pretty decent company and I exited that. I saw that in December 22 to get a little bit like the cohort guys to get into prop tech. I’d rather have my agency back now if I’m

honest because we deal a lot with artificial intelligence or lack of it in some cases.

The research I did, so I speak to agents all the time, literally on a daily basis. I’ve had a couple of coaching calls on the way down here, three and a half hour drive from the Northeast, in case you can’t tell from the accent. So I speak to agents all the time. And I spoke to about 80 HMO and traditional agents for this, around about 50-50, just to gather some data and also speak to some of my coaching clients as well, just to find out exactly how they operate.

I’ve coached and trained about 300 agents since 2018 from all across the UK and I run a Facebook group with two and a half thousand members called the Agency Growth Strategies Group. So go and join that. Hopefully we’ll get a lot of accepting in the next 20 minutes or so. I’m on the board of directors for Arlet and Property Mark which is the UK’s largest voluntary organization for estate agents and letting agents. And it’s doing some really, really great work in lobbying government and trying to, you know, get certain bills and legislation through.

Have we got any Arlo Appropriate Mark members in here today? Fantastic. I’m going for my board director’s role again next month so I’d love your vote. Thank you very much. Depends on the speech. And I do speak to HMO landlords and traditional landlords on a weekly basis and I genuinely find it fascinating how HMO landlords work and traditional landlords work.

John Paul (03:42.667)

So there’s five topics I’m going to talk about. The first one is the marketing. There’s diversification of the marketing where people sort of put their input. Legal and compliance.

It might be a little bit of a shock and say I do want to get out here alive so just bear with me on that one. Culture and people. Everybody who knows me thinks I’m all about systems and processes but in reality it’s the people and the culture because if you get a business right, especially around the culture, the people will write the systems. You could have the world’s best systems and processes and procedures but if you get the wrong culture in a business it will go downhill very, very fast.

There was a Harvard Business Review article, probably about six, seven years ago now, and they asked 10,000 people, if we could give you one thing to make your job, your life, your role easier where you work, what would it be? They give about 12 options, more money, flexi time, promotion, better equipment. 65 % of people said, give me better people to work with. So that just tells you that culture is more important than money, everything in a business.

We’re going to talk about revenue and income streams, and also operations and growth, which is quite surprising about how the different types of agents operate. So sales and marketing. So HMOs.

In the main, and this is a very generalised view, I do think that because you guys are probably the top of your game in your various disciplines, HMO traditional, some of these are going to be a little bit like, well, we do that, but this is sort of a generalised view of what I found over my research over the last couple of months. HMO agents are very, very good at marketing to students to get them on board. And I understand why and I totally get it, but they’re very poor at marketing for new landlords.

John Paul (05:37.933)

Your client is your landlord, your client’s client is the students. I totally get we have to go for students because there’s a certain cycle and I get that. I just think with a little bit of a different tact we could market a lot more for the landlords to grow the business. And I found that HMO agents don’t necessarily have a strong strategy for sales and marketing.

which is absolutely a paramount and you should have a strategy that is pretty much working 24 7 3 6 5 and I’m talking Facebook, Google, know letters, all sorts of stuff. know events, organise your own events. We’re traditional, by God they love a good letter.

I don’t know if you’ve ever been to one of your properties and it’s like, do you sir, we notice your property has been, you know, not tenanted. Can we have your property? It’s the same crap over and over and over and over again. So it’s not all, you know, knocking HMO, I’m pretty much knocking all agents to be fair. But this is just to sort of give you an idea.

I think that traditional agents rely on the portals far too much, especially your right moves. There’s a lot of fear mongering out there at the minute and I think a lot of agents need to step away from the portals and start doing what a lot of HMO managing agents are very good at and is looking for their tenants in other means.

and they do use a lot more marketing tactics. There’s a lot of kind of Facebook gurus or coaches in our marketplace. There’s a lot of Google experts and a lot of the traditional agents use them a lot. They use funnels, they use a lot of newsletters, which again I find has used a lot more than traditional managing agents.

John Paul (07:24.332)

Legal and compliance. I found that HMO agents are very good at industry specific legislation and regulation like HMOs. This one’s going to raise some eyebrows. Not very good at general legislation. I’ve checked quite a few websites, probably some people in the room here and 95 % weren’t compliant. That’s bad.

95 % of websites weren’t compliant. The deregulation act as well, there’s a lot of agents that need to know that. And by the way, guys, these are things that you could literally, by the end of the talk, have Googled, understand what you need to do, and then get your website compliant.

But I’ve got a theory about this and I think that a lot of HMO agents have started off as landlords. So you haven’t gone down the traditional working in a corporate route. So therefore you’re not taught by your Connells or your country rides or your Reeds Reans about legislation and compliance. Most HMO agents may not be Arla and legal and compliance has drilled into you from a very early age in your career. But it’s not too late because trading standards, et cetera, et cetera, are really cracking down on the legalities

or the lack of legal and compliance in this industry. Traditional love a good legislation debate. You would not want to go for a drink with them. They are really, really boring when it comes to this. mean, I’m on the board of Arlo, I can say that and get away with it. But you know, in the WhatsApp groups, it’s not like, how many houses do you rent? Or did you do this? It’s all about the Renters Reform Act and the leasehold bill. It’s like, for God’s sake, I put it on mute half the time, to be honest.

Because they’ve got property mark or a rival firm, Oocola, there’s a lot of traditional agents who see that as a competitive advantage. And it is really, especially if you’re shouting about it. So again, I’m not on commission, but if you haven’t joined, I strongly suggest you do join for the legal helpline alone. And there’s a massive conference coming up next month, actually. We’ve got some really, really great speakers on. And the way the property mark is set up, we’ve got some regional execs, you’ve got the board, we’ve got a CEO.

John Paul (09:30.036)

etc etc it’s a really really good organization to get behind and the more members we get we can lobby government and get things passed through to the benefit of us and the good agents more importantly get the Cowboys out of the industry as well. Culture and people this is very interesting I found that HMO agencies had a closer-knit smaller younger team

And I think they, my theory again was that they recruited people a little bit more like them.

It was more around feelings and people, that’s for sure. It was never about we’ve got to hit this profit or hit this KPI. It was more about how does your team feel? And again, I love that because there’s a big place for that and that’s exactly how we ran our business. Hence, we went for investors and people. Don’t get me wrong, profit is incredibly important, but you get the right people and you build the right culture, profit will come second. It’s people before profit.

The team tend to stay longer. A lot of the guys that I coach who own HMOs, they don’t tend to have that high turnover of staff, whereas other traditional agents tend to do so. And they’re very good at taking people from outside the industry. Again, they just look at people and they say, look, they’ve got something about them, they’ve got the right attitude. I think they can fit into our culture because you can’t teach attitude.

You can coach and train people to become capable. They will become competent over time. But that’s one thing you can’t coach and teach is the attitude.

John Paul (11:04.298)

traditional. It’s very mixed because of the great plethora of independence.

your regional firms, is your six, seven, eight, nine, 10 branches, and then you’ve got your big corporates. So culture is very, very difficult in regional firm and a corporate to get down. And when we had the agency, we used to, I was going to say a porch then, it’s unethical, get people to come work for us. And one of the things they hated if they came from a big corporate was the fact that it didn’t have a culture. It was all about the KPIs. wasn’t like, oh, how was your weekend? a case of how many phone calls have you knocked out? If you hit your KPIs, what’s your sales rate?

issue. You can’t run a business based on that. It was definitely a lot more around the processes and finances and they had a high turnover of staff. Towards the end, just before I exit my business, we had a relative high turnover of staff. We had a board, you know, it was quite a large turnover business.

Just after Covid, there was definitely a shift of people wanting to work somewhere where they were very, very happy. It definitely wasn’t about the money anymore. It was always about the culture and stuff. any tips to traditional agents out there, if you want to compete on a recruitment and a retirement of staff, concentrate on the culture.

When we used to do our interviews, we used to let them talk for a while, but then we used to try and sell them the company because we want them to come to us knowing that we’re a good place to work. So again, if you’re recruiting, concentrate on the culture.

John Paul (12:38.94)

And traditional agencies prefer people who come from the corporates. They prefer people who’ve got previous experience. But if you’ve got a good training, robust training and development in place, you don’t actually need it. And sometimes when they come from the corporates or larger agencies, you come with your bad habits. You come with your 25 cigarette breaks and your two hour lunch break and all that sort of stuff. And you leave at five o’clock on the dot and you don’t put your computer until one minute to nine. That’s a bad habit and it can take quite a while to get out.

HMO has got a pretty standard revenue stream, I found. It was very, very sort of predictable. And high, but they did have high property management commission. 12.5 % right the way up to 20 % management. But other than that, there wasn’t a lot of other income streams. They did a lot for free or low cost, going backwards and forwards to the HMOs, going to court with people, serving the notices, all those sorts of things tend to be baked in.

to that quite high fee of 12.5 to 15 % to 20 % management fee. Whereas traditional, the lowest commission was 5%. We used to charge for, this is sales, but we used to charge one and a quarter to one and a half percent and there was a 400,000 pound house, so I think we were going to get about five and a half thousand pound fee. There was a big agency up in the Northeast that they would do it for 789 pounds including VAT.

How can you compete with that? It cost us double that just to get out there, do the Matterport, the photographs, all that sort of stuff. So the thing that I would say is that we can learn a lot from each other is charging really, really good fees. So you can pay for the best people who can do a great job to get you more landlords. And then it’s a positive circle, not a downward vicious circle.

Traditional agents do charge for lot of other things such as inventories, inspections, maintenance. I don’t know if there’s a debate on should we charge on top of maintenance or should you not.

John Paul (14:40.882)

charge so long as it’s upfront, so long as it’s transparent and there’s no hidden cost, it’s perfectly legal, it’s perfectly ethical. I do remember having this debate online a couple of years ago where somebody said it was unethical and I asked them why and they couldn’t. said well if the landlord knows about it, it’s in my contract, it’s you know everybody’s upfront about it and I charge it and they’re happy to pay for it, why is it unethical? Couldn’t answer that.

Renewals, notices, Section 8, 21s, if you want to increase the rent, 13s, et cetera, et cetera. Traditional agents tend to charge for an awful lot. I don’t think there’s anything wrong with that on the proviso that it’s all upfront. The landlord hasn’t come, you’ve signed them into a 20-year contract, then all of a sudden you hit them with all these increases. That’s the unethical part of it. But if everybody goes into a business relationship, because that’s what it is, with eyes wide open, then charging fees is totally acceptable.

and operations and growth. So HMOs, very rare to do, pure HMO agents have more than a single branch. They might do, but I’ve not come across many, if at all. There’s a lot of risk for external factors, councils, perhaps built student blocks.

There’s quite a few people that I’m speaking to at the minute are thinking about what we’re going to do because the council have come in and bought a couple of our landlords huge blocks or we know that this university is building their own accommodation. What do we do? Or can we change and flip from student accommodation to traditional management? So there’s a lot more risk with the HMO management company. And it is hard to grow past a certain threshold.

Universities are a certain size. There’s a certain number of HMO agents in an area. So it can be quite difficult to grow into other areas as well. And I think a lot of HMO agents feel very, very comfortable in a certain town or an area because maybe they went to university there, maybe they live there. They’ve got some connection to Durham, a Newcastle, a Sunderland, although why you want to be connected to Sunderland I’ll never know. But it’s very difficult to grow that business. Whereas traditional…

John Paul (16:47.432)

It’s easy to grow into multiple brands or branches. know, we doubled up. Just during COVID, we went from six branches to 12 branches. It was very, very easy. The big reason for that was I recruited an MD, put her in place so I could just concentrate on the acquisitions. But it was incredibly easy to grow the business.

John Paul (17:11.21)

It’s a lot slower growth because remember you guys are taking on a hitch or more with maybe six, 12, 15 people, tenancies living there. We’re taking on a terraced house in the colliery villages of the northeast or a family home. So the growth isn’t as fast in traditional agencies. But then again, it’s not capped as well just because the amount of people that live in, you you’re two up two down as opposed to live in house sharing. But let’s join the two together.

Let’s see what we can get from HMOs and let’s see what we can get from traditional management. I think that having a robust all-encompassing sales and marketing strategy is of absolute, it’s the most crucial thing any business in any industry should have. You should be lead generating on a daily basis. That should be the first thing you do when you get into work and everything else, including repairs, including dealing with your emails, including your inquiries, that should be a secondary thing.

The worst time you can start prospecting is today when you need it. The best time was six months ago. So anything to do with lead generation, make that a priority. Of course, not everybody in your business is going to be generating leads and trying to get new business on, but get the best people in your business. Speaking to your current landlords, your past landlords, your let-only landlords, whoever it is, but get a proper strategy. And by the way, decide to post a couple of things on TikTok or Facebook. That’s not a strategy. That’s a tactic.

You need a proper strategy as to how you’re going to achieve the things you are and what tactics you’re going to employ to achieve those goals. Focus on legislation. Be an expert in all areas and CUIA. Does anyone know what that stands for? Cover your ass. It is inevitable you will, standards are coming after rogue landlords. There’s been money put aside to do this and rightly so.

But the agents in here, a good agent, it just might be you’re not aware of it. It’s the old, don’t know what I don’t know. So make sure you understand the legislation, the deregulation act, consumer eggs, all that sort of stuff. And just make sure little things like your website are compliant. If your website’s not compliant and someone’s checking it out, what else do they think that’s not compliant? And that’s when you can get an investigation and nobody wants one of those. Look at different revenue streams. Know your worth and charge for it.

John Paul (19:32.988)

Again, as long as it’s in your terms of business when you’re signing up landlords and they understand what they’re signing up for, so to speak, then there’s nothing wrong with charging stuff. The more income and revenue you can generate, you can pay your team better, you can retain better staff, you can use better technology, you can have a refresh of the office, which is an environment which our first speaker spoke about, well, wellness. I’m a big believer in that. I we had some of our branches in the collieries of the Northeast.

Has anyone seen Billy Elliot? That’s where one of our branches was. You talk about mining and working class, but we had the best office on the street. Again, that wasn’t very difficult. But we made sure that people enjoyed working there. If people enjoy working there, you’re going to retain them a hell of a lot easier. And I like this phrase, be corporate but agile. The corporates, for all their failings, they do work. Six, seven hundred branches, but why do they work?

They’ve got the KPIs, the processors, leadership management training, financial accountability. They’ve got all those things in the business and it works, but you’ve got to be agile with it. Don’t have a about a meeting to choose what toilet roll you’re going to use this week. Try and get rid of all the meetings as you can. One thing that we had in our business was no agenda, no tender. If I don’t know what I’m going to a meeting for, then I’m not going to turn up.

The most valuable commodity in anyone’s life or business is what? Time. So make sure you’re not wasting it on BS, going to meetings that you don’t know what it’s about, you shouldn’t even be there, or do quite frankly, you can’t affect the change of the outcome anyway.

John Paul (21:15.663)

Has anyone got any questions?

Stunned silence, I love it. Did anyone understand my accent? Was that the problem?

John Paul (21:35.847)

Yeah, yeah. So really good question. How do you acquire other agents? So again, you’ve got to have a strategy. So you can’t have like a blanket approach where you just start sending out letters and leaflets to all agents. So understand why you want to buy, what you want to buy. And the other thing, phrase we say is get your own house in order. So don’t let the ego want to acquire businesses because you want to be on the front page of your local press. We bought 24 or 25 businesses and sold two.

The first I would like to be honest was a bit about ego but then the next 20 or so was all about a concerted strategy, how to grow and scale the business. So out of 50, 60, 70 agents in your local area, you’ll probably nail and narrow it down to about say six or seven.

And then it’s just a nice letter. You can go through your accountant or you can go through your solicitor who can write a letter on your behalf. We have a client who wants to buy and it’s that air of mystery where they go, I wonder who it is. Especially if it’s a rival and they’d rather let it go popped than sell it to you. But once, you know, if it comes from a solicitor and accountant, it’s a little bit more real, so to speak. Perfect. Thank you.

All right.