Do you rely too much on a few landlords?

When you sell your letting agency, one of the buyer’s concerns will be that existing landlords will leave. This risk is much greater if your letting agency relies on a few landlords for a lot of its business. If those key landlords leave when your agency is sold, then suddenly the new owner could be looking at a much less profitable company. Any savvy buyer will factor this risk into the price they offer and the terms of the purchase.

In fact, buyers will always worry that any of the existing landlords might leave the agency when the ownership changes. But if a landlord with a large portfolio leaves, then this will have a much bigger impact on the business.

It is almost inevitable that some landlords will leave when the business changes hands, because there is a natural turnover of landlords in any letting agency. That is understood, and it is priced in. What is not priced in is one landlord taking forty properties with him.

Diversified portfolios, relying on lots of landlords each owning a handful of properties, are much less risky for a buyer.

Diversified managed portfolios, that rely on lots of landlords each owning a handful of properties at the most, are much less risky for a new buyer than portfolios that have one or more landlords with a large number of properties. Any agency looking to sell should assess the vulnerability of its managed portfolio in this regard, and then deal with it in the way described in the next section.