Why (and how) a developer is setting up an in-house estate agency

It’s not uncommon for developers to set up their own in-house agency in an effort to take more control of the process and to increase their margins.

Joe Fogel, Managing Director of House Group Developments, has just started this process, so we sat down to chat about why he set up his new venture – House Group Estates, what he’s learnt so far, and how other developers could do the same for their business.

Tell us a bit about  how you got started with House Group Developments?

Initially, it was purely from an investment perspective. 

Then within the last four years, I moved to doing more permitted development conversions. 

Even though the recent updates to permitted development rights have opened up new opportunities and made more sites accessible, I've found that the newly updated process of applying for permitted development is often more time-consuming than it was before and more comparable to a full planning application.

This, combined with the fact we wanted to focus more on build-to-sell rather than build-to-rent, instigated our move over to sourcing off-market land deals to build out.

And now, my most recent venture has been to set up our own in-house estate agency so that we can list all our own properties. 

What prompted you to set up your own in-house estate agency?

There were actually a lot of factors that came together at once which finally pushed me to give it a try. 

• Responding to changing customer preferences

In my experience, many traditional commercial estate agents can be resistant to change and slow to reflect the realities of the industry. 

For example, there’s still a focus on 10-year leases for commercial properties, even though we’re seeing a growing trend for 12-month flexible licenses, particularly when it comes to office space.

I have a number of mixed-office buildings in my portfolio and since the pandemic there’s been a real uplift in demand for hot-desking and shared work spaces.

So, we had to do something in order to sustain interest and keep our units filled – and this meant being able to offer more flexible lease terms through our own in-house agency. 

• Working at a faster pace

There’s also the time-saving element. Before, it could take up to six months to even get someone in to view a unit, but now we can show people around a site within a week of posting about it. 

With fewer external parties involved, we’re also able to draw up contracts a lot quicker and get moving forward with deals at our own pace.

• Increasing our margins

Estate agents were invaluable for a lot of our history, and they do great work. But as we got a little bigger, we ultimately realised – if someone’s making a profit from this part of the process, why shouldn’t it be us?

There were some costs in setting up, obviously, but not as many as I’d assumed. 

Then, once we had everything in place, the return on investment should be good enough that we not only get those other two advantages, but make some money along the way, too.

And how did you actually go about getting your estate agency set up? 

The process of getting set-up was actually fairly quick and painless (with relatively low overheads). 

But, there were a few key steps I had to take before I could get started: 

• Join the relevant schemes – as an estate agent, it’s a legal requirement to be part of a government-approved redress scheme, such as The Property Ombudsman or The Property Redress Scheme. These schemes are designed to provide independent dispute arbitration. 
• Choose your CRM system and property portal – research and decide which portal you want to list your properties on. There are a number of options out there, but it’s important to run a costing exercise based on their pricing to make sure it will work with your budget.
• Work with a trusted lawyer – as a developer, you probably already have a property lawyer that you work closely with. It’s likely they’ll also be able to handle the additional legal requirements of an in-house estate agency, but if not, find one you can trust.
• Decide whether you need to hire – in our case we realised that we’d be able to manage with the team we already had in place with our property management division. But, if you’re looking to list 50+ properties it may be worth bringing in an extra team member. 

There is, of course, a lot of research that needs to be done to make sure this is the right business decision for you. But if it is a good fit, and undertaken correctly, there’s the chance to save a lot of time and money – and have more control over the whole development process. 

Learn more in our on-demand webinar

If you’d like to find out more about how Joe set up his in-house estate agency, and whether doing the same could work for your business, watch our on-demand webinar – How to diversify as a developer and set up your own in-house estate agency. 

During the session, we discussed:

• How to set up your own estate agency
• Why your business could benefit from bringing this service in-house
• How to diversify your business and set up new revenue streams