Estate agents’ top profitability strategy for 2024 is growing their managed rental book, according to PayProp’s latest State of the Rental Industry report.More than half (51.7%) of residential rental professionals across South Africa said this was their preferred strategy, making it by far the most popular option in the survey.
Andre van Rooyen from PayProp says that agencies are increasingly recognising the potential for reliable annuity income that comes with managed rentals – especially as sales performance has been patchy over the past couple of years. “Managing rental properties lets agencies charge ongoing fees and create consistent monthly income streams. Moreover, in a rental market where supply is tight, upselling existing placement-only clients to a fully managed scenario is a low-friction way to boost revenues without having to sign new landlords.”
Van Rooyen says that agents need to ask themselves the following questions:
1. Is my rental budget sufficient for growth?
Only 29% of respondents in the State of the Rental Industry report indicated that their agency currently allocates budget specifically for growing managed rentals. In property sales, considerable effort goes into generating marketing ideas, including social media campaigns, purchasing flyers, securing boards, and more. These same strategies can yield great results on the rental side too, but sufficient budget allocation for their execution is crucial.
2. Is my agency focused enough to achieve growth?
The majority of agencies represented in the report (67.7%) reported that their agents split their time between sales and rentals. Van Rooyen says that this isn’t necessarily an obstacle to rental growth: given the dedication and experience of full-service agents, they’re perfectly capable of handling both as long as they have the right technology to limit their admin burden. However, it’s important to ensure that enough working hours are dedicated to rental portfolio growth, whether they’re worked by dedicated rental agents or not.
3. Are my agents remunerated in a way that incentivises them correctly?
Traditionally, estate agents have operated on commission-based earnings. To foster growth in a managed rentals portfolio, consider empowering agents to develop their own rental client base within the agency framework. Van Rooyen says that agent remuneration can be more of an art than a science, and that agencies have experimented with different models – as can be seen in the PayProp survey. Once-off commission, monthly commission, hybrid models and even salary-only pay structures all proved popular. But whatever your incentive structures, it’s important to ask yourself whether it promotes the level of managed rental growth you want.
4. Can I introduce or improve a rental presentation to sign more landlords?
42% of respondents in the PayProp report revealed that they lack a customised sales presentation for negotiating rental mandates. Van Rooyen emphasises the importance of a professional presentation to equip agents with the necessary tools to secure new listings.
5. How can I adapt my services to change placements into managed rentals?
Van Rooyen suggests empowering and equipping property sales and tenant placement teams to upsell the agency’s managed rentals capability to landlords. This is a straightforward way to drive growth. Competing for new landlords can be challenging, but Van Rooyen says that landlords who have already experienced the quality of your placement service are low-hanging fruit. “If you are able to get the mandate to do a placement, and if you are able to place the tenant, it should be a very easy sell for you to get the managed rental as well. If you walk into your office and you find agents cold calling, ask that agent if they can upsell your managed rental service.”
Equipped with these strategies, agencies can build annuity income from a managed rental portfolio no matter where they’re starting from, says Van Rooyen. “The question I often get is, am I able to compete in the market because I have a smaller book? And the answer to that is yes. Don’t be intimidated by bigger competitors – you’re still able to build from a low base.”