> Buying a Letting Agent Business
kindly supplied by John Paul
1, Easington Business Centre,
Seaside Lane, Easington, Durham, SR8 3LJ
have been very fortunate, that despite the current economic
climate, Castledene Property Management has enjoyed
huge success. We have grown organically to over 600
properties but have recently acquired another letting
agent that takes the amount of properties under our
management to over 1000. This Article will explain the
ups and downs of the acquisition and answer the most
important question, to buy or not to buy?
had known the owners for a good few years from when
I used to trawl the estate agents for looking for property
deals, as they also own a chain of Estate Agents. They
had a great reputation of being ethical and professional
and so did their letting agent Interlet North East (NE).
NE has been trading since 1992 and managed over 400
properties, mostly mid to higher end in value, which
is pretty much the opposite to what we manage at Castledene
so it was a nice variation. They are ARLA accredited
which is widely regarded as one of the most professional
of accreditation bodies but most importantly, in my
opinion, had been producing consistent profit over the
last 3 years.
immediately saw the potential of joining Castledene
and the Interlet together. There would obviously be
savings on certain items and since we have our own repairs
department, we could obviously pass on those saving
to the Landlords.
approached them and asked if they would be interested
in selling, I hadn’t the finance in place, but
I didn’t want to waste time getting the finance
if the business wasn’t even up for sale. It wasn’t
actually up for sale, but had been speaking to interested
parties over the previous few years when ever some one
had asked them, but as a general rule were happy to
keep trading as it.
had a few initial meetings discussing price and details
of the deal, which went remarkably well. They told me
what they wanted and we went away to see if the business
was worth it. I cant divulge any exact figures due to
contractual constraints but I think it was great value
Buying a business was very new for me and to be
honest, when it came to raising finance, I wasn’t
sure who could help. Initially I thought my broker
would be the person to speak to, but he said very
few commercial lenders are lending for this type
of business at present. Then by sheer chance I
was at a networking event (See it does work) and
got speaking to an accountant. It turns out that
quite a few medium to large accountancy firms
have corporate financing departments which specialise
in these sorts of commercial transactions.
met with four firms to get an idea of what to expect
and charges etc and picked one that I felt comfortable
with. This is extremely important, as this can be a
very stressful and tense time so you need some one on
your side, who you feel at ease with and also to be
open and honest with you.
accountant helped put together a very comprehensive
business plan, much more in depth and impressive than
I ever could. They write it in such a way that it makes
more of an opportunity for the banks and at least gets
you through the door, which these days is hard enough.
if any bank manager says to you that they are open for
business as usual, I can tell you, that in general,
they are not. We initially had 25% deposit to put down
and a few years ago this would have been enough for
the purchase. Unfortunately the banks are extremely
risk averse and politely declined.
therefore had to go down the EFG (Enterprise Finance
Guarantee) route, which is the old small firms loan
guarantee scheme. This scheme is a fantastic idea where,
in a nut shell, the government guarantees 75% of individual
loans made by participating banks to SME’s. The
only problem is that banks are not fully aware of the
finer details of the EFG, to the point that some of
the banks we spoke to didn’t think that it applied
to property even though we pointed out that it did.
eventually spoke to Lloyds who were very keen to help,
and after many meetings with them, they came back and
made us an offer. They would lend us 50% of what we
were asking for. To be honest I was very disappointed
as it was no where near we needed to be with regard
to our initial deposit.
went back to the owners, explained the situation and
asked for some deferment over a set period of time.
They were very understanding of banks reluctance to
lend and we agreed on 15% over a two year period, which
still meant we had to come up with an extra 10%.
wasn’t easy but we tightened our belts and managed
to come up with the additional 10%. We then had mountains
of paperwork, guarantees, etc to complete in order that
the banks were happy with everything.
Once we had the offer letter, we could then carry
out the due diligence part of the transaction
and after signing confidentiality agreements we
then got straight into it, which I can honestly
say was a real eye opener.
a potential purchaser of a new business, you have to
keep a cool head on your shoulders and not get excited
by potentially YOUR new business. You have to stay impartial
and be open and honest in your findings, ask as many
questions as you feel necessary, so that you completely
understand how the business runs and why it runs the
way it does.
feel as though you can’t ask a question as you
might offend some one. It’s a lot of money what
your paying and if your not 100% right you might end
up with a dog of a business. I basically asked as many
questions as I could until I knew the business inside
out. When I eventually took over the business and walked
through the door as its new owner I felt as though I
knew how it was run already (although there will always
Another part of the process that I wasn’t expecting
was the length of time it took for the solicitors to
finalise agreements and contracts. You feel as though
things are dragging on and want them to just get on
with it. However they take their time for a reason,
they should always have your best interests at heart
and if their not happy about something, take notice
of them and let them sort it out with the other side.
was very fortunate that both sets of solicitors were
not only good and proficient at their job but also realists.
I would ask for certain points and my solicitor would
say “ill ask, but you don’t really need
to push that point” or “ let them have that
one, we can use it as a bargaining tool”. It was
a fun experience although I think ive aged 10 years
during the whole process.
To buy or not to Buy?
you buy a business or not is really down to two things:-
Your individual strategy
What do you want from it? Is growing the business
this fast, really what you want?
Are you prepared for the extra work, and it will be
Are you cut out for the extra work, it can be very
Have you got your team in place to help, solicitors,
accountant, business advisors etc?
If the business is to be integrated, have you got
the systems in place to do so?
Can you raise the finance
Bear in mind the banks are not lending as much as
they like to tell us
You might be able to get private finance but at what
not just a case of wanting a business and going out
and buying one, I think that’s a lot of people
downfall. You have to seriously weigh up both sides
of the deal and see if its worth it.
this instance I felt that buying this agent was a great
move for many of the mentioned reasons:-
• Established business with superb reputation
• Profitable business that can be improved
• Great staff who are good at their jobs and
• Gets us to our goal quicker
• Increase the reputation and market share of
all it was a great experience and I can say I have learnt
an awful lot. We are actually in talks with another,
smaller, letting agent and hope to have that deal completed
within a couple of months so you could probably say
I’ve got the bug
has certainly improved me in many ways, as a businessman
but also a person. Patience was never one of my strong
points, but I have learnt that in life, you can’t
rush certain things.
is what you pay, Value is what you get” –