The LetPal solution for private landlords is a full suite of competitively priced on-line services, from which landlords can select and pay for only those they require. LetPal now intend on being the dominant player in the Scottish Private Rented Sector (“PRS”) and then expanding into the rest of the UK.
The scale of the market and opportunity is huge. There are more than 5 million homes in the UK PRS, of which about 380,000 are in Scotland. The sector has grown by an average of over 6% per year in the last 10 years, and is expected to continue to grow. The % of homes that are rented privately has increased from 11% in 2004 to 17%, and this is projected to rise to 27% by 2020. There are 1.9 million landlords in the UK and 89% of them are private individuals, most of whom have little or no previous experience in managing a let property.
50% of PRS properties are managed by professional letting agents on behalf of landlords and these letting services have traditionally been provided by high-street property agencies. Research undertaken by the analysts Jefferies showed that the majority of landlords and tenants were dissatisfied with the service provided by letting agencies and that most of the complaints related to fees and poor service.
High street agencies generally operate with high overheads, including rent and rates, utilities, staffing and marketing. These costs need to be covered and this can only be done through their fees. Most agencies bundle a variety of services together to justify their high fees and there can often be a lack of transparency on what landlords are actually paying.
The significant growth of the market and the development of online platforms and applications have provided the opportunity for the ‘virtual letting agent’, providing products and services at highly competitive prices, which should be attractive to the growing number of private landlords across the UK.
The UK and Scottish governments have also been taking steps to regulate the market to ensure that tenants are looked after and that unscrupulous landlords are driven out of the market. The Scottish government has been particularly active in the sector. The Housing (Scotland) Bill 2014 became law on 1st August 2014 and a significant element of the Act was directed at reform of the PRS. This has introduced tenancy deposit schemes, tenant information packs, safety certification, property energy performance data and landlord registration.
The new legislation and regulations have made it increasingly onerous for landlords to comply with all the requirements. This has resulted in more landlords seeking advice and help from professional letting agencies and using their services to help manage their regulatory obligations.
The differences in legislation between Scotland and the rest of the UK has also meant that the current on-line letting agencies, such as Upas, Rentify and easyProperty have opted to focus on the English and Welsh markets and their websites do not cater for the different legislation in Scotland. There is therefore an opportunity for LetPal, as the first Scottish-based platform, to dominate this market.
The co-founders Miles Gilham and Philip Horne have the required knowledge, experience and skills to take LetPal to market and grow the business to become a major player in the PRS. Based on very conservative assumptions regarding market share, they are projecting the business will turnover £1.8m and return profits of £600k by Year 3.