Any serious, sensible landlord or agent will understand the importance of inventory reports. Whether they own one property, several or manage a large portfolio, one of the most effective ways of protecting their investment is by keeping exhaustive and frequently updated records of a property’s condition and contents.
This is a time-consuming process if it is going to be conducted with the regularity it requires which is why many landlords choose to outsource this function to specialists, often in the form of inventory clerks. Unwise landlords may be reluctant to spend either time or money and forgo this vital undertaking altogether, but that is another issue entirely.
Companies and even sole traders who provide inventory services to the private rental sector (PRS) are in high demand as this part of the rental market grows but there are also competitive pressures to keep charges as low as possible.
So the question Is – is the market rental sufficiently buoyant and are landlords willing enough to sustain inventory provision as a viable business?
According to current figures (2020/21) the private rental sector (PRS) comprises 5.4 million dwellings, which is roughly one fifth of the total housing stock. Nearly 4 and a half million people rent social housing and there are approximately 2 million landlords. It is estimated that rental payments amount to something in the region of £58 billion.
To put this in context, manufacturing accounts for £186 billion and construction £115 billion. The rental market is clearly an extremely significant sector and it is growing all the time. Since the supply of affordable housing isn’t even close to meeting demand, the private sector offers what is frequently the only alternative.
How does inventory reporting fit into this economic model?
If we accept that it is a vital service that cannot be properly conducted and maintained without employing specialists, then a few calculations can give us a pretty good idea as to how good a business opportunity it can be.
Tenants come and go. That means inventories must be compiled both on moving in (inventory and check in) and moving out (check out). In addition, interim inventory reports are essential to enable landlords to monitor the property, any ongoing maintenance needs and attend to any particularly urgent repairs. Interim checks should be carried out at least once a year and if possible every three to six months. The average tenancy is estimated to be about two years. So with the start and end of the tenancy plus interim checks, there is the potential for up to six reports per property and at the very least, three (inventory, interim, check out).
How much are landlords paying for inventory inspections?
There are many different methods of pricing a report and of course the size of the property is important but even taking the lowest figures, where an inspection for a 2-bedroom house may be quoted at between £80 to £120, the size of the market is considerable – each year sees around 1.4 million tenancy changes (move in/out) in the PRS.
A conservative calculation based on the lowest number of inspections still points to 3.3 million reports a year, which at the lowest price per inspection gives an annual figure of £264 million. As soon as you factor in higher prices for larger properties this figure quickly escalates. Although there is no definitive data on the numbers of inventory report providers in the UK, the sheer size of the market strongly indicates that sound opportunities exist for new entrants.
An estimate by the upmarket estate agents Savills calculates that the UK housing market is approaching £400 billion, four times the value of all FTSE100 companies.
The market is regionally sensitive, of course.
A quarter of that market value is concentrated in London and another quarter in the South East and the East, with numbers falling dramatically the further you go from the Capital. However, even the relatively modest areas such as Wales, the North East and Northern Ireland are measured in the millions.
Based upon these figures, it’s clear that a competitively priced inventory reporting service can thrive in any part of the UK. However; competitive doesn’t mean undercutting, which is never good for the long-term health of the market, but it does mean pricing with accuracy, transparency and with a clear vision of potential revenue. The more detail landlords have as to what intelligence an inspection will give them, the more inclined they will be to accept a sensibly priced quote. It also helps to prevent any uncertainty about what should be included in the report.
The first step is to find out what the market rates are in your chosen or given area and then base your revenue forecast model upon a realistic balance of both direct and indirect costs and profit margins. And as the property market grows, as it will do in every region, so will your business.