INTERVIEW: Alex Sullivan – Smarter Rent

Alex Sullivan and his business partner Adrian Sutherland run Smarter Rent, arguably one of the most unusual agencies within the industry and, given its success, a likely preview of what lettings agencies will be like in the future. Part lettings operation, part refurbishment company, part property management outfit (while also being a bricks-and-mortar investment consultancy), it claims to be unique.

Established four years ago, it already has a portfolio of 200 properties under management across West London with plans to expand further afield. The business model behind it is simple, which Sullivan says is surprising given so many people talk about ‘disruption’ within the industry. His firm’s 11-strong team find properties within neighbourhoods on a client’s behalf, usually in areas where professionals like to live, upgrade them into des-rez accommodation, improve their energy efficiency and then ensure each tenancy and property is run properly. “By upgrading our EPCs and making the properties more energy efficient, we’re creating 1% more yield on average for our clients,” he says. “We’re also running a project to eventually have all of the properties within our portfolio being zero emission homes.”

Increased returns

Consequently, and with cost control at the fore, Sullivan says his firm’s clients, who are either landlords, institutional money or ‘family office’ investors, see their returns increased by an average 40% on an annual basis for properties that his firm picks, upgrades and operates when compared to traditionally-sourced and operated ones.

We’re running a project to eventually have all of the properties within our portfolio being zero emission homes.

This is helped by the firm’s in-house rent pricing software and its own house-keeping operation for shorter lets. Smarter Rent, which is based in Richmond, West London, is essentially a ‘build-to-rent’ style service including flexible tenancies for tenants that can run for weeks or years and a concierge-style property management service.

“Build-to-rent is expanding because the professional money behind it is very patient, they have very large sums of cash to deploy and therefore BTR can spend big on research to find out what tenants want,” says Sullivan. “We’re emulating what the build-to-rent operators are doing but rather than providing homes just for young people in city centre apartment blocks, we’re after tenants in suburban areas and include a wider range of ages.

“What we’re doing isn’t terribly sophisticated, we just want to offer a renting experience that is based on listening to both landlords and tenants, rather than just doing it the way it’s always been done.” He says there are other agencies doing part of what Smarter Rent does, but he’s yet to come across one that’s doing exactly what they do.

Proptech start

Sullivan, like his business partner, started out in estate agency before delving into the worlds of initially fintech and later proptech – the latter of which he sold to Nationwide – and then helped establish Sutherland’s business. Sutherland began Smarter Rent because he became a single father, didn’t want to work full-time in central London any longer and consequently set up a business dealing with friends and family who wanted to invest in property.

“I came on board after it had been running for about two years and realised that he had something really special here because he made it easier for both new and existing property investors to acquire properties by doing the hard work for them; sourcing properties, kicking the bricks, completing the purchase negotiations, running property management and, more recently, all the design of the refurbs too,” he says. “We do the desk research to ensure we know how to design each property so that each one gives the best returns for an investor – as well as working out where to buy.”

Sullivan says that, for example, they researched from their own data which items were being damaged most often by tenants in rental properties and designed theirs to prevent this, consequently reducing maintenance costs.

One direct comparison with build-to-rent is that Smarter Rent offers flexible tenancy contracts and, although Sullivan is mindful that it’s a “strong statement”, says traditional agents are a “bit out of date and that the market has really changed”. This is something the Government agrees on; its Renters (Reform) Bill includes plans to usher in periodic tenancies and bin ASTs.

BTR opportunity

“A large portion of tenants are now over 35 years-old, with pets and children in tow, plus more renters are now over 50 years-old, but the ‘product’ hasn’t changed,” he adds. “That’s where we and the BTR operators see the opportunity.” Sullivan says his tenants want a ‘home’ not a property and therefore seek security of tenure – so Smarter Rent offers contracts of between one week and 36 months to serve both younger people who want short stays (and who are prepared to pay more for short-lets) with bills included and furnished properties, while at the other extreme also catering for older tenants who may want to stay in their properties ‘for ever’.

Tenants are also offered one-sided tenancy breaks where only they can give notice – assuming they pay the rent and look after the property – and agree to RPI-linked annual rent rises.

“This is much better because the tenants know what’s coming rather than being surprised by a huge rise after five or ten years of no rent rises,” he says. “It’s not fair on tenants when the rises are arbitrary and not transparent.”

“As a business, we’re growing fast because investors realise that they can make better returns than they would on their own, without lifting a finger, and that’s good because the PRS desperately needs fresh investors, so you’ve got to make it easier to get into the market.

Views on Buy-To-Let

“One error that many BTL investors make is to play it safe and only buy in areas they know or that are local – which is understandable but it’s not how you get better returns on your investment,” says Sullivan. “For example, there are many landlords who have long-standing properties or portfolios within Zones One and Two [of London’s Underground network] who don’t realise there are opportunities further out or if they do, don’t know where to look.”

Sullivan has also been watching the launch of the Government’s Renters (Reform) Bill but, unlike many commentators within the sector, says better returns for investors and the reforms within the draft legislation are “two sides of the same coin”. “What we’re doing is offering solutions to many of the challenges that the Bill seeks to address but I think many traditional agents and landlords don’t realise that their less flexible approach is soon going to come to a crunch point as the market changes as build to rent unit numbers grow and the reforms change everything,” he says.

This crunch point is also being accelerated by the hikes in BTL mortgages rates, which are likely to stay high for the foreseeable future. “Some landlords will quit, and more than usual have been, but those that remain can make a difference and have a positive impact on the market by changing the way the properties are rented and operated,” adds Sullivan. “And the returns will be better too.”

CURRICULA VITAE

 

ALEX SULLIVAN – started out at Buckinghamshire fi rm Michael Anthony Estate Agents in 1999, leaving after three years to join fintech FX fi rm World First where he rose to become its Group Chief Commercial Officer. He then set up property search AI chatbot ems.ai which he sold to Nationwide in November 2018, then worked for several tech platforms including as a NED before co-founding Smarter Rent with Sutherland.

ADRIAN SUTHERLAND – started out in 2001 as a negotiator and later senior sales neg at High Wycombe fi rm Hurst Estate agents before becoming a property investment consultant for three years and then joining FX fi rm World First where he stayed for five years. In 2014 he launched online property marketplace BeStreetSmart, and in 2016 created Smarter Rent with Sullivan.