Cut Price Agents with Cut Price Rates
Today I see a flyer put through one of our let properties from a new agent offering for a limited time fully managed at 5% plus VAT.
I'm sure there are ample landlords who will take you up on it because there are plenty of people in the world out for the very best and lowest price they can find. Thankfully I dont believe these are the majority of landlords who entrust their properties to Letting Agents. The point you are missing is that most landlords will know the going rate for a managed service. Landlords expect to pay an average of 10-12 or 13% for a managed service. Why position your new business as a budget cut price business?
I honestly dont think this is the way to do it. Slashing rates to get new business. Have a good long think about how you are going to increase your rates to your landlords to a realistic (and profitable????) level in the future. Lets assume a reasonable average management charge in the area of 10% plus VAT. One of two things will happen:
1. You will either encounter a landlord who flatly refuses to pay any more (because you've now set your benchmark as a cut price agent) so putting your rates up in the future will be immensley difficult for you. You either lose the business or you will keep the cut-price rate and feel frustrated in being unable to charge any more. You will work for this landlord totally without motivation.
2. When you next put your rates up have a look at how they appear to your customer? When you wish to put your rates up, lets say to 9% plus VAT then you have effectively given your customer an 80% price increase. To a realistic 10% you've given them a 100% price increase! How would you feel if your stationery supplier, any other supplier/contractor etc, suddenly said to you "dear customer here is a 100% price increase".
We all know how many Letting Agents there now are in the town. Irrespective of your motivation for doing this challenging and sometimes difficult job in an equally difficult market right now, we are all trying to make a living and competition is not a bad thing. However, you are effectively working for a loss and what's the point of setting up a new business to make a loss? I don't buy the argument, low overheads = lower prices. At those prices its a loss making charge. Those of us in lettings know this as you do too.
We wish you the very best in your endeavours with a new business.
