Lettings Agent not VAT registered?

muffmagnet197

I am currently gathering together a few rental valuations to see if the figures add up so I can rent my flat out and buy a house. I have noticed that the figures I am getting quoted are all pretty similar. One local agent however has quoted a rental income that was around £50 higher than the others. Most are charging around 8-10% plus VAT for a fully managed lettings service, however with this agent VAT is not payable. I assume that is because they are not VAT registered. Would this be a problem in the long run, and will effect any tax bills I might get in the future?

G_M

If they are not VAT registered their annual turn-over must be below a certain level. This will not affect you other than the cost saving, unless their turn-over increases in the future.

However, PLEASE....PLEASE....do not make your selection of agent on the basis of cost. By all means consider the cost, but there are far more important considerations.

The right agent is as important as the right tenant.

Read: New Landlords (information for new or prospective landlords)

And consider:

We see countless threads here from LLs who have had problems with their agents. Do NOT assume the agent knows what they are doing, or will protect your interests.

Question them extensively before signing up. Make sure you are happy with their professionalism.

And then you must decide what you want them to do. They will generally offer you 3 choices:

* tenant-find only; and/or
* rent collection; and/or
* tenancy management

But this is just the starting point: what do they mean by each? What is included, or excluded? Will they register the deposit as part of 'tenant-find'? Maybe, but maybe not!

I would prepare a spreadsheet of tasks related to letting, covering everything from obtaining the EPC, Gas cert, marketing to reference check, credit check, inventory, through inspections, repairs etc etc

If your list does not have atleast 50 items, you have not been thorough!

Then have a column where you tick those items YOU want to do (and a 2nd column to tick off as you complete them.)

Only then can you go to the agent and say

1) "will you do all these other things?"
2) How much will you charge?
3) and make sure EACH item is then included in the contract you sign - so there can be no misunderstanding!

Some items will need even more detail:

eg repairs. You may want the agent to deal with tenant-reported repairs, and arrange contractors. But are you giving them carte blanche to pay whatever they want to get the repairs done? Using your money? Ordo you want
* to see, and authorise, all quotes before work is done?
* or to allow them to go ahead up to, say £100 without consulting you?Or 500?
*or what?

YOU must consider these things, and decide, and then get them written into the contract with the agent.

Do NOT just accept the agent saying vaguely "we'll look after repairs" unless you want to give them compete freedom to spend your money.
Then check how you get ridofthemifyou are dissatisfied. Are you tied in? For how long? What ifyou sack thembut keep the tenant they found?
And check their CodeofConduct and complaints procedure. Is it only internal, or are they members of a professional body with a CoC? Or a Head Office you can turn to?

googler

VAT registration is optional for a business turning over less than £79,000 pa.

whalster

It really is not hard to conduct the rental and management yourself ,it will save you a lot of time and money in the long term as GM has said above agents are in effect a rent collection service at 10 percent or more it is your property our business and at the end of the day if anything goes wrong itis not the agent stood in court it is you .
When I got my first house an agent never even entered my head ,what did was ow do I keep a tenant in this house as long as possible ,the answer is fair but firm resolve any problems very quickly and keep the rent a little lower than anyone else .my average is 36 months against an industry average of 18 months .my longest tenant has just left after8 years I have 2 on 7 years and 5 on six years .
Remember the turn around costs it pays to keep people happy and in the property,agents generate churn as it makes them a whole new setof fees

muffmagnet197

Thanks for the feedback everyone. Never even entered my mind that the lettings agents would try to get new tenants as often as possible in order to generate new fees for themselves! Its a lot to take on board, and a decision that will be very carefully thought out.

makeyourdaddyproud

googler wrote: »

VAT registration is optional for a business turning over less than £79,000 pa.

How on earth can a lettings agency be earning less than that figure and be a viable business? I would choose another agent right away.

There's is no way a bona fide lettings business can be run with premises and staff on that figure and it would be madness to try to do so.

Yorkie1

OP, not on topic but have you double checked that the lease of your flat allows you to let it out?

googler

makeyourdaddyproud wrote: »

How on earth can a lettings agency be earning less than that figure and be a viable business? I would choose another agent right away.

There's is no way a bona fide lettings business can be run with premises and staff on that figure and it would be madness to try to do so.

I don't know, I'm merely quoting the VAT threshold.

Go on, then - tell us all what the turnover figures should be for a letting agent in their first year, a small established one, and a wildly successful one.

makeyourdaddyproud

googler wrote: »

I don't know, I'm merely quoting the VAT threshold.

Go on, then - tell us all what the turnover figures should be for a letting agent in their first year, a small established one, and a wildly successful one.

That's the whole point, a first year lettings agency like you just said, which not many would risk using due to perceived corporate inexperience. An agent not to be charging vat smacks of a cheap home enterprise would fall under the £80k threshold without premises or staff to pay for.

A wildy successful one would have multiple branches, many staff and subcontractors working in syncopation. They would easily be registered for vat and actually take your call instead of you leaving a message and waiting for them to call you back after a showing, often late in the evening!

googler

A new agency in its first year could well be a breakaway from an existing one, and the owner/manager could well be someone with years of experience in a previous agency or agencies.

The owner could well be downsizing to get away from a fat organisation, and is hoping to maximise profit by reducing what they perceive as excessive overheads.

Now, about those figures....

vectistim

It depends where you are for the viability of non-VAT rated, eg:
Isle of Wight, c 60k dwellings.
Say 15% privately rented: 9,000
50% through agents: 4,500
c. 50 agent offices: 90 per office.
£79,000 / 90 = c.£900 per property per year.

So single office lettings agent on a business park:
Office cost: £15,000
Advertising: £15,000
Staff: £25,000
Net profit: £24,000

Very back of an envelope, but shows it is possible.