Do I set up a new Agency or Inventory business instead of investing in property directly?

Do I set up a new Agency or Inventory business instead of investing in property directly?

12:31 PM, 5th November 2014, About 7 years ago 14

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Have been browsing here for a while, but havent written anything yet. I’ve been a landlord for 5 years, just 3 properties so far, but now doing it full time as recently lost my job.

I have a bit of redundancy money to invest, and because there’s so much new legislation proposed, and changes to letting, I’d like to hedge my bets instead of just buying another property to rent out.

Would I be better off using my landlord experience (I’m NLA and RLA accredited) and investing in a franchise or a licence to start my own online letting or property inventory business? I’m finding it hard to get another job as there’s just so many applicants, all much younger than me. I live in London so should be enough business.

Have any Property118 members done this, or know anyone that has?

Thanks

Callieroulette



Comments

by Steve From Leicester

11:47 AM, 8th November 2014, About 7 years ago

Here's an alternative viewpoint to Julia's. Julia, please don't take this personally, if you read to the end I hope you'll think it's a balanced view.

Julia advocates buying property instead of starting an agency. if you think you've got the skills, the willingness to take a risk, and the appetite for sheer hard work why not do both? Believe me, if you run an established agency you'll always know where the best local opportunities are. Plus, I let and manage my properties through my own agency giving me maximum control.

Julia suggests that if you really must start your own agency you should do it yourself rather than buy a franchise.

OK let's look at the facts. Julia herself tells us that most new business fail within 5 years - but the figure for franchise failures is vastly lower. So that in itself is a good reason to consider a franchise over a DIY.

No disrespect, but investing over £100k and turning over less than the VAT threshold (about £80,000 a year) means Julia has a very modest business at present. Buying a franchise would typically require a similar initial investment, and you'd have reasonable expectations of turning over significantly more than that in the same time frame.

NB That's why most franchisors insist you're VAT registered - they expect you to quickly reach and exceed the threshold. There's no HMRC rule that says a business has to be VAT registered just because they're a franchise.

Of course its not all about turnover - profit is much more important. I'm not going to tell you how much I make, suffice to say I'm very happy with it. I also own a business which, one day, I'll be able to sell for a tidy six figure sum. Granted my franchisor earns even more, but fair play to him - he started the business in the first place and is reaping a return on his own investment.

I promised a bit of balance so here goes.

Julia is master of her own destiny where her business is concerned. I, on the other hand am bound by the constraints of my franchise agreement which dictate what I can do and where I can do it.

Buying a franchise doesn't guarantee success - it merely improves the odds. I should also add that whilst my results are by no means exceptional they are above average compared to other franchisees in my group.

Paying royalties on over half a million quid a year is an awful lot of money (how much? Look up what a typical franchisor charges and work it out). That's a massive overhead which Julia will never have to incur.

Neither me nor Julia is right or wrong. Different things work for different people. For some people starting their own business (one way or another) is a road to riches. For others its a way to earn a living but nothing more, and for some its a disaster.

I think all of us who've done it will agree on one thing though. It's bloody hard work.

by Mark Alexander

12:23 PM, 8th November 2014, About 7 years ago

Reply to the comment left by "Steve From Leicester" at "08/11/2014 - 11:47":

Excellent post Steve, I've given you the thumbs up for that one 🙂
.

by Steve From Leicester

12:59 PM, 8th November 2014, About 7 years ago

Reply to the comment left by "Mark Alexander" at "08/11/2014 - 12:23":

Glad you liked it. It came from the heart.

by Julia Benham

10:08 AM, 10th November 2014, About 7 years ago

Reply to the comment left by "Steve From Leicester" at "08/11/2014 - 11:47":

Thanks for your comments Steve - it's always good to get different opinions 🙂 The lettings agency I run BTW, I don't own - I just get a very nice salary! Some of the set up costs I didn't have any control over either - i.e the board decided to pay £8K for a bespoke website - something of which I wouldn't have done! I have to say though, that I love this buisness and wouldn't want to do anything else (apart from grow my property portfolio!) Like anything - you need to know your stuff. I wish you all the best Callie.


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