Which Agency?

[july]

I am warming towards the idea of using an agency.

Any recommendations? Good occupancy at nice prices would be good:)

Our house is very expensive to heat so it is difficult to cover the costs in winter. About £250 to cover. And people dont want to pay much more in the winter.

[Eagerbeaver]

We use Cottages4you. Their charges are high but their coverage is very good which means we are always full when we want to be.

[july]

How do you find the winter months? Do you make much or just break even?

[charles cawley]

Many agencies do not like cherry picking leaving them with the low income. hard to fill periods. Cottages4You restrict owner freedom significantly.

Even agencies such as ours could not work this way. The bulk of all agents profit comes from the shoulder and summer months. Trying to use an agent as a source of income to cover costs is not always the best approach unless a full-on business like approach is used.

It is worth considering that, on average, depending on area, between 35 and 50% of all income should go towards running costs. In our area, due to lower rents, 50% is often the realistic figure.

Holiday letting is not well suited to part time activity. However, we do have several owners who do used it successfully to defray costs. They succeed because they do not compromise on quality and, when there is any unforeseen clash, they tend to put letting first.

www.holidayletsforsale.com provides quite a bit of information about holiday letting: click on the 'Advice' or 'Articles' tabs.

[bessie]

Charles could I ask maybe a silly question.
You say up to 50% for running costs,during off peak when clearly agencies charge considerable lower rates does this figure increase.
If I earn £500 in peak ,running cost £250
But off peak £250 my running cost surely is not going to decrease.
Excuse me if I am beenthick this morning ,but having a costings morning with cottage and my nightmare ASTs.

[e-richard]

The key word in Charles last comment is "Average".

Now it may well be that the average costs across the whole year for an average occupancy rate is approximately 50%, but this is not in any way the % cost for any specific booking.

In reality its all much much more complicated when you think that there are some fixed costs (these are costs you will incur whether or not you get a single booking. e.g. Mortgage, or maybe line rental, Internet, TV license, Advertising and Marketing, including website costs, in fact any weekly this or monthly that or annual fees).
Then there are variable costs that only occur when you get bookings and can be anything from cleaning costs, agency commission, marginal utility costs (i.e. usage over and above the standing charges).
The mix and ratio of fixed to variable can vary considerably depending on your own cost structures (with or without a mortgage) and number of bookings.

So if you only have 1 booking per year, you will have to load all your fixed costs onto that one booking.
If that one booking is in the summer, your costs may be 250% of the revenue.
If that one booking is off peak, your costs may be 350% of the revenue.

If you had 100 bookings you can spread the fixed costs across each of them - even perhaps in proportion to the rental rate. Thank goodness for Excel !

Average is truly a wonderful thing, but needs very careful interpretation.

[charles cawley]

I should have been more precise.

The direct operating costs of running a holiday let include heating beyond maintenance requirements, wear and tear, changeover labour, electric, LA waste disposal charges, owner financial and administrative control, insurance, wifi, etc:.

Advertising or use of an agent should be added to these to come to the direct operating cost of running a holiday let. In low season this can easily exceed 50% of rental income in any one week assuming direct cost allocation per week. Some cottage owners (in my opinion, often mistakenly) will close up because the margins are so small in winter that they would rather the cottage be empty than the risk of ending up busy fools.

These direct costs to not include interest on property loans.

However, for those converting from domestic use it is sometimes possible to save on council tax by becoming business rated and then to benefit from rates relief. This topic has been well covered elsewhere on LMH.

A doing a profit and loss for AST and contrasting it to a holiday let could be useful. Void periods for AST and the higher wear and tear as well as the risk of being short changed on rental should all be taken into account.

This can get a bit complicated involving fixed and variable costs as well as direct and indirect costs.

[charles cawley]

Sorry, e-richard made the point so much better. There was a cross-over of posts.

[rigmover]

We use Sykescottages and are very happy with them so far, however this is our first year.
Some people say they undercharge but we thought they overcharged, saying that we have been booked solid from day one, some will say this is because Sykes have undercharged, we say it's because we have a nice place that sleeps 7 and there are not a lot in Kent that do that.

[charles cawley]

Banding very often causes either under or over-charging because each holiday let is unique.

Smaller agencies sometimes, and we do, use the far more sophisticated rate ratchet system. Larger agencies find negotiating rates each year with individual owners tiresome and unprofitable so prefer banding. Owners often pay the price.

The rate ratchet works for new cottages by undercharging to start and ratcheting the rate up to what demand will stand. This system ensures owners do not sit around with few bookings and, more importantly, it permits the build up of feedback that ensures a final higher rate.

Setting rates has changed in the last few years. It's no longer a case of looking at what others charge locally, not least, because many privately discount and, some, quite heavily. Rates now depend on more than pictures and what you say you offer.. feedback continues to change things.

Do not fall for apparently 'friendly' local cottage owners saying you should charge such and such and that low rates will deter guest for fear of sub-standard quality. Pictures and feedback have changed the terms of business. In all too many cases, other owners do not want a strong competitor on their patch.

There are, of course, well intentioned owners who do wish to help, but there are many who simply do not want a new owner to do too well. These people often, privately, discount heavily. Agents are, sometimes, no better but most advertise the fact that they are discounting to encourage guests.

Sleep 7 is an awkward niche as odd numbers below sleep eight tend to push owners into the charging niche of one below. Ie, Sleep seven is pushed into sleep 6. Sleep 5 into sleep 4 and so on. When you get to sleep 3 attempting to charge any more than a sleep 2 would be a very costly mistake in most cases.

Two's company, three's a crowd.

[bessie]

Looks like I am going on a crash course to learn how to use excel ,I think at the end of the day it's been honest in your costings .As for AST costings well mind have gone in melt down after an agent has failed in full management.