How much do maintenance and voids cost for HMOs. #R2Rshortandsweet #34
How much do maintenance and voids cost for HMOs?
I’m back with another Short and Sweet video, with a question from the lovely Garfield.
“When making an offer for rent to rent, what percentage do you allow for voids and what percentage do you allow for maintenance?”
Now that’s a brilliant question because a lot of rent to renters get it wrong in this area.
So, what should you do in this situation?
When you're analysing a deal to see whether a property is going to work for you for rent to rent - you want to work out what all the costs are, you want to work out the rate coming in and you want to work out accurately whether the agreement will make money. These are all important questions.
The number one answer is the Rent to Rent Success Deal Analyser – which you can download for free!
With the deal analyser, you'll see every row of costs is documented so you can really get a good handle on this.
How much percentage do you allow for voids?
Voids are when a room is empty. You might say that you're going to have £2,000 a month coming in when all the rooms are full, but what you must allow for is that sometimes your rooms may not be full - depending on your area, it might take longer to fill a room.
What we find is our voids are very low and they're between 0% and 1%. But we allow 3% of the total incoming rent when the room is empty. And that means that we know the deal works even if there are some empty periods.
How much do you allow for maintenance?
With a rent to rent property we're dealing with minor maintenance and the owner of the property will be dealing with big things like if the roof fell in or the boiler went wrong.
We deal with little things like the shower curtain needs replacing or a door handle needs fixing – just the small things like that which tends to be the majority of things that need fixing.
We would allow 3% of gross and none of our properties have gone over 3% of the gross rent.
We also add in another line of costs, which is 3% for management. Now, even though we are managing the properties ourselves, we still allow that 3%.
Altogether we've got 9% as a little buffer:
3% for voids
3% for management
3% for maintenance
And if the deal still stacks up and is profitable with the 9% we have allowed, we know that even if something goes wrong, that property will still work for us.
And I think a lot of the time where people go wrong is, they don’t do the analysis. They don't use the Deal Analyser and try to work it out in their head - that's the recipe for disaster.
So, work it out and allow those buffers in there and let me know how you get on and remember to use our free Deal Analyser!
Bye for now.
Stephanie & Nicky
xx