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The Nationwide Building Society has produced some figures to suggest what it might cost to run one rental property over a year.This is obviously quite hard to pin down based on whether a letting agent is used, and there will also be regional variations.But this is what Nationwide says:
Finding new tenants includes advertising property, arranging viewings, running financial background or immigration status checks, paying fees to letting agents to find new tenants, preparing an inventory, pre or post rental cleaning - £552 (although 18 per cent spend more than £1,000 and 18 per cent spend nothing);
Annual costs include annual gas safety inspection, electrical safety check if applicable, tenancy renewal, management including rent collection, completing related tax returns, insurance for buildings, paying ground rent if applicable, maintenance charges - £879 (although 30 per cent spend more than £1,000);
Annual maintenance costs include wear and tear repairs, redecoration, replacing items - £601 (though 16 per cent spend more than £1,000).So in total, Nationwide reckons landlords pay £1,500 a year to rent out a property, rising to over £2,000 if new tenant is needed.
While the mean monthly profit from renting out property, after taking away typical costs, is £610, almost three in five landlords make £500 or less a month, a third earn less than £300 and 22 per cent less than £200. One in seven say they make £100 or less monthly profit from renting out their property - less than £1,200 per year. One in 20 landlords don’t know how much, or even if, they make a profit!!Full/source article - Letting Agent Today Our lettings partner, Northwood, have a calculator that helps you work out the true net rental income from a property.Northwood Rental Income Calculator If you want to reduce one of your costs, our insurance partner, Alan Boswell Group, are running a "Price Beater" guarantee for PT members, meaning they will beat the price of your current insurance premium. You can call the helpful and friendly team on 01603 649736. Using the products and services of our trusted partners is helping maintain this site as a "free to use" community resource. If you have got value from PT, you may like to reciprocate and show your appreciation by using our partner services.What do you think of the Nationwide figures? What is your experience of the costs involved in running a rental property?SEE ALSO - Income from each propertyUP NEXT - The true cost of being a landlordDON'T MISS - The Real Life Costs of Running an HMONOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Many of these LL will soon be forced to know all this stuff when and if they need to remortgage.
LL will have to know all this stuff if they are to have a hope of complying with PRA requirements.
It's absolutely vital that landlords understand their NET rental profit.With a fully managed lettings service charging typically between 8 and 15%, it can be hard for landlords to keep track of percentages.At the Property Management People, we have simplified that by charging £40.00 per month plus VAT to manage your property, no matter what the rental income.A landlord's cash flow position must be understood at all times - base rate rises, increased taxation etc. must all be factored in so that landlords understand their margins.Those minority of landlords that don't know if they are making a profit are extremely vulnerable to outside factors and are probably living on borrowed time imho.
"Looking after landlords for less"
The flat rate fee charging method you have chosen is the fair way to do things.
The costs of managing a property are the same whether the rent is £1000 pcm or £3000 pcm.
With all the attendant cost pressures on LL those who wish to retain the services of a LA will certainly be considering moving business to LA like you who charge flat rate fees.
Thanks for your supportive comments Paul. Much appreciated.
£40 a month covers what? Is this only when there is a tenant in place? Or does it include finding a tenant?
At £40 a month, I would say you are charging too little. As a landlord, I do not want you going out of business if I am using your service.
I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.
Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.
Hi John,Thank you for your interest in our service, and more than happy to clarify this for you.We are a specialist property management company and the £40.00 per month plus VAT per property is for property management only. We can find tenants, but there is an additional cost associated with that.With regards to how sustainable our service is, we are able to offer this price as we are backed by a major company that has been offering this service in a different area for a number of years and this is piggy-backing off our existing infrastructure, staff, and systems.I would also like to confirm that we have client money protection, are members of an independent redress scheme (the Property Redress Scheme) and the Residential Landlords Association.Please do not hesitate to ask if you have any further questions.
Many LL such as I would not use you for tenant sourcing unless you could do so for about £140 including a RGI policy.
But that doesn't mean the LL cannot then use your flat rate services
I would suggest to you that you utilise the LRS TRP system.
That means you wouldn't need to charge anything for tenant source.
You would be just shown the TRP and make recommendations to the LL based on them.
Using this referencing system would be a useful marketing strategy to encourage LL to use your flat rate management service.
I know I will never use a normal LA for referencing or tenant sourcing .
I am simply not prepared to pay a large fee for a tenant.
I prefer to pay nothing which is what the LRS TRP achieves.
I believe the LA fee ban will certainly shake the LA market up.
repairs alone I set aside around 17%
On top of that I have Insurance voids management charges
So all in all maybe 25% to 30% of gross rent
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.