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I am compiling a cost budget for a 6 bed HMO and would appreciate some input from those more experienced than I am with HMOs.
Looking at HMOs for sale on Vesta, costs appear understated and revenue overstated - not surprising I guess, but also not helpful.
In my financial modelling, I'm struggling to project certain costs with accuracy.
TV Licence - this is only ever shown as the cost of a single TV licence, yet legally, HMO's are obligated to have 1 licence per HMO bedroom, if a TV is used in it. I'm assuming the work around here is to pay 1 licence for communal TV use and to have a section in the AST which states the tenant is responsible for licence in individual rooms?
Gas&Electricity - has anyone used the likes of Splitthebills, Dividable, GLIDE to cover use over and above fair use policy limits set by the landlord? A quick meta analysis appears to show usage at about £40 pp per month for G&E in mid size HMOs?
Waste - I note a number of HMO's have private refuse collection, is this mandatory? regional variation in council rules? Costs?
What do people allow for repairs and maintenance as a % of revenue?
Any help appreciated.
It depends on the size of your mortgage and the type of property. I don't think splitting bills works as it only causes friction.
Gas and Electric: 150-200 per month. Give more heat than needed otherwise they'll put electric heaters on and that will cost a fortune. 500 units a month of electricity for 6 people is a reasonable amount. Gas usage depends on how well insulated the house is.
All other bills are fixed and dependent on the area you're in. A good internet is normally wanted and that is around 40 per month.
I just pay for one TV licence and make it clear in the ASTs that tenants have to pay for the TV licence covering their room (this obviously wouldn't be an issue for single tenancy HMOs). Gas and electricity costs will depend on how well insulated the HMO is, the type of heating controls being used and the efficiency of appliances. I budget £135pm for gas and electricity (combined) in a large 6 bed (all en-suite) terraced house but this includes additional insulation in all the external walls and roof void, Heat Genius heating controls, condensing boiler, LED lighting and efficient appliances. I also budget for 200 Mbps broadband at £45pm, water £50pm, insurance £40, gardening £60pm, cleaning £56pm, maintenance £100pm, certs/testing £30pm. Also don't forget to include council tax which will obviously depend on location and size of the HMO (unless of course the tenants are students).
If you're more hands on it lowers the price(agency fees, some repairs etc) Be prepared for period when you have no interest and other times when you can fill the house twice over.
I like to personally meet the tenants because a bad apple and it can ruin you financially. I don't use agencies for that reason. It's up to you of course, I am not a very experienced landlord so others may have more of positive experience in that field.
Ross' costing was much more detailed
Thanks everyone for your replies - most helpful