We, Kieba Property Ltd, have been working with HMO (Houses of Multiple Occupancy) Landlords for over 7 years now offering them a Guaranteed rent for their properties.
So what exactly does this mean?
Well, simply put, we take the hassle, stress and uncertainty out of their property investment. We turn a potential liability into a predictable Asset.
“Every Liability is just an Asset in Hiding” ~ Mark Victor Hansen
Unless you are 100% on the ball, have the correct marketing, management and maintenance teams in place - it is challenging to keep any HMO property at full occupancy. Even Traditional Estate agents struggle. Let me explain why.
Just imagine you have one single 6 Bed HMO that you have bought as an investment property. You give it to a local estate agent to manage as you don't want to be the first point of call when issues crop up, and there are now 270 odd pieces of legislation you need to adhere to let property compliantly in the current market, yes really! - they have promised the world and you have worked out your income based on them keeping your property full for you - after all they are the professionals.
But lets just be realistic for a minute.
Lets say they have 50 HMO’s on their books - that could be anywhere from 250 - 400+ rooms under their management. If they have 10% of their rooms vacant or coming available thats 50 odd rooms - again a realistic figure as its a fluid marketplace! In walks ‘Little Jimmy’ looking to rent a room. If he enquires about your room, is the agent going to also mention other rooms they have coming available? Of course they are, because filling one of their rooms, no matter which HMO it is in is the most important thing for their business, not keeping your specific HMO full. After all they earn their 15%+ Commission based on the occupancy income.
A Quick numbers example on your 6 bed HMO:
6 out of 6 beds @ £400 per room = £2400 pcm
15% commission to agent = £360 per month
5 out of 6 beds @ £400 per room = £2000 pcm
15% commission to agent = £300 per month
4 out of 6 beds @ £400 per room = £1600 pcm
15% commission to agent = £240 per month
As you can see, the agent still makes a significant income while it's the landlord that takes a bigger hit on income with the rooms in the property sat empty. Agents, who can now no longer charge tenant fees, pass these fees on charging the landlords tenant find fees, inventory and referencing fees, often charge a fee for organising maintenance etc so they are always making their money from the landlord. None of which is really considered or highlighted to the landlord at the outset. Factor in, Bills, Council Tax, Licensing and regulation compliance. There are a lot of cost that need to be considered, not just the monthly mortgage payment.
This is where we come in:
When we set up a Guaranteed Rent Arrangement with our landlords, we agree a monthly amount that is paid no matter what. This means that we don't need to bother our landlords and have the control and freedom to rectify issues and undertake maintenance without waiting for permission. This keeps tenants happy and the properties in top condition.
No Voids:
Our arrangements are typically 3-5 years +. For the length of our arrangement the landlord receives our monthly amount even if the property is completely empty. Throughout the Covid-19 lockdown ALL our HMO landlords have received their rent without question. It is in our interest to work proactively to ensure the property is kept full
No Maintenance:
We generally take care of all maintenance costs upto a certain predetermined level, this means things like water leaks, electrical faults, locks etc are taken care of promptly by our team at our expense
No Refurbishment Costs:
We regularly invest our funds into properties to bring them upto the standard we require to keep them full. This means redecoration costs in between tenancies for our landlords are nil. By Taking care of the maintenance and refurbishment proactively throughout our arrangement our properties are kept to the highest standards. Whether it is painting, recarpeting, replacing furniture we take care of it all. Our regular professional cleaning team means standards are maintained and potential problems are picked up early.
No Furnishing or Appliance Cost:
Wear and tear on a HMO is higher than a normal single let investment property, its the nature of the beast. We look after all furniture and appliances, if they need replacing or upgrading we do that to.
No Fees:
There are no extra fees charged for tenant change overs, referencing, inventories, or maintenance organisational fees. The agreed amount is what our landlords receive.
No Licensing and Compliance Costs:
We will generally cover the cost of 5 Year HMO licensing, Annual Gas Safety Checks, Periodic Electrical Checks, Annual Fire Alarm Tests, Annual Emergency Lighting Tests, Annual PAT Tests and EPC certificates. These can run into the high hundreds of pounds a year.
No Tenant issues:
This is a big one, as all tenancy agreements are with ourselves as the managing agent. So it is our responsibility to vet the right tenants and our liability if a bad one slips through the net. Court and legal fees can add up if you end up stuck with a bad non paying tenant
No Hassle:
When you add up the operating costs of the above and when you factor them into normal HMO Operation our arrangement is very attractive.
It allows landlords to predict exactly how much comes in over the course of a year, with zero headaches and hassle. In fact we only really speak to our landlords just to check in and let them know everything is running smoothly, never because there is a headache they need to concern them selves with. They can get on with doing what they want with their time, in fact a lot of our landlords now live abroad or spend a large amount of time out of the country.
How do we manage to deliver such a great service and package. 7+ years of specialising in Professional HMO Management, means we know our marketplace, we have the correct systems and procedures in place to ensure all boxes are ticked and nothing gets missed.
Through managing a smaller hand selected portfolio our experienced and proactive maintenance and cleaning teams make sure all our Guaranteed Rent properties are brought up to, and kept to, the highest standards.
Guaranteed Rent isn't for everyone, If people love managing their own properties, doing and arranging their own maintenance and dealing with tenants on a daily basis then they should carry on. For everyone else it can often be a much more profitable and attractive proposition than a traditional letting agent and well worth exploring.
If you would like to know more specifically about how we could potentially help, feel free to give us a shout.
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