Your HMO is fully occupied. The rent comes in every month. But how much money is the property actually making?
For many Cardiff HMO landlords, there can be a significant difference between the rent a property collects and the cash profit it actually produces.
Mortgage payments, gas and electricity, council tax, water, broadband, maintenance, cleaning, insurance, management fees, compliance costs and occasional voids all eat into the headline rental income.
That is why Rooms in Cardiff has created a FREE Cardiff HMO Profit Calculator to help landlords get a clearer picture of how their property is performing.
A £3,500-a-Month HMO Doesn’t Necessarily Make £3,500 a Month
It sounds obvious, but gross rent can easily become the number landlords focus on.
Imagine a five-bedroom Cardiff HMO producing several thousand pounds of rent every month.
On the surface, it may look like a strong-performing property.
But what happens after allowing for:
- Mortgage or finance payments
- Gas and electricity
- Council tax
- Water
- Broadband and TV
- Insurance
- Cleaning and gardening
- Repairs and maintenance
- Management costs
- Licensing and compliance
- Accountancy and administration
- Voids and non-payment
The number that matters to most landlords is not simply how much rent comes in.
It is how much is left.
Try the Free Cardiff HMO Profit Calculator
Our calculator allows you to enter the figures for your own property rather than relying on generic yield calculations.
Start by entering the monthly rent for each individual room.
You can then add your expected void or non-payment allowance together with the main monthly running costs of the property.
The calculator also allows you to include annual HMO and compliance costs, which can be taken into account when estimating your property’s performance.
Once completed, you can see an estimated monthly and annual cash profit together with useful HMO performance indicators.
One Number Every HMO Landlord Should Know
Profit per room per month.
Two HMOs can collect similar gross rents but produce very different results for their owners.
A property with high utilities, regular maintenance, expensive finance or persistent void periods may be substantially less profitable than another property collecting a similar level of rent.
Looking at performance on a room-by-room basis can make it easier to identify where improvements could potentially be made.
What Is Your Break-Even Occupancy?
This is another figure landlords can easily overlook.
If your HMO has five or six rooms, how many rooms need to be occupied before the property covers its operating costs?
A property with relatively low fixed costs may be able to absorb an occasional empty room.
A highly leveraged HMO with significant running costs may have much less room for error.
Understanding your break-even occupancy can help you see how dependent your HMO is on maintaining consistently high occupancy.
Then Test the Numbers
Once you have entered your current figures, don’t stop there.
Start changing them.
- What happens if your average room rents increase?
- What happens if your void allowance falls?
- What happens if gas and electricity costs rise?
- How much difference would reducing management costs make?
- What happens if maintenance costs increase?
- What happens to annual cash profit if one room remains empty for longer than expected?
This is where a simple HMO calculator becomes much more useful than looking at a headline rental yield.
You can begin modelling different scenarios and understanding which parts of your HMO operation have the biggest impact on profitability.
How Much Is Your HMO Actually Making?
Enter your real room rents, mortgage, utilities, council tax, maintenance and other operating costs into our free calculator.
It takes just a few minutes and gives you a much clearer picture of your property’s current performance.
Is Your HMO Performing as Well as It Could?
If the figures aren’t where you expected them to be, the next question is why?
It could be room rents.
It could be occupancy.
It could be operating costs.
It could be your management structure.
Or it could be a combination of several relatively small issues which collectively have a significant impact on your annual return.
Rooms in Cardiff specialises in HMO property management and room-by-room lettings across Cardiff and South Wales.
If you would like a second opinion after completing the calculator, you can also request our Free Cardiff HMO Performance Review.
Would a Different Management Model Produce a Better Result?
For some landlords, improving profitability is about achieving stronger room rents and maintaining occupancy.
For others, the issue is the amount of time, administration and management involved in running the property themselves.
Rooms in Cardiff provides professional HMO Management for Cardiff landlords.
We also offer an HMO Rent Guarantee option for suitable properties where landlords want a more hands-off approach and greater certainty around rental income.
Neither option will necessarily be right for every landlord or every property.
That is why understanding the existing numbers should come first.
Don’t Judge Your HMO by Gross Rent Alone
A property producing a large monthly rental figure can look excellent on paper.
But gross rental income only tells part of the story.
The more useful questions are:
- How much cash does the property produce after its running costs?
- How much profit does each room generate?
- What occupancy level does the property need to break even?
- Where are the biggest operating costs?
- Could rents be improved?
- Could voids be reduced?
- Could the property be managed more efficiently?
Those are the numbers that can help you make better decisions about your HMO.
Start With Your Own HMO
You don’t need projections based on somebody else’s property.
Enter your own room rents.
Enter your own mortgage.
Enter your own bills.
Enter your own management and maintenance costs.
Then see what the property is actually producing as a cash-flow estimate.
The Cardiff HMO Profit Calculator is completely free to use.
What Is Your Cardiff HMO Really Making?
Find out using the free Rooms in Cardiff HMO Profit Calculator.
Please note: The Cardiff HMO Profit Calculator provides an indicative commercial cash-flow estimate and should not be treated as tax, mortgage, financial or investment advice. Individual property circumstances and costs will vary.
Your property’s net cash flow also depends on how it is managed. Room advertising, contract-holder communication, maintenance, inspections and voids can all take time as well as money. If the figures prompt you to review your current arrangements, see our Cardiff HMO management service for the responsibilities that can be included in an individually agreed management package.
