When running the numbers on a buy-to-let or HMO property, most new investors focus on headline figures – purchase price, rental income, and refurbishment costs. But one area that often gets overlooked – and can seriously eat into your profit – is property management costs.
From a sample HMO property earning £2,400 PCM, once you factor in just a 5% void, the net income drops to £2,280. But management eats up 14.6% of that, which includes:
- 12% + VAT monthly management fees: £273.60/month
- Average of 6 tenancy find fees per year, costing around £713/year or £59/month
- Total monthly management cost: £333
Why This Matters
Many investors underestimate this. If your figures are tight, 14.6% lost to management could be the difference between a solid return and a breakeven situation.
Pro Tips for Mitigating This
- Self-manage in the early days if time allows.
- Streamline your onboarding process to reduce tenancy turnover.
- Negotiate VAT-free rates with independent local agents.
Use Your Numbers Wisely
Always run realistic scenarios – best case, expected, and worst case – to see how management costs affect ROI. As shown in your own figures, even with solid income, if left unchecked, management expenses can delay how quickly you pay back initial investments.
Being aware of these costs and baking them into your deal analysis is what separates a hopeful investor from a profitable one.
