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Please critique my calculations


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Hi hubbers,

 

I am very new to property investment and am only just starting out. I don't have any investment or the funds to plunge in yet, so I am building on my knowledge for when I am ready to take the plunge. I have built a spreadsheet that I hope will allow me to compare deals quickly. I have been quite pessimistic about some of the rates so please advise if you thing any of these figures are unrealistically high/low. Really appreciate your input and advice!

 

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Hi, some of those values are very expensive on a monthly basis, even if you are being negative.

Gas certificate is about £60. Agent shouldn't be paying more than about 10% +Vat. Fire alarm testing... Seems a lot. Mortgage rate is double what you should be looking at.

I understand being negative, I do it myself, but you need to be realistic too.

With the refurbishment I try to break it down a bit more... I'd advise that.

HTH

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16 hours ago, jonnyboy said:

Hi, some of those values are very expensive on a monthly basis, even if you are being negative.

Gas certificate is about £60. Agent shouldn't be paying more than about 10% +Vat. Fire alarm testing... Seems a lot. Mortgage rate is double what you should be looking at.

I understand being negative, I do it myself, but you need to be realistic too.

With the refurbishment I try to break it down a bit more... I'd advise that.

HTH

Hi Jonnyboy,

Thanks a lot for your comments. I understand the costs may seem on the high side, this is totally down to not having real life experience so was planning for the very worst case scenario, more research is needed definitely. I was using a 6% mortgage rate to future proof the deal but as there is a lot of noise on the BoE base rate going negative I think it is highly unlikely that the mortgage rates will be as high as 6% in the near future. I shall put it more in line with the market rates for mortgage for Ltd.

I will definitely have to breakdown the refurbishment costs and am in the process of doing that. 

Thanks again for your reply, I really appreciate it!.

G

 

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  • 2 weeks later...

Hi G

Great spreadsheet.... I know this is terribly cheeky of me, but would you tell me where you got this from please? I've been looking for something clear and concise that a non Excel user can easily understand and use and this fits the bill really well... 

I think your calculations look good by the way.. and also agree that some of the costs are a little high, which can only be a good thing. 

Best wishes

J

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Definitely look at your monthly costs, as they're a bit too pessimistic and you'll end up with nothing working. The key thing once you sort them is to stick with the same amounts for each house - don't be tempted to twist them to make a specific house work because you like it.

This looks like it was built for an HMO with the rent per room and cleaning costs. For a standard BTL, there wouldn't be any fire alarms that need testing, just a replacement of a smoke alarm every few years, but that's almost incidental. You've included for maintenance, so I wouldn't include miscellaneous.

Gas certificate - just had a bill for one today at £75+VAT. Would be a bit less if I arranged myself, but it's a few pounds etc.

Letting agent is usually around 10%+VAT. Most expensive I've got is 14% incl VAT with a national agency, but they were existing agent for a house we bought with a tenant, so easier to keep. 15% may be in London, but then you're not going to get a house for £100k there, so not relevant.

One thing to be aware of is ground rent and service charges. If it's a old house, there will either be no ground rent or an annoying amount like £4 a year. Be careful of newer houses, as they often have high ground rents and sometimes service charges for no apparent reason. If you look at a flat, you will need to pay them and about £100/month seems to be the average, so a significant impact on ROI if you miss it.

For mortgages, depends on whether private or Ltd company. For ltd company, it'll be more expensive but generally about 3.8% for a 5 year fix, maybe a bit less depending on the arrangement fee etc.

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On 6/4/2020 at 4:02 PM, djaneyc said:

Hi G

Great spreadsheet.... I know this is terribly cheeky of me, but would you tell me where you got this from please? I've been looking for something clear and concise that a non Excel user can easily understand and use and this fits the bill really well... 

I think your calculations look good by the way.. and also agree that some of the costs are a little high, which can only be a good thing. 

Best wishes

J

Hi J, Thank you for your reply, I built this from scratch myself so if you don't mind using it I've attached a link to download it here for your reference. Pay extra attention in the mortgage calculations on the terms and rate. 

https://drive.google.com/file/d/1v6uk8IU6m2zGqqztJrRpfjwfeLxqfZQY/view?usp=sharing

 

13 hours ago, dino v said:

Definitely look at your monthly costs, as they're a bit too pessimistic and you'll end up with nothing working. The key thing once you sort them is to stick with the same amounts for each house - don't be tempted to twist them to make a specific house work because you like it.

This looks like it was built for an HMO with the rent per room and cleaning costs. For a standard BTL, there wouldn't be any fire alarms that need testing, just a replacement of a smoke alarm every few years, but that's almost incidental. You've included for maintenance, so I wouldn't include miscellaneous.

Gas certificate - just had a bill for one today at £75+VAT. Would be a bit less if I arranged myself, but it's a few pounds etc.

Letting agent is usually around 10%+VAT. Most expensive I've got is 14% incl VAT with a national agency, but they were existing agent for a house we bought with a tenant, so easier to keep. 15% may be in London, but then you're not going to get a house for £100k there, so not relevant.

One thing to be aware of is ground rent and service charges. If it's a old house, there will either be no ground rent or an annoying amount like £4 a year. Be careful of newer houses, as they often have high ground rents and sometimes service charges for no apparent reason. If you look at a flat, you will need to pay them and about £100/month seems to be the average, so a significant impact on ROI if you miss it.

For mortgages, depends on whether private or Ltd company. For ltd company, it'll be more expensive but generally about 3.8% for a 5 year fix, maybe a bit less depending on the arrangement fee etc.

Hi Dino, Thank you so much for your reply. I intended to build this for BTL but thought it would be easier for me to quickly compare the rent/room for properties in a specific area to say, but also would be applicable for if I want to invest in HMO. 

Really appreciate your figures for the Gas and Fire Alarm. I have no experience in BTL yet as I am still saving up for my lump sum for my first investment. (Having bought a flat with my partner last year has wiped out almost all of my savings) So your figures definitely help a lot. 

I have since added Ground Rent and Service Charge in my spreadsheet so that will allow for flats as well as for houses. 

I am intending to invest under a ltd company as I am close to the 40% tax bracket, but of course this will need further conversation with an accountant specialised in property investment to work out the numbers to weigh up my options. I hoped that a 6% rate would be adequate to future proof the deal allowing for rates rising, but in the current climate I agree that a 4%-5% is probably more realistic. 

Again really appreciate your help and valuable information! Always welcome more information and your experience! I really like the work you've done at your properties, light touches yet significantly looks more appealing! 

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If you do decide to invest via limited company, which I myself do, then you don't need to pay an accountant to do this for you. You can do it via Companies House and pay the small fee yourself.

My thoughts on ltd via personal is this, if you are going to hit 40% and/or you want a number of properties then ltd is very likely better for you.

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On 6/7/2020 at 12:47 PM, jonnyboy said:

If you do decide to invest via limited company, which I myself do, then you don't need to pay an accountant to do this for you. You can do it via Companies House and pay the small fee yourself.

My thoughts on ltd via personal is this, if you are going to hit 40% and/or you want a number of properties then ltd is very likely better for you.

Hi Jonnyboy,

Thank you for your reply. That's good to hear. I am researching how to set up a company such as the SIC code to use etc so I can do that myself. Yeah I do think the ltd is the route for me, but still stacking up the numbers to have a clear idea. 

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