HMO Management Fees

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    HMO Management Fees

    Hi, I have recently completed my first HMO and I am using a letting management agency to run it for me. It is a large 9 bedroom HMO. I would really like some advice on whether you think that their fees are fair or too much.

    They are taking 8% + VAT of the rent from the property. They are also charging £225 + VAT for each tenancy agreement to be drawn up (one for each of the 9 tenants) plus an inventory fee of £30 including VAT per room. They are deducting these costs from the rent per room before it is transferred to me. I know I should have looked at the terms properly before I signed up to this agency but I really didn't realise I would have to keep paying these fees every time a new tenant moves in. I think it's very unfair that they on top of their 8% cut of the rent they are charging such a high amount for each tenancy agreement to be drawn up. There is a high turnaround of tenants in a HMO and whilst they have got every tenant on a minimum of a 6 month tenancy I am very wary to keep paying £225 + VAT every time a new tenant moves in plus the inventory cost.

    I appreciate running an HMO is a lot of work but this HMO has just been completed to a high standard and everything is brand new meaning there are very little maintenance problems. Also there are 9 bedrooms so this is generating a lot of income (roughly £4500 per month for the 9 bedrooms) so obviously their 8% + VAT cut amounts to a lot alone.

    Is it ridiculous that they are charging the tenancy agreement fees plus inventory fees on top? An example of a breakdown of their fees for one room for the first month is:

    Rent - £530

    Minus:

    Inventory £30

    Management fee - £50.88 (8% + VAT)

    Tenancy set up fee - £270 (including VAT)

    Total I receive for the first month is £179.12

    After the first month I believe just their management fee of £50.88 is deducted per month.

    Any advice would be much appreciated.

    Many Thanks

    Victoria






    #2
    What contract or terms have you agreed with this agent? If so do these charges comply with those terms?

    Were they managing it before you bought and you've simply carried on?

    Done any training in how to be a landlord? (I ask as when I started I hadn't, made painful expensive long-drawn out daft mistakes: So decided to get educated: More aware now, still getting things wrong....)
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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      #3
      Those terms sound fairly typical to me.

      And while yes, you should have read the agreement and worked out what you were agreeing to, would you have not signed it anyway had you done?
      You're earning a small fortune and having to do no work.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        I used to run 2 HMOs with 7 people in each and I think you are fortunate to get an agent to take it on, let alone at these rates which I consider to be favorable. The standard rate applied for running a HMO for me was 15% plus fees as above as it is more complicated than a residential let.
        The difficulty of finding tenants and managing the HMO depends on how the HMO is set up,its location and catchment area for tenants. I used to have 100% turnover p.a.of tenants which means viewings, deposits and agreements. There is also the possibility of disputes,cleaning, gardening and rubbish collection to deal with. Tenants can often treat a HMO like a hotel.

        Have you thought of doing the work yourself and earning an extra £3150 in the first month alone and an extra £450 per month thereafter?

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