Looking for advice on running costs

[Laurel]

Hi All,

We're doing some number crunching in preparation for (hopefully) starting to let early next year.

We are trying to work out ballpark figures for running costs and have searched for threads on that topic on here without much luck. I am sure they are out there so if anyone can point us in the right direction it'd be much appreciated.

LMH is brilliant in all respects apart from the Search function! I remember a while ago someone posted a way of searching LMH via the web that was a bit more accurate. Any ideas welcomed.

Many Thanks

[French Cricket]

I agree with you Laurel about the search function! Blame phpbb - I'm admin for a forum that uses the same software and even though it's a later edition the search function is if anything even worse! Using Google search is much better:
site:www.laymyhat.com/forum/ followed by your search keyword(s).

Having said that, I suspect the reason you're not turning up anything on ballpark figures for running costs is because there's no such thing! So much depends on your individual property, its size, its market, how long you've been open, how long you're open each year, whether you're on or off site, your particular offer, your location and a million and one other things ...

(Sorry, not helpful, I know ).

[greenbarn]

i just found this thread which might be worth a look, and it includes a useful link from Nemo, which should give an idea of some of the things you need to think about.

Not sure where FC got her "million and one other things" from. I only counted a million; maybe that's the difference between UK and France!

[e-richard]

I just typed this into Google, and there is a wealth of results giving hints on how to go about calculating the costs and what things to think about including.

Code: Select all

costs of running a holiday let

Of course, there are no actual numbers, but hey who said the rental business was easy !

[aasta]

Have attempted to get a grip on calculating running costs, but the vast number of variables in our B&B (for example we serve different things at breakfast each morning depending on what is available at local market, what is in season and how much baking I feel like doing etc....then things keep breaking down and need replacing. Ok eventually everything will have been replaced....Then we have a low season, high season etc. etc. ) was just too much so I gave up......and am grateful that we manage to pay the monthly bills....
We have now hired an accountant to help us sort things out...

[Laurel]

Thanks for your responses. The links, and Google search advice are really helpful.

It is quite reassuring to read that people generally go on gut instinct and seat of the pants as this has been our approach so far

We aren't attempting to do a full costing/business plan, just do a bit more than the 'back of the envelope' calculations we have at the moment. I have posted our current list of headings below. We are researching the likely costs under each of these according to our property/market/area etc. However, the list seems quite short so please do shout if you can see any glaring holes!!



Start Up/One Off Costs
House alterations
Garden Improvements
Legal fees
Furnishing
Website Development? (May do ourselves initially)
Professional Deep Clean? (May do ourselves)


Ongoing
Insurance
Council Rates
Utilities (Water, Electricity, Gas, Oil, Wood for burner)
Booking Agent
Promotion/Advertising
Cleaning/Caretaking/Gardening
Property Maintenance
Replacing Breakages/Updating Equipment
TV license

[Laurel]

Just re read my post. Can anyone spot the major 'start up' expense missed out on the list?

[Nemo]

Nothing immediately obvious, but that list covers a multitude of variables within each subheading!

Small but significant costs include use of phone/internet and motor/travel expenses.

These are likely to be things you already have (who doesn't have a phone, a car or use the internet?!) but be sure to factor in what you can claim as a genuine business expense.

Furnishings obviously includes a great deal; don't overlook bedlinen and the cost of crockery,cutlery and all the kitchen paraphenalia.

Do you need a promotion/advertising budget as well as a booking agent? Do you plan a two pronged approach of having an agent but having a contract that will allow you to do some of your own letting? That is quite a significant cost if so.

[Nemo]

Just re read my post. Can anyone spot the major 'start up' expense missed out on the list?

The cost of buying the property perhaps? Remember that loan interest can be allowable however.

[greenbarn]

I don't see Laundry Costs in the second list - it's quite a big expense, and needs separating out.

Options:
1) Do it all yourself (with or without help).
2) Use a linen hire/laundry service.

Pros and cons:

1)DIY. You need to buy all the linen, probably about 3x the number of beds, consider bed sizes (are you going to have zip/links so that you can accommodate couples and groups of singles? Depends on your likely market.)
You need the equipment to wash, dry and iron and the space to store it all. Storage is easy to overlook!
You need to factor the laundry costs - detergent etc, and electricity, which is significant.
It's cheaper long term than a linen hire/laundry service.
You can decide exactly what linen you want (although the linen hire services will have stuff geared to the accommodation business such as colour coded (for size) duvet covers with hand openings for fitting and open ends - you can buy these anyway from Richard Haworth)
It's more expensive in the short term if you need to buy big machines.
You have complete control over quality.
You get p***ed off with items that are badly marked or stained as you have to replace them!

2)Linen hire/laundry. More expensive long term, but you're buying your own time back, so can be a lot less hassle.
You don't need to buy in a lot of stock; you'll still need a running stock for which the laundry company will charge a hire fee.
You're tied to their delivery/collection days - are you going to be there, or is there somewhere secure and dry it can be left?
You have no control over quality. From our experience with a NW company called Shortridge (probably no better or worse than most) our deliveries would very often contain unusable items - including very obvious things like duvet covers with huge rips in them, but also eg pillow cases with black marks. This was probably as much as 10% of items. Deliveries would sometimes be short. You find these problems when you're in the middle of a changeover, and then have to dip into your stock for immediate replacements.

Of course, there's also the halfway - buy your own stock and use a laundry service.


On the startup front, the house alterations may kick off some other expenses associated with Change of Use permission; typically this will be for fire regs.

No doubt there's more thoughts in the collective pipeline!

[Nemo]

I remember there's a very good thread on here about an inventory. I can't find that one at present, but here is another albeit a bit older. It should help to compile and once you start costing it's frightening!

viewtopic.php?t=4737

[greenbarn]

For an idea of inventory, you might find it useful to download the Standards for self catering from Visit England. You should be able to get it from here unless that's now a members only area. Shout if you can't get it!

If you haven't already got it, you need a download of "Do you have Paying Guests?" which explains fire precautions and risk assessment.

[DaveN]

For the ongoing expenses, you should also check with you local council as to their approach to rubbish collection.

Many (most?) treat holiday lets as commercial, and so charge for collection.

You will need to be on business rates, rather than council tax, but the good news there is that you will probably qualify for 100% rate relief (as a small business) until at least March 2013.

For the start-up costs, stuff like boiler service, chimney sweeps, stuff uncovered during alterations can all add up.

Don't forget odds & ends like scatter cushions, table lamps, toys/games/books/pictures in your furnishings list - they all add up.

Most of these are probably small-fry compared to the cost of the house, and you can offset the costs against profit, and so reduce your tax bill!

[Laurel]

Great stuff! Thanks alot.
(Special points to Nemo for spotting the minor omission!)

Laundry - we are offsite so are going to have to use a laundry service. We were erring on the side of hiring linen but it sounds as though this could be a bit of a nightmare from your experience Greenbarn. Thinking about it, we arrived at a lovely holiday cottage last Christmas and found one of the single duvet covers spattered all over with little blood spots - yuk. We mentioned it to the cleaner as we didn't want them to think we'd done it and she said 'Oh yes, it was like that when it came from the laundry company' !! Obviously no spares kept at the cottage then! We're now thinking we'll buy our own linen (with lots of spares) and choose a changeover company that offers a laundry service.

REALLY useful link to the Visit England Standards - very comprehensive. We have given ourselves a pretty hefty budget for furnishing and know the little costs can quickly mount. However, browsing/shopping for furniture etc is definitely one of the most fun parts

Hadn't thought about rubbish collection, chimney sweeping or our own phone/internet/car use - will add these in.

Cheers!

[greenbarn]

Add accountant's fees....... there's an awful lot of stuff that you can and can't claim; worth a chat with one who knows the FHL business if you haven't already.