Being an ex commercial accountant, forecasting is something that comes naturally to me. There is no hiding it, 2022 has been the year of unexpected surprises with costs changing on the daily. From interest rate rises to utility bills absolutely soaring, labour rates, maintenance costs - everything is on the up.
That being said, the rental market is also seeing red hot demand! According to a recent study by Paragon Bank, demand for high quality HMO rooms are up by 45% and we are definitely seeing that! From people downsizing from a 1 bed flat which they can’t afford on their own anymore, to landlords selling up after the latest student season, we are seeing less supply and more demand.
All of these changes to the revenue line and expenses lines all have to be reforecasted for the remaining of our financial year (for us, another 3 quarters to go). I’m naturally really cautious when it comes to playing about with figures. I underestimate my rental revenue and overestimate my expenses. When the actuals come through - it’s a bonus.
For example, I know with energy rates the way they are - I’ve forecasted £500 - £800 per month per house for gas & electric. Realistically - probably £450 - £600pm per house, but with winter coming, I would rather have that buffer in there. We have now fixed our utility rates, so I’m hoping we don’t get stung with any more price rises for the next 2 years.
Maintenance and voids (currently at 0%), I always allow 10% and this will be closely monitored. Anything that isn’t used, goes straight to topping up utility accounts!
I’ve seen people claim how good their profit lines are - but are they really accounting for every single cost? I sure hope they do this winter!
Ensuring you are all over your numbers helps you to plan and make decisions in your business. You know exactly where you are, how much buffer you have and your expected profit and tax at the end of your financial year. Forecasting is absolutely key to that. I look at my forecasts every week, but in depth every month and make adjustments to any key changes in order to know exactly what to expect.