Updated: Aug 25, 2020
(10 minute read)
Although we provide information within our website and within The FAQ regards what commission and fixed rent offers. Many of our clients wanted to know in-depth what it actually entails.
Example of Commission VS Fixed Rent Chart
We shall use the example of the generated numbers constant through all the charts following from above
Yearly Fixed Rent = £7440
Yearly Profit with the cost of Council tax included = £8506.35
(14.33% higher return)
Yearly Profit with the cost of Business rates included = £10306.35
(38.53% higher return)
Before we even offer a fixed rent deal, we will analyse your property to see what the total revenue minimum-maximum potential is in the short-term market vs the long term market.
We do this using data analytics from sites such as airDNA, Airbnb's calculator and a few of our own internal spreadsheets/charts analysis.
How does this work?
We effectively become your professional tenants.
The contract will allow us with your 'consent' to sub-let your property on the short-term let market via a fixed rent management agreement.
In this example we are paying a fixed monthly income to the client of £620 a month (£7440) a year to the landlord over an agreed period.
Understanding the above chart
The Fixed Rent Offer: in this example we are using £620 a month as illustrated in the graph above. This becomes our cost to rent to our clients (aka you).
Market Rate for BTL: The market rate of this property would be £650 in the local area for long term tenants. we have agreed with this client of £620 a month for the duration of 2 years. (to see why we offer less than market rate please visit here.)
On a fixed rate deal, the bills and cosmetic responsibilities would be passed onto Airhosts4u ltd. We have included the costs in the chart.
Cleaning Fee: We will now be responsible for directly paying our team of cleaners. This is an agreed fix rate to be paid on each guest booking via the Revenue of the listing(s).
Essentials: Average costs of £33 a month spent each month.
Internet: £22 a month, minimum 50mb for a decent connection for guests.
Water: £25 a month
Gas & Electric: £95 a month
PMC Profit Difference: PMC=(Property Management Company) As we take on the responsibility of the bills in respect to a potential fixed rent deal. We now take the variable potential profit/loss in between. the trade off is you do not receive a commission charge variable to the list performance.
Cleaning fee + Internet + Water + Gas & Electric + Fixed Rent Offer = Airhost4u ltd total running costs.
How will Airhosts4u ltd still provide my fixed rent in an unlikely situation the given property fails to achieve a monthly total running costs?
You may have noticed in the chart above, this has happened in February. We have achieved -£164 Loss this month. however over the course of the year we will make +£5436
Airhosts4u ltd has been operating since October 2018. At the given date of February 2020 we currently manage over 15 properties on either commission or fixed rent contracts. We would never take on a property that we have analysed that will achieve over 3 months of potential negative Gross Loss. This means in turn you can be assured that we should never miss a payment unless in extreme circumstances.