FINANCIALS

Income from rents and service charges is sufficient to cover the costs of insurance, management, maintenance and servicing of the properties and the grounds. So after loan interest, there is a net annual surplus. This is reduced by depreciation of the properties and future interest on Bonds is supported by the income and expenditure account as a whole. 

The overall trading position of forecasts increasing cumulative surpluses over five years. These surpluses will be used to maintain the operating reserves and contribute to the sinking fund for the properties. Lemon’s Reserves Policy requires the Equity Rent site to maintain a free cash reserve that is equal to three months’ operational costs. 

The reserve requirement will be £20,000 in the first year . The forecast cumulative surplus will be £20,000 which meets the reserve requirement.

 Medium and long-term repairs and replacements are managed through a capital reserve fund. This makes long-term provision for major repairs and for replacements and renewals of kitchens, bathrooms and heating systems through a planned programme. 

The cost of the long-term fund has been forecast at £24473 at 2025 prices.

This will be index linked over the lifetime of the properties. With careful management of funds, the capital reserve fund will provide sufficient capital to cover these costs over the lifetime of the properties.

With an interest rate of 5.75% on £600,000 loan, the forecast finances mean that Gather Inn will be in a position to pay interest on capital. 

In summary, the income and expenditure forecasts for the first Equity Rent property are presented in the table on the next two pages.