Are You Trading Profitably?
When you purchase an investment property to let out, presumably you are doing so to make money. If you have bought the property with the assistance of a capital and interest buy-to-let mortgage you will, at very least, be looking for the rental monies to cover the mortgage repayments and any other related expenses.
If you have bought an investment property outright from savings you will be looking for the rental income to provide a greater return than you were getting in your savings account and also cover the expenses involved in renting out a property.
It is interesting to hear that, according to the National Landlords Association (NLA), there are 27% of landlords who own and rent out a single investment property who are either trading at a loss or are breaking even. Furthermore, 19% of landlords who own between two to four investment properties that they rent out are either loosing money or are just breaking even.
These statistics are concerning and, in some cases, it begs the question as to how much research and planning some landlords have carried out when assessing the viability of a particular property as to its suitability for renting out. It would appear from these figures, however, that it is not just those becoming a landlord for the first time that could have “got it wrong” as there would appear to be a significant number that are experienced landlords owning a number of tenanted properties.
In fairness, there are always going to be a certain number of landlords who do end up making a loss or breaking even over a specific period of time perhaps through circumstances that are difficult to control. For instance, if a major employer in the locality were to cease trading and laid off thousands of workers, some of whom just happened to be renting homes from you, it may be difficult to replace those tenants if they had to vacate the properties from a financial point of view.
Someone considering entering the rental marketplace as a landlord for the first time could seek whatever advice they can from the likes of their accountant, bank, NLA and letting agent as well as other experienced landlords that they may know on a personal basis. This may help reduce the likelihood of becoming one of the above statistics.