A high proportion of struggling residential property owners are copying the practices of successful portfolio landlords and choosing to offer their properties for rental purposes in the UK private rental sector (PRS) in order to provide adequate finances for their retirement.
Of the struggling property owners choosing to offer property to rent for the first time and existing portfolio landlords who responded to the BM Solutions/ BDRC Continental survey:
- 84% view their rental property as a supplementary income to their pension
- 60%of landlords actively plan to live off the rental income either before or at retirement.
- 40% agree that their property is their pension and intend to make a decision dependent on the state of the property market once they reach retirement age.
- Very few landlords plan to sell all properties in their portfolio when they reach retirement
Although existing landlords may have some experience with the UK PRS, the national media reports that rental yields fell by 0.5% to 6.2% in the final quarter of 2012, however, this is not very significant when it is considered that the average rental yield for the previous quarters were:
- 6.7% in Q3 2012
- 6.2% in Q2 2012
- 6.2% in Q4 2011
The strongest performing UK region was East Midlands with landlords on average achieving a rental return of 7.1%.
Landlords in Yorkshire and Humberside reported the lowest rental yield of just 4.6%.
In the final quarter of 2012, an average 2.4 tenants were in severe rent arrears and were facing eviction, a fall from the average 3.3 tenants reported in Q3 2012.
Whilst the proportion of landlords experiencing rent arrears has fallen to the lowest level since Q2 2010 (41%) the average amount owed per tenant stands at £2,613 (GBP) up £247 (GBP) since the previous quarter.
Strong and consistent tenant demand in the UK PRS has seen void periods fall to their lowest level for over 12 months.
33% of landlords reported void periods in Q4 2012, a 4% decrease compared to Q3 2012 and a 13% decrease compared to Q4 2011.
The average duration of a void period has fallen consistently over the last 12 months, falling to an average of just 60 days by the last quarter of 2012.
- The greatest proportion of void periods was seen in the North East – 53%
- The lowest proportion of void periods was in Central London – 20%
The private rental sector remains an alternative source of long term investment for landlords in later life and this is not set to change.
Whilst rental yields may appear to have dipped slightly, they still remain at the high levels observed over the past few years and continue to represent a sound indicator of the strength of the UK private rented sector.
Products and services that actively protect a landlord’s rental income, such as Comprehensive Tenant Referencing and Rent Guarantee Insurance were cited by existing portfolio landlords as being very effective in providing necessary income and rental property protection, as well as providing peace of mind for both tenants and landlords.
Advice that should be noted by all new landlords before attempting to let out their rental properties for the first time.
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