If you’ve been toying with the idea of becoming a landlord, now could be the time to seriously consider it. Research from Paragon Mortgages has found that the average void period (the length of time a property is without tenants) has fallen to the lowest level since 2002, and with tenant demand only ever seeming to rise and buy-to-let mortgage rates at record lows, you could have a nice little income stream on your hands!
Shorter void periods = more rental income
The figures show that the average void period stood at 2.4 weeks in the first three months of the year, the lowest since Paragon’s survey began. This is down from the average void period of 2.6 weeks at the end of 2014 and marks a drop of 14% on an annual basis, down from the 2.8 weeks recorded a year previously.
This is a continuing theme: the report noted that void periods have been on a general downward trend since 2013, with tenant demand remaining high. In fact, 42% of landlords questioned said that demand was either growing or booming, while 54% said it was stable. Combined, this means that securing a stable rental income shouldn’t be too difficult for the foreseeable future.
“Void periods have been consistently low for some time, which is not unexpected when you also look at what landlords are telling us about the level of demand from tenants,” said John Heron of Paragon. “The housing market is currently experiencing a shift, with more people choosing to live in the private rented sector. This change in housing dynamics appears to be a continuing and long-term trend.”
Higher rents = more profit
And that’s not all. Additional figures from Your Move and Reeds Rains have revealed that average rents across England & Wales rose by 3.1% year-on-year in February, the greatest annual increase seen since May 2013. This means that, in real terms, average rents now stand at £766pm, up from £763 in January and £743 in February last year.
Analysis suggests that this increase has been largely driven by a lack of supply of affordable homes, which is pushing people into the rental sector and further increasing demand, leading to higher rents – and shorter void periods – accordingly.
While it may not be great news for renters, it certainly is for landlords. Being able to command higher rents while benefitting from shorter void periods means overall gains will increase as a result, something that can be seen when looking at average returns.
The figures show that, taking into account price growth and void periods between tenants, total annual returns on an average rental property now stand at 11.5%. In absolute terms, this means the average landlord in England & Wales has seen a return, before deductions such as mortgage payments and maintenance, of £19,849 over the last 12 months, made up of rental income (£8,167) and average capital gain (£11,682).
Get on the BTL bandwagon!
So, is it time you got on the buy-to-let bandwagon? Whether you’re new to the arena or are a seasoned landlord, it could be a great time to expand your portfolio. Not only could you see some exceptional returns but there are some great BTL mortgage deals to be found, too, and that means your repayments could be even lower – and your end profit even more impressive.