Running costs are rising across the private rented sector.
Pegasus Insight research shows property maintenance and repairs remain the largest cost for landlords, accounting for 31% to 39% of expenditure depending on property type.
Overall, landlords now spend 25% to 45% of gross rental income on running costs, including maintenance, servicing, insurance, utilities, fees and compliance.
Average total annual expenditure is £19,604 for landlords with non-HMO properties, or £35,720 for those operating HMOs.
The average buy-to-let portfolio generates gross income of £79,000 per year.
The primary difference between HMO and non-HMO landlords is the amount spent on utility bills, which is more than four times higher for HMO landlords (16% vs. 4%) who more commonly include these in the rent they charge.
Pegasus founder Mark Long says: “What we’re seeing now is a step-change … Even with yields at multi-year highs, a growing share of rental income is being absorbed by day-to-day running costs and compliance demands.
“For many landlords, particularly those with older stock or more complex portfolios, the challenge is no longer generating income, it’s protecting margins in the face of rising costs.
“… The risk is that sustained increases in upkeep costs ultimately feed through into higher rents, as landlords look for ways to fund the ongoing investment required to keep properties in good condition.”
This article is taken from Landlord Today