Landlords are warned to get their finances in order to avoid repossession

Written by RLA

Landlords are not factoring in the costs of owning a buy-to-let property with a contingency fund and this is leading to an upward trend in repossessions, according to Invest Connect, leading property investment specialists…

Landlords are not factoring in the costs of owning a buy-to-let property with a contingency fund and this is leading to an upward trend in repossessions, according to Invest Connect, leading property investment specialists.

Recent statistics show that one in five repossessions during the first three months of 2013 were on buy-to-let properties, according to the Council of Mortgage Lenders. In the last quarter of 2012, landlord properties represented 12.8 per cent of the repossessed total.

Charles Brittain, Business Development Director at Invest Connect comments: “Buy-to-Let repossessions are on the rise because of a number of major causal factors including rising rent arrears and void periods.   If landlords do not have a contingency fund in place to cover these unforeseen circumstances, then they could fall into financial difficulty and potentially lose their property.

“As a general guideline,  30 to 35 per cent of one year’s gross annual rental income should be put aside to cover rent arrears, void periods, maintenance, repairs and refurbishment, white and brown goods replacement and the on-going rental costs, such as gas safety certificates and letting agent fees. This contingency may not be used and should not be seen as an additional annual cost, just part of the investment business plan from the outset for investment protection

“Redecoration may be needed every 3 to 5 years. Kitchens, bathrooms, boilers, interior doors etc. will probably have to be replaced every 5 to 15 years. New windows, external doors, barge boards, guttering, pathways, driveways, radiators etc. will be required every 15 to 25 years

“Depending on the age of the property and the length of time you retain it, rewiring and re-roofing may be necessary at some point. Major renovation work like this can be expensive, so unless you have budgeted for it in your investment calculations, you may not be able to afford to carry out essential work when required.

“Buy-to-let is very profitable in the long term, but only if you do your sums properly and structure your investment wisely. A property investment is similar to running a business, so you need a business plan, cash-flow forecast, finance and funding. Therefore it’s sensible to budget for all the costs you’re likely to encounter during the life of your investment. The maintenance costs for a new or recently refurbished property are likely to be minimal at first. But over time, those costs will grow in significance, particularly when larger scale refurbishment is required.”

Invest Connect has put together a starting list of some of the costs to be considered when owning a buy-to-let property which should be catered for from rental income and an appropriate contingency fund:

  • EPC certificate
  • Gas safety certificate
  • Letting agents fees
  • TDS scheme fees
  • AST fees
  • Landlords insurance
  • Void allowance
  • Council tax
  • Ground Rent
  • Service Charge
  • Buildings insurance
  • Utility bills
  • White goods
  • Furnishings
  • Repairs

About the author



The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.


  • This article pinpointed very useful point. Landlords need to have contingency fund in place to cover for rent arrears and any unexpected circumstances to avoid the property being repossessed.
    I have a number of buy to let properties and I always make sure that I have enough money to keep me going if unexpected things happen. I don’t want to lose my properties and it is better to be in save side then regret for rest of my life.

  • In many cases, particularly if it is a terrace or small semi-detached, 30% of gross rental income represents the profit gained from a property after mortgage and insurance payments are taken out. If that is what landlords must do there doesn’t seem to be much point in owning the house, particularly if it is still in negative equity after the crunch. many landlords own one or two of these, and it is impossible to build a contingency fund. So how do we solve this?
    If the government really want to help young people onto the property ladder they should give the owners of these typical first-time buyer houses 100% Capital Gains Tax relief if they sell to a first time buyer, especially if that buyer is getting government help with the deposit.
    This would represent no loss to the treasury since the owners probably wouldn’t sell without the relief and no tax revenue would be generated anyway. It would put money back in the lenders coffers ready for re-use and would improve their balance sheets. It would also get those small investors out of a hole they got into when they thought rental property would be an easy way to supplement their pensions.
    It’s a win/win situation, particularly when you consider that most new build houses include a considerable sum for white goods that increases the buying price of the property beyond the reach of a large proportion of first-time buyers. Worse still, as soon as the deed is signed those white goods depreciate in value bringing the worth of the property well below the buying price.

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