Analysis by portfolio landlord Open Property Group has revealed that it pays out 32% of its gross rent each month in rental property expenses.
Using Hammock software, the company studied its 140-strong portfolio across England and Wales to establish what percentage of the gross rent it receives as net rent (gross profit) after subtracting typical running expenses but excluding financing costs.
Repairs were revealed as the biggest outlay in November, equating to 11% of the total rental income, while the cost of full-time property managers came a close second at 10%.
General maintenance amounted to 7% and other costs such as gas safety, electrical safety and energy performance certificates totalled 5%.
This means its net rent is 68% of the gross rent, although this does not include mortgage, insurance, licensing and other miscellaneous costs.
Stark reminder The findings are a stark reminder to landlords that management of a rental portfolio can make up a large chunk of the monthly rental income, eating into profits, and all on top of additional finance and miscellaneous costs, says Open Property Group MD Jason Harris-Cohen (main picture).
“Even if a landlord doesn’t outsource the management, there is still a value they need to put on their time, and these are the kinds of costs they should be scrutinizing when evaluating the health of property portfolios,” he explains.
“With falling property prices, increased management costs and higher borrowing rates, landlords need to ensure they are conducting a thorough review of their rental portfolio profits to understand which properties are still a viable investment.
“Property remains a solid investment over the long-term, but in the current market and with the ever-changing pressures on regulation, it could make sense to invest in other types of rental properties.”
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