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Avoid the voids!

We should probably say ‘avoid the voids – as much as possible’ because that’s more realistic.

You will find that many, many roads that lead to optimal yield also lead to minimising voids.

The rate at which voids can eat into your cashflow is quite staggering, and very often surprises new investors.

Just to be absolutely clear then, a void is a period when your investment property is not earning any income from rent.

The property may well be earning you a great deal of money, of course, because it might be growing in capital value. But the essence of building a property portfolio – and indeed the great advantage property has as an investment asset – is gearing and gearing depends on cashflow.

Let’s look at how voids can wreck your cashflow and leave you without income to cover your monthly mortgage and maintenance and service costs.

Assumptions

Cost of Property: £150,000
Yield: 5.50%
Cashflow/year: 8250
Void (weeks): 13
Cashflow/year - inc void: 6188
Rent inflation rate: 2.5%

Loss over 10 years: £23107


Anyone must agree, then, a sizeable shortfall!

Of all the things that can go wrong, an extended void period will cause you the greatest problems because it can ruin your finances very quickly.

Copyright © Property Secrets 2007

“Property Management Secrets”
Reproduced with the permission of Property Secrets.

Further information on this topic can be found in “Property Management Secrets”

For extensive, regularly updated information about UK and Overseas property investment and to purchase this book, go to http://www.propertysecrets.net


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