Why rising rental arrears and void periods do not need to hold buy-to-let investors back

The outlook for landlords doesn’t appear great. But that isn’t denting their spirits. It feels like there is a never-ending supply of challenges in the current property market. The latest to emerge will certainly make for alarming reading. 

Rental arrears are creating a rift between landlords and their tenants. The cost-of-living crisis is still clearly taking a toll on us all. According to analysis from FCC Paragon, an estimated 47,405 disputes were lodged by tenants across the private rental sector in 2024. A 13.6% rise on 2023, and the highest figure seen over the last five years. 

Nearly 10,000 of these disputes concerned rental arrears. A huge 80.8% jump on the prior year. We all know that rental arrears often only lead to one thing for landlords – void periods. 

Arrears are leaving landlords exposed. The amount of debt accumulated on average by landlords facing rental arrears hit £2,597 in late 2024, according to Reposit. A 44% year-on-year jump. 

These issues hit the bottom line. Benham and Reeves found that the level of rental revenues lost by landlords due to void periods rose by 19% across England over the past year. Void periods themselves are also increasing, jumping from 22 days to 24 on average over the last 12 months or so. 

When we see these kinds of results, one must wonder if they’ll be the final straw. Landlords have faced so much negativity in recent months, surely the market will be completely abandoned. 

While it’s true, we have seen a rise in buy-to-let sales, there is a surprising amount of optimism in the market right now. Not all landlords believe that the buy-to-let market is dead. Let us not forget, the market has been declared dead more times than we can count, and yet it’s still going. The laws of supply and demand appear immortal. 

Landlords may be more optimistic than many expect 

At Market Financial Solutions, we wanted to get a better understanding of what buy-to-let investors are thinking and feeling in the current market. There’s a lot of alarmism in the press, and we wanted to see if it was really having an effect on our clientele. 

As such, for our independent Q1 report, we surveyed landlords for their thoughts on the current state of the buy-to-let market, and the outlook for 2025 and beyond. The results provided a tonic to all the pessimism out there. 

Only 7% of our respondents decreased the size of their buy-to-let portfolios in 2024. In fact, over the coming year, 36% plan to increase their portfolio size, while 55% will keep it as is. 

Property investors appear to recognize that their situation doesn’t have to match up with what’s going on in the wider scene. Around 60% in our survey wither somewhat, or strongly agreed with the statement: “The buy-to-let market is in a much stronger position than negative stories in the media often suggest.”

For those who may be struggling, or who are at least worried about what’s on the way, proactivity is being embraced. No one needs to accept failure if they can do something about it. Over half (58%) plan to diversify their portfolios (e.g. by investing in different regions or property types) over the next 12 months. 

Keeping our eye on the ball 

Still, embracing optimism doesn’t mean we allow ourselves to become complacent. Property investors can’t drop the ball in this market. Challenges remain, and landlords appear fully aware of what they need to keep an eye on. 

We also asked our respondents to select up to 3 (if any) market conditions that represented the biggest risks to their buy-to-let portfolio. Renters’ ability to meet rental payments if inflation or the cost of living rises further took the top spot (40.5%). It is a bigger concern than domestic political or economic instability (34.5%), or global political or economic instability (28%). 

A rise in rental arrears, and the corresponding impact they may have on void periods, needs to be addressed. This challenge, and others like it, could derail an investment strategy, even if the long-term outlook is promising.

Oncoming shifts in the market may raise the likelihood of rental issues too. The Renters’ Rights Bill is just around the corner, and Propertymark has warned the reforms could drive up rents, and limit supply. Put simply, it may cost landlords a lot of money to adhere to all the new rules, and these costs are likely to be passed onto tenants.

Uncertainty, if only temporary, looms in the buy-to-let market. But it’s the kind of uncertainty that the specialist market is primed to accommodate, and find a solution for. 

For instance, Market Financial Solution’s bespoke buy-to-let mortgages bring bridging-like speed and flexibility to the rental market. We’re happy to hear from landlords who may have struggled with rental arrears and void periods. We will give every enquiry a fair hearing, and factor in the wider economic picture when assessing a case.

Also, we have a range of bridging products at our disposal that can help with market specific complications. This can include refinancing options for those who need to tidy-up their portfolios, or refurbishment finance to ensure an asset meets tough new minimum standards. 

Then there’s Bridge Fusion, our newest option. Providing a more medium-term solution, with the option to extend by 12 months at the end of the term, it allows property investors to embrace a cautious “wait-and-see” approach. Borrowers can still keep their investment plans progressing, while they await a calmer market, better rates, or even more solid renters. 

We do not need to fear the challenges in the market. We just need to be prepared.