Ask a new landlord what their income is and they will say £12,000 a year on a £1,000-a-month property. Ask what their void allowance is and they will look confused.
Void allowance is the money you set aside for periods when your property is empty. It is real cash you will not receive. And it is one of the most common reasons new investors overestimate their returns.
For a standard single-let, the UK average void between tenancies is roughly three to four weeks. Add time for referencing and checks before the new tenant moves in, and you are looking at four to six weeks of lost rent per tenancy change.
If your average tenancy lasts 18 months, that is one void period every 18 months, roughly 8% of your income. On £12,000 annual rent, that is £960 a year.
For HMOs, voids are lower per room but happen more frequently. A five-bed HMO might have each room empty for two weeks between tenants. With six-month tenancies, that is roughly four weeks of void per room per year. At £600 per month per room, that is £600 in void allowance per room, or £3,000 total.
Be realistic about your local void rates. In Portsmouth, student lets have predictable summer voids. Professional lets have shorter voids but more uncertainty. Build your allowance based on local knowledge, not national averages.
The formula
Void Allowance = Monthly Rent × Void Months per Year
Why this matters
Void allowance is real money you will never receive. Budget for it honestly. A one-month void on a £1,000-a-month property costs you £1,000 in lost income. Build it into your cashflow calculations.
Running these calculations before you buy is the difference between a good investment and an expensive lesson. Xelox Properties can help you evaluate any deal.