According to the latest research by Direct Line, many landlords are literally having sleepless nights due to the current economic climate. The research found that up to around a third of landlords surveyed were anxious that their tenants would run into rental arrears. This is a fundamental issue for landlords who depend on the monthly income generated from rent to maintain their property and earn a living. However, as many as 22% are worried about their cash flow, especially in the event that their tenant was unable to service the rent.

There is evidence to suggest that these fears are not unfounded, as 16% of respondents have changed their payment terms in order to remain competitive and keep tenants in their properties.  In addition, some 65% of respondents have felt their tenants are feeling increased pressure in the first half of 2009. The big question and cause for anxiety of many landlords is the inevitable rise of interest rates, which will squeeze their margins still further. Many could be soon left with a tough decision: increase rent and run the risk of a tenant defaulting or lose out on valuable income.

What perhaps is more unnerving is the fact that 9% of those landlords interviewed had cancelled their insurance policies in an attempt to cut costs due to the deteriorating environment. This in itself is a dangerous and rather short-term solution as one could be left with a huge liability if something were to go wrong. One thing is for sure it is always best to be prepared for a rainy day.