Are you even charging the right rent? Could you charge more?
Are you a landlord? Are you watching the private rented sector at the moment and wondering what on earth is going on? If you have a happy and settled tenant, it could be that you have no idea what's happening in the market at the moment. Read this to find out more…
When the property market is transitioning and experiencing a change or two, it can affect the values of properties for both sales and lettings. New properties coming to the market are seeing a stampede of potential tenants all fighting for their chance to even view, never mind applying to rent it. It must feel like you've won the lottery to be told that you've been accepted for a property to rent at the moment.
This exponential rise in competition over each listed property has resulted in quite a dramatic rise in rental prices over recent years. According to Homelet, the average price for a rental property in the UK is now £1,229! That is an increase of 10.4% from June 2022 to June 2023.
This rise has resulted in tenants choosing to stay in their properties for longer, meaning that some landlords may be charging much lower than market-value rent.
If your tenants have been in your property for a long time, are you even aware of the property's actual market value? Perhaps it is time for a rent review?
One of the main issues for a self-managing landlord is they are unsure how to increase the rent. It's widely reported that the rental market and property values have risen dramatically, but if you've had the same tenant in your property since before the pandemic, your rent could now be significantly lower than the market value. So what should you do?
- Firstly, you need to know what the market value for the property is on the rental market. This way, you know how much below the market figure you are.
- Secondly, you need to decide if you want to rock the boat. Is it fair for you to increase the rent? We are all experiencing the impact of the cost of living crisis and rising inflation. Do you need another £50 so badly that you will add this expense to your tenant's monthly outgoings? If you push the rent to the point that the tenants can't manage, they may default on the payments, opening up a new can of worms.
- Finally, have the tenants been in the property for long enough? Your agreement should specify when and how frequently the rent can be increased; you don't want to breach your agreement by increasing the rent too soon.
If, after asking yourself these few questions, you decide that you are, in fact, going to increase the rent, the next step would be to determine what the new rent will be. If you increase the monthly payment by hundreds of pounds, there's a strong chance that the tenant will struggle with such a vast increase. So, decide what you're happy with that won't push the tenants over the edge. The last thing you want to do is cause stress and upset the tenants, forcing them into being unable to meet the payments and ending up in rent arrears.
Once you have your new rental price in mind, it is time to action the rent increase. And you will need to serve a Section 13 notice to your tenants to enforce the new price.
Of course, there are parameters on how and when this notice can be served. You'll need to give time to the tenants to allow them to prepare and change their rental payments with their bank.
There is no easy way to process this; whichever way you do, it will be met with resistance from the tenants; after all, no one likes to hear that their payments are going up. But clear communication is often the best policy, particularly when delivering bad news. Don't let the first knowledge of their increasing rent come from opening your notice, have a conversation with them to explain what is coming and be empathetic to their circumstances.
Alternatively, you could ask your letting agent to process a rent increase. If you don't have a letting agent, now could be the perfect time to get one!
Passing over the management of your tenancy to a professional will ensure that these rent increases occur more frequently so that you aren't left drastically out of pocket and the tenants are not hit with a massive rent increase out of the blue. It will also ensure that your property is legally compliant and these notices are correctly actioned, so you don't have to worry about it.
If you're managing your property on your own and need some advice or guidance on how to make your property investment more successful, not to mention giving you back the time you currently spend on managing things for yourself, get in touch with our property management experts. They can take over the management for you, mid-tenancy if needed, and get everything ship-shape and profitable for you in no time.