Do you regularly (or at all) increase rent for existing tenants?

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    Do you regularly (or at all) increase rent for existing tenants?

    I would like to gauge your experience on this - in all my properties I have never increased rent in an existing tenancy, regardless of how long the tenant stays. Am I stupid or normal or somewhere in between?

    I’m of course happy to adjust to market rent whenever a tenant moves out and a new one moves in, but I always found it strange to even consider regular rent increases for existing tenancies. Even though I have that right in my tenancy agreements, and even though my tenancies so far have averaged about four years per tenant.

    My thinking for this approach is mainly because my costs of running the BTL business for that particular tenancy don’t normally increase, so if it is profitable on day 1 of a tenancy (and it always is) then it will be profitable in year 5 with the same rent. Of course this view is a bit incorrect because regulatory burdens tend to increase cost over time (and of course inflation is an aspect as well), but in the end I’ve never run the risk of not making money so I never thought to increase rent.

    The flipside of this I guess is it keeps tenants happy, but it could also mean they get a bit of a shock when they move on after a good number of years and realise that rents have gone up considerably (all my properties are in the South West where this tends to be the case).

    So anyways, I’m interested to hear what you think of this and what your approach is?

    Many thanks and have a nice weekend!

    #2
    I take pretty much the same approach. By keeping rent the same, the property tends to become gradually cheaper in real terms for the tenant and makes moving a less attractive option. Conversely, an increase in line with inflation / 'the market' could feel to them like they were being left worse off.

    That said, in the case where a tenancy lasts a long time it becomes fairly inevitable that rent should increase at some point. My longest tenancy is over ten years. Nearly eleven. In that time I have increased the rent once, by about £50 per month and I have recently proposed that we should increase it again by the same amount.

    That tenancy is the only one of mine which has been subject to a rent increase.
    There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

    Comment


      #3
      I increase my rents every year to keep them inline with current rents. Occasionally they don’t go up and if tenants are good and long term then the rents track lower than current average.

      Food, utilities, wages, and my costs all go up annually so why shouldn’t rents?

      Comment


        #4
        The only one time I did not increase rent (for 10 years) I got very very badly burned.

        The tenant (who was paying about 60% market rate by the end of this) claimed that the rent increase that was applied 10 years before (and which they had paid for 10 years) was invalid because I had not served proper notice. As you will know, formal statutory notice is not required for a rent increase during a periodic tenancy and it can be done by agreement (and actual payment for 10 years constitutes pretty robust agreement). They then said that they were not going to pay rent from now on until the £50/month x 10 years had been "caught up". They even persuaded Citizens Advice to represent them in court in this ludicrous claim.

        The judge chucked it out after 1 minute, blasted the CAB and they not only lost their tenancy but got a CCJ in the process.

        I think you have to increase the rent steadily according to local rental inflation and changes in risk. Yes costs may be going down, but your deposit is also getting whittled and even long-term tenants can represent massive risk these days. If you like (I usually do) if the tenant is a good one they can get sweeteners at the end (like leeway on notice, pro-rata rent refunds for a part month, turning a blind eye to minor damages, and so on). And they get better service too.

        I will never do this again. I always increase the rent by approximate rental inflation even if it's only £5/month. Waiting too long means that you will have to apply large rent jumps later, which are not nice.

        Comment


          #5
          I only increased on new tenants but to be fair most tenants were only a in for a year to two years.

          Last tenant I didnt increase even when suggested by my agent but did increase by £20 a month after 8 years. 6 months later they left the property and me with a bill of approx £3k to make good all the damage and replace items taken and a deposit just under £900. Was wanting to get in and refurb top to bottom anyway to stop it looking tired but learnt a lesson. From now on rent will be increased every year.

          Out of interest if the rent is increased can you insist the deposit is topped up to remain at 5 weeks max permitted?

          Comment


            #6
            Early on in my BTL career I chose not to increase rents but you eventually reach a point where your rents are way below market levels and it becomes extremely difficult to drag them back up without giving your tenants sleepless nights. My method now is to increase annually but usually by silly amounts, £5 pcm £10pcm or such. This way the tenants learn to expect a rise every year but don't sweat over the amount. My rents are typically 20% below market levels.

            Comment


              #7
              I think about it after 3 years.

              Comment


                #8
                My model is similar to the OP's - I have never increased rent for a tenant.

                It doesn't bother me that they end up renting below market rate - if they are a good tenant, you want to keep them. If they research rents after a couple of years, then they will realize how much you are, in effect, rewarding them. You will end up 'trapping' (in the nicest possible way) good tenants in your properties as they baulk at the prospect of moving on to much higher rents - even for something similar in the same area.

                Obviously, keeping properties well maintained is an essential part of this model.

                I didn't get into BTL to get rich (just as well ), I did it to provide enough income to cover my costs at home without having to go out to work. I have a modest lifestyle, so I'm happy with the money I make. I understand completely that this model won't suit everyone.

                What this does mean is that, when a tenant does eventually move on, I get a nice little 'pay rise' as I market at the current market rate. That's my 'sweetener' for losing a good tenant.

                The only time I would consider putting up rents is in the scenario of considerable interest rate rises (and then only once my existing fixed rate periods have ended). This is the reason I include a 'rent review' with my annual inspection. I usually list the reasons why I think they are a good tenant, before giving them the news that I'm freezing their rent for another year.

                Comment


                  #9
                  haven't increased any rents in the last seven years with one exception when a tenant asked if her boyfriend could move in. we agreed an increase and lowered it back down again when they broke up a year later and he moved out.

                  We have really good relationships with all of our tenants. They all maintain the properties very well and that saves us money. This is the main reason why we don't increase rent. The other is that we don't actually need the extra money.

                  A property I've been executor for for over five years is a different story that sounds similar to AndrewDod's experience. The tenant has been there 15 years and was paying a lot below market value when the owner died. As executors we didn't increase it. In the last year, the tenant started being late with rent payments. In January, they lost their job and stopped paying. Then Covid happened and while they did end up on UC, their payment isn't enough to cover the rent each month. Basically, they're now stuck in a property they cannot afford. Had the rent been increased in line with inflation to market value, they would have been forced to leave ages ago. Now they're facing an S8 and a money claim unless they jump ship before probate is granted.

                  I can see the value in AndrewDod's approach therefore in areas where rent payments are large, tenants stay a relatively long while and affordability becomes a risk if rent is increased to market value.

                  Comment


                    #10
                    I am quite surprised at the number of LLs that don't increase rent regularly. If you have a medium sized portfolio - say 8 properties and you put up the rent £25 pm per property each year that is an increase of £2400. If your tenants stay on average 4 years that is £9600 in lost rent. Even a very modest £10 per month rise equates to nearly £4000.

                    I understand all the comments about keeping rents a bit lower for good tenants, but as one or two comments above show, even good tenants can get into trouble.

                    If you are a social housing tenant I believe your rent goes up each year inline with inflation so why would it be different in the PRS?

                    Comment


                      #11
                      I’m getting a bit burned just now by not increasing rent. Tenants have been in situ for~6 1/2 years during which the market has moved on. I’ve been trying to evict them for the better part of a year but they say they have no savings and can’t afford to move.

                      Comment


                        #12
                        Is it legal to add this in to the AST?

                        ".....will increase on DAY / MONTH every year by the Consumer Price Index rate of inflation published in January that year, plus 3.9%." [courtesy of EE standard broadband terms]

                        Obviously set the plus % to whatever suits your situation.

                        Comment


                          #13
                          Originally posted by landlord-man View Post
                          Is it legal to add this in to the AST?

                          ".....will increase on DAY / MONTH every year by the Consumer Price Index rate of inflation published in January that year, plus 3.9%." [courtesy of EE standard broadband terms]

                          Obviously set the plus % to whatever suits your situation.
                          That seems life making like difficult - why not just put in rent to be reviewed annually?

                          Comment


                            #14
                            lol just noticed it on EE website - certainly lets you know whats coming (but did put me off)

                            Comment


                              #15
                              Originally posted by jpucng62 View Post

                              That seems life making like difficult - why not just put in rent to be reviewed annually?
                              I have a clause that allows rent increase at any time, but not less than 12 months after previous rise.

                              That means I don't have a "use it or lose it" clause that would prevent me raising it if personal circumstances meant I missed the anniversary.
                              It also means that I can raise the rent when economic conditions change for me without having to wait for the anniversary.

                              Comment

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