As a landlord, how do you decide if to raise the rent when all is going well?

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    As a landlord, how do you decide if to raise the rent when all is going well?

    So, rents have been rising, demand has picked up quite a bit in my area and agents tell me I have a great home and that I can reasonably expect to get more rent than I am currently getting (around £250-300 per month or more).

    I have a good situation with my tenants, who have always paid their rent on time, kept the home in great condition and there's not a peep out of them about anything.
    This has been the situation for almost 2 years.

    Other than the rent question, I do not want to "disturb" anything and there are risks with making a change, including any voids which could eliminate any hoped for extra.

    It is quite clear that not only are we not out of the woods yet from the global financial crisis, but that it could be another 3-5 years before we are back where we were.

    So my question if you are a landlord, is if you can see that you can achieve more rent than you are currently getting (such as my example above), how do you judge if you should change tenants and raise the rent in such a situation?

    Would you be happy, in these times, to have the situation that I do or would you be brave and take the chance?

    #2
    What rent are you getting now?
    Ambition is Critical

    I don't profess to be a knowledge in all areas, my advice is based on life experience.

    Comment


      #3
      I have a property I rent out which is around £150 less than market value, its been rented for the last 4 years and like you have very good tenants, she pays the rent on time and I've never seen the property with a speck of dust on or around it in the time that shes been in occupation (touch-wood). If this wasn't the case and the property was a state I'd think twice.

      Its one of those situations that you wont find out until you try. You might get someone straight away willing to sign up for a year, you might get a host of tenants who want a 6 month let and move on after that time. With having a high turn around you may pay more in general upkeep on the property.

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        #4
        Originally posted by DrunkenJedi View Post
        agents tell me I have a great home and that I can reasonably expect to get more rent than I am currently getting (around £250-300 per month or more).
        That sounds a helluva lot to me, though it's hard to know how far off market rents you are without knowing the actual monthly rent - ie, if your tenant is currently paying £300 a month it's way different to if they are paying £3000.

        It's always a balancing act I think; espcially when you've got good tenants who you want to keep - I've just been through exactly the same issue. I always pitch my rents at a little below the market rate anyway; I've just decided to put this one up by about 4%, 18 months after the tenancy started, and as I have pointed out to the tenants, this is still below the current market rate and represents good value. I think that is very important - ie, if they decided to quit, they'd certainly not find anything as good in the same price range.

        It sounds as if you may be a large % off the market rate - if you want to keep the current tenants, I think you need to be careful before wacking the rent up massively. Better to review the rent say, annually; keep in step with current rates and manage tenants' expectations than lull the tenant into a false sense of security and hit them with a huge rise after several years.

        Alternatively if your rents are way off, then from a business point of view you might decide you need to redress this even if it does mean risking losing the current tenant...

        Comment


          #5
          Agree with Eric: I also try to pitch a bit below market & to be a bit-more-than-reasonable Landlord in the hope that the tenant might just treat me & the property decently as well and I get more stability of tenants. Doesn't always work out, it's a balancing act & a gamble..

          A "good" tenant is worth cherishing, IMHO!
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            Originally posted by J4L View Post
            What rent are you getting now?
            I'm getting £2000 and its inclusive of bills. This is as a HMO.
            The original total rent was higher but I was not able to fill 1 room.
            I was still marketing the last room when the initial 6 month tenancies were about to expire and the tenants were aware of this, as well as how much I had dropped their rent by as the market had gotten worse since they moved in.
            So when I offered to renew the existing tenant's tenancies, I dropped their rents and all rents have stayed the same ever since.
            I found someone for the last room shortly after I renewed all the other tenancies and all rooms have been occupied since.

            I too have always aimed my rents to be a bit less than the top of the market, because I believe this allows me to see a larger selection of people from which to select a tenant from.
            Getting top rent isn't worth it if you have voids and expenses and its only really possible if you have a property and location that is always, at the very least, in reasonably high demand.
            I believe almost all properties have at least 1 or 2 downsides and if not, by making top rent your goal, you could be creating one or another one.

            The letting agents have given me their valuations as a HMO and also, to let the property as one unit (without me paying the bills).
            The amount I quoted is not the top end of the market, as agents have a tendency to exaggerate.

            I have a few things to think about but my main concern with renting the property as one unit is that with a large property, the pool of potential tenants drops markedly (the property doesn't suit families as its a flat, so prof. sharers are the only market essentially) and if I have 1-2 months of voids, there goes my extra rent.

            I will have a vacancy on one room soon and I upped the advertised rent by almost 20%, initially to see what kind of response I would get.
            Within 1 week, someone has made an offer and paid the full deposit.

            Comment


              #7
              Is it based on just what the agents have said? Have you looked at comparables as well?

              Comment


                #8
                Yes, I spent a while looking at my competition, what they offer, location, condition etc.

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                  #9
                  Originally posted by Ericthelobster View Post
                  I think that is very important - ie, if they decided to quit, they'd certainly not find anything as good in the same price range.

                  if you want to keep the current tenants, I think you need to be careful before wacking the rent up massively. Better to review the rent say, annually; keep in step with current rates and manage tenants' expectations than lull the tenant into a false sense of security and hit them with a huge rise after several years.

                  I am happy to keep my current tenants as I have implied and my tenants are quite aware of the deal they have been getting and that I dropped their rents when the circumstabces dictated it.
                  So I don't think they will be shocked if I bring up the issue with them.
                  If I raise the rent with the current tenants, it will be to the rough level that they used to pay when they moved in.

                  Tenants can't have it both ways.

                  I am sure there will be other properties that could offer lower rents, but amount of rent isn't the only consideration for a tenant, especially if you have lived somewhere for a while, are comfortable, happy and settled.
                  Moving out represents a risk for tenants (more so I would say than for a landlord looking to find someone new), and who knows what situation the tenant will end up with in a new place?

                  Comment


                    #10
                    Originally posted by DrunkenJedi View Post
                    I will have a vacancy on one room soon and I upped the advertised rent by almost 20%, initially to see what kind of response I would get. Within 1 week, someone has made an offer and paid the full deposit.
                    I'll bet the newbie is unaware how much the current incumbents are paying, and equally that (s)he will find out pretty quickly after moving in and be unhappy if the rent discrepancy continues - so I'd be inclined to nip that one in the bud by being upfront about it, with a decent explanation!

                    Comment


                      #11
                      Originally posted by Ericthelobster View Post
                      I'll bet the newbie is unaware how much the current incumbents are paying, and equally that (s)he will find out pretty quickly after moving in and be unhappy if the rent discrepancy continues - so I'd be inclined to nip that one in the bud by being upfront about it, with a decent explanation!
                      I don't see why I should do what you suggest.
                      The incoming tenant will be a separate and exclusive contract, not conditional or with reference to what others are paying or any other terms, at that moment in time.

                      Does a company that owns a shopping centre rent out its individual units by reference to what the other businesses are paying or other negotiated terms? No.

                      Of course no-one wants to pay more for something that they have to.
                      But this is a free market, private business agreement and surely, its up to the buyer to make their enquiries as they see fit, before they commit to a deal.
                      The person clearly feel that the deal is fine with them.

                      I do intend to seek a rent rise with the other tenants but not now.

                      Comment


                        #12
                        Originally posted by DrunkenJedi View Post
                        I don't see why I should do what you suggest.
                        I'm not sure you understand what I suggest, actually.


                        its up to the buyer to make their enquiries as they see fit, before they commit to a deal.
                        The person clearly feel that the deal is fine with them.
                        Yeah, of course they do - and you really think they are still going to be happy once they've had a chat with their new sharers? Answer - no - of course not. Chances are they will be highly aggrieved; will believe they've been conned; will be quite likely to start making waves with you and the current tenants. All I'm suggesting is that you think about being up front about the fact the existing tenants are currently on a lower rent, so that the incomer finds out from you, not the current tenants. You can present that information with whatever positive spin you can come up with - but however you choose to do it, it will be preferable to just doing nothing.

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                          #13
                          Originally posted by Ericthelobster View Post
                          I'm not sure you understand what I suggest, actually.
                          Actually I do, I just don't agree with it or see the need for it.

                          Why should the tenant feel agrrieved or "make waves" (whatever that is)?
                          What do the other tenants rent levels have to do with the new tenant?

                          Comment


                            #14
                            Originally posted by DrunkenJedi View Post
                            Actually I do, I just don't agree with it or see the need for it.

                            Why should the tenant feel agrrieved or "make waves" (whatever that is)?
                            I'm sure you'll find out soon enough...

                            Comment


                              #15
                              Originally posted by Ericthelobster View Post
                              I'm sure you'll find out soon enough...
                              Since you are not willing to contribute nor do you have a genuine desire to help, please say so instead of being a heckler.

                              Comment

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