Acceptable rental increase?

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  • Acceptable rental increase?

    Hello, we are loking for some advice raising the rent on our 3 be Flat.

    We need to raise our rent to cover our mortgage hike (just about to fall off the end of our initial 2 yr fixed deal!), we have never raised our rent before and so don't know what an acceptable percentage rise would be.

    We need to raise the rent by circa 8% pcm to cover our out goings (raising the monthly rent by £130 on a 3 bed flat in London) does this sound acceptable? If anyone could give us a steer on this we would appreciate it.

    Cheers

  • #2
    You can only base it on what is the going rate, otherwise you may loose your tenants...and that would be even worse than not quite having enough to cover the mortgage.
    All posts in good faith, but do not rely on them

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    • #3
      Originally posted by Mark&Sam View Post
      Hello, we are loking for some advice raising the rent on our 3 be Flat.

      We need to raise our rent to cover our mortgage hike (just about to fall off the end of our initial 2 yr fixed deal!), we have never raised our rent before and so don't know what an acceptable percentage rise would be.

      We need to raise the rent by circa 8% pcm to cover our out goings (raising the monthly rent by £130 on a 3 bed flat in London) does this sound acceptable? If anyone could give us a steer on this we would appreciate it.

      Cheers
      Two ways to implement increase:
      A. Keep existing AST going but serve Notice under s.13 of Housing Act 1988 (assuming that AST does not itself contain a rent increase mechanism). This has the advantage of not triggering DPS requirements.
      B. Terminate existing AST (s.21) but immediately grant new AST at increased rent.
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
      4. *- Contact info: click on my name (blue-highlight link).

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      • #4
        You could look on rightmove or whatever the best London sites are for advertising rentals to see what the current asking rents are for properties in you area, bearing in mind how many are available, how long they've been advertised (which you get to notice after looking for a while) and bearing in mind that achieved rents are usually a bit below asking rents. Then consider what it would cost you if your tenant leaves.

        Thing is every landlord has a different sized mortgage, it may be smaller if for example they purchased ages ago, so rents aren't set based on your costs but by the market as a whole and by what tenants can pay or they can just move somewhere cheaper.

        An 8% rise sounds a lot to me but I am not on London.
        ~~~~~

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        • #5
          Your mortgage doesn't drive the cost of your rent, the local market does

          So rather than looking at what you need to raise by, you need to look at what equivalent properties on the local market are going for

          Who knows, you might even need to drop the rent for your next tenants if you're above the market rate

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          • #6
            8% is a pretty steep rise to expect your tenants to accept. I know if my landlord were looking to increase my rent by that much I'd probably say "thanks but no thanks ... I'll move" unless I had already been getting the place for a ridiculously cheap amount

            I think if you try and raise by such a large amount you'll be looking for new tenants (and end up getting the associated costs)

            Just out of interest ... would you pass on a reduction in rent if your costs went down or would you continue to expect your tenants to pay the market rate?

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            • #7
              Originally posted by Mark&Sam View Post
              Hello, we are loking for some advice raising the rent on our 3 be Flat.

              We need to raise our rent to cover our mortgage hike (just about to fall off the end of our initial 2 yr fixed deal!), we have never raised our rent before and so don't know what an acceptable percentage rise would be.

              We need to raise the rent by circa 8% pcm to cover our out goings (raising the monthly rent by £130 on a 3 bed flat in London) does this sound acceptable? If anyone could give us a steer on this we would appreciate it.

              Cheers
              Why don't you just remortgage to a better deal (I assume that you are about to go to the Lender's SVR (Standard variable rate) Which in most cases is 7.5% +. There are some decent deals about at the moment on 2 year fixes at 5.35% for Buy to lets. (If my assumption is wrong then please disregard).

              Regards

              Jai

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              • #8
                Some London rentals have apprently gone up by 30% in the last year alone.
                The contents of this note are neither advice nor a definitive answer. If you plan to rely on this, you should pay somebody for proper advice.

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                • #9
                  I trawled round SW London rental agents this Spring & asking prices for rents have shot up - as posted here some 20% or so v 2006. I am v happy with my current tenant so increased the rent by RPI - c 4% from memory - & he accepted without question.

                  My rents probably a bit low but I am happy & he pays for the contract in advance. The real money is in the capital appreciation anyway (20% 2006 - 7) v the yield c 4%. Don´t be greedy....

                  Cheers all

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                  • #10
                    The real money is in the capital appreciation anyway (20% 2006 - 7) v the yield c 4%. Don´t be greedy....
                    One of these days you will get in a mess. Don't say I didn't warn you... Oh yes, if you put the rent up by 25% - which you probably could, at least, then your yield would be 5% or more.
                    The contents of this note are neither advice nor a definitive answer. If you plan to rely on this, you should pay somebody for proper advice.

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