How Often Should You Increase The Rent?
In over 13 years in the lettings industry I have seen Landlord’s who haven’t increased the rent in 15 years right through to Landlords who look for more rent at every contract renewal and everything in between. The best approach is somewhere in-between these two extremes so as a Landlord how often should you be increasing the rent on your property?
Firstly let’s look at some of the reasons why it wouldn’t be a good idea to increase your rent at every available opportunity. Having a good relationship with your tenants whether through your letting agent or directly, is important and quite apart from it being a nicer way to do business is also better for your bottom line. When a tenant feels they are being treated fairly they will on average stay in the property for longer and will look after it better happily taking on some minor maintenance issues themselves. You will then benefit from a long term tenant resulting in less void periods & marketing fees and lower running costs. Conversely if you increase the rent by as much as possible at each and every opportunity you will see a higher turnover of tenants, less goodwill and more than likely less care being taken with the property. I have seen Landlords lose good tenants through overly greedy rent demands and end up ultimately worse off than if they had kept the rent the same.
At the same time whether you intentionally got into ‘buy to let’ or became an accidental Landlord by renting out a previous home your property is of course an investment and needs to provide you with a good return. I once took over management of a property where the tenant had been living there for 15 years without any form of rental increase and they were paying at least £500 a month less than the market rate. Running at £6000 per annum below a fair market rent you only have to go back a few years before you can see that this particular Landlord was tens of thousands of pounds worse off than they should have been!
Many of the most successful Landlords I have been fortunate enough to work with over the years have had an intentional strategy of keeping any rent increases infrequent and keeping the rent below market rate on renewal to reflect the fact they were happy with the tenants. Their argument was that whilst they may have been able to squeeze a little more out of their properties, by being fair and treating their tenants well they would end up making a better return overall anyway. Many of these Landlords were very experienced having been letting properties out for many years and had decided that this was the most effective strategy for them.
From my own experience and speaking to others I would look at reviewing the rent every 2 years during a tenancy and provided you are happy with the tenants keep any increase below the market rate. For example if similar properties were now achieving an extra £50 per month I would suggest only asking the tenants for an additional £25 letting them know that this is on the basis you are happy with them as tenants and appreciate how well they are looking after the property. Of course it depends on the market conditions at the time but looking at an increase every two years would be my best general advice and would be considered fair to both parties. If your property is in Derby or the surrounding area and you would like some free no-obligation advice then just give me a call on 01332 303030 or email firstname.lastname@example.org and I would be very happy to help.
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