Investment landlords have a very simple requirement, they want
tenants to pay the rent and look after their property. However many
things can affect this simple requirement which can result in less of
the rent getting to or remaining in the landlord's bank account.
Maximising rental return is not about increasing the rent every year. Sometimes it is prudent to leave the rent unchanged even if the local market has increased.
For example, if you have tenants with no pets; tenants that don't smoke in the property; tenants with no children and tenants that are clearly looking after the property then there is a value to keeping them as tenants for as long as possible.
Increasing the rent may result in notice to quit from the tenants. Replacing them with tenants with children and pets will mean more wear and tear to the property. In this I don't mean damage just routine wear and tear and the cost to a landlord can be a lot higher than the total value of the rent increase. Landlords need to understand the value of a good tenant. Over the years I have seen landlords hold rent for years and occasionally some to reduce rents to retain good tenants.
How often can I increase the rent?
You can increase the rent at the end of the initial term (often 6 months - sometimes longer) and then not more than once every 12 months unless previously agreed in writing with the tenants. A tenant has a right to challenge an increase you are applying for. You should use a Section 13 (2) prescribed notice to apply for an increased rent (if you search for this online you will find this document).
How much should I increase the rent to?
When considering rent increases I always keep the new proposed rent lower than I would confidently be able to achieve on the open market if I had to re-let. If your tenant carries out some research they will see you are being fair and hopefully support your request. I suggest phoning or visiting your tenants to talk about the changes in the local market and discussing your thoughts about a new higher rent. Remember if they decide to move on rather than pay the rent you may experience a void between tenancies which would most likely eat away at any benefit you've gained.
Letting quickly and minimising voids
Another critical point that many landlords over look is to get the property let quickly. Things that can put off viewers include such points as: poor broadband connection; high energy costs; external presentation; ease of garden management; condition of the gutters soffits and fascias; condition of the window frames and the internal decorative condition. In my experience even a property with an old kitchen and bathroom can look attractive if clean, well decorated and cared for.
Treat your tenant like a customer and deal with maintenance issues promptly. If you live locally visit the tenant by arrangement and prove to them you are interested in them and your property.
Tenants change of circumstances
Do you have rent default protection should the tenant's circumstances change?
Buildings insurance doesn't cover for this. Some policies cover for lost rent if the property becomes inhabitable for a time during works but not a change to the tenants circumstances causing them to go into rent arrears.
Good local lettings agent will be able to provide appropriate insurance cover.
Free Advice
A great source of free, specialist, local advice is a qualified lettings agent. They will know the rental values of a property in their areas and how fast a particular property might let and what could be done to increase rental value and the speed of letting. Check that you chose a qualified agent who typically will be a member of ARLA, Safe agent, NALS and the Property Ombudsman schemes. These independent bodies ensure the lettings agent operates their business professionally and ethically.
Maximising rental return is not about increasing the rent every year. Sometimes it is prudent to leave the rent unchanged even if the local market has increased.
For example, if you have tenants with no pets; tenants that don't smoke in the property; tenants with no children and tenants that are clearly looking after the property then there is a value to keeping them as tenants for as long as possible.
Increasing the rent may result in notice to quit from the tenants. Replacing them with tenants with children and pets will mean more wear and tear to the property. In this I don't mean damage just routine wear and tear and the cost to a landlord can be a lot higher than the total value of the rent increase. Landlords need to understand the value of a good tenant. Over the years I have seen landlords hold rent for years and occasionally some to reduce rents to retain good tenants.
How often can I increase the rent?
You can increase the rent at the end of the initial term (often 6 months - sometimes longer) and then not more than once every 12 months unless previously agreed in writing with the tenants. A tenant has a right to challenge an increase you are applying for. You should use a Section 13 (2) prescribed notice to apply for an increased rent (if you search for this online you will find this document).
How much should I increase the rent to?
When considering rent increases I always keep the new proposed rent lower than I would confidently be able to achieve on the open market if I had to re-let. If your tenant carries out some research they will see you are being fair and hopefully support your request. I suggest phoning or visiting your tenants to talk about the changes in the local market and discussing your thoughts about a new higher rent. Remember if they decide to move on rather than pay the rent you may experience a void between tenancies which would most likely eat away at any benefit you've gained.
Letting quickly and minimising voids
Another critical point that many landlords over look is to get the property let quickly. Things that can put off viewers include such points as: poor broadband connection; high energy costs; external presentation; ease of garden management; condition of the gutters soffits and fascias; condition of the window frames and the internal decorative condition. In my experience even a property with an old kitchen and bathroom can look attractive if clean, well decorated and cared for.
Treat your tenant like a customer and deal with maintenance issues promptly. If you live locally visit the tenant by arrangement and prove to them you are interested in them and your property.
Tenants change of circumstances
Do you have rent default protection should the tenant's circumstances change?
Buildings insurance doesn't cover for this. Some policies cover for lost rent if the property becomes inhabitable for a time during works but not a change to the tenants circumstances causing them to go into rent arrears.
Good local lettings agent will be able to provide appropriate insurance cover.
Free Advice
A great source of free, specialist, local advice is a qualified lettings agent. They will know the rental values of a property in their areas and how fast a particular property might let and what could be done to increase rental value and the speed of letting. Check that you chose a qualified agent who typically will be a member of ARLA, Safe agent, NALS and the Property Ombudsman schemes. These independent bodies ensure the lettings agent operates their business professionally and ethically.
Terry Lucking is Managing Director of Belvoir Property Lettings the leading property lettings agents in Cambridge offering a range of houses to let in Cambridge. In addition to lettings he offers comprehensive
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