Should I Raise my Rent?13th Jul, 16
Should I Raise my Rent?
Buy-to-let investments are just that – an investment. As with all investments landlords want to maximise their returns. One of the easiest ways to do that is to ensure the rent you are charging reflects the maximum rent achievable in your area.
With higher tax bills for landlords from April 2017 onwards a lot of landlords are saying they will have no choice but to raise rents further but the question has to be asked is it always a good idea?
Tempting as rent increase’s are for the landlords there is always a balancing act to be had. If you have good tenants for example, who pay on time, look after your property and rarely come to you with issues, maybe it is worth rewarding that so they stay.
You also have to factor in the start of tenancy cost – both in terms of time and money (advertising, show arounds, referencing, contracts etc) which can quickly add up.
Can I Raise my tenants Rent?
First things first, unless you put a specific clause in your tenancy agreement saying otherwise you need to remember you are only allowed to raise rents once the fixed term of the tenancy agreement has come to an end.
Once the fixed term has ended you can put a new tenancy agreement with a higher rent or increasing the rent under their existing Assured Shorthold Tenancy Agreement. If you do take the 2nd option however you must get a signed letter from the tenant stating that they agree to the new rent from the set date.
Section 13 Notice
If you allow the original tenancy agreement to continue rolling on month by month (this is called a periodic tenancy) you can raise the rent at any point however you can only do so once every 12 months unless otherwise agreed by the tenant. If you choose to raise the rent during a periodic tenancy what you cannot do however is just drop them a text message or quick email saying you want to do that. You must issue your tenant with “Landlord Notice of Intention to Raise the Rent” otherwise know as a Section 13 notice. This notice must provide at least one months notice to your tenant.
Remember your tenant will have the right to challenge or reject the rent increase but the landlord then has the right to evict the tenant once the fixed term of their contract is over.
How should I decide what Rent to Charge & how to tell your tenants?
To judge what your rent should be take a look on the big online sites like (Rightmove.co.uk & Zoopla). It is worth, whilst doing your research, you keep records because if you do decide to raise the rent it’s always a nice idea to show your tenants why you are doing it. Showing them the adverts will show that you are being fair – especially if you are choosing not to raise rents to maximum levels available to you (i.e. you could charge £1200pcm but still offering them £1100pcm for example).
It’s worth remembering that despite all the hype that rents are raising so quickly there is no guarantee you will actually find a new tenant that can / is willing to pay the rent you are seeking.
To conclude then: Should I Raise my Tenants Rent?
In my view, as with any business a landlord to tenant transaction is based on trust and mutual respect. If you treat your tenants well they will be more likely to look after your property and help you when required (i.e. allowing access for vendors to save you a trip etc.).
It is always a good idea to consider raising rents in smaller increments if you must increase them at all to minimise the impact on your tenants.
The main principle I work too (and appreciate this is not for everyone) is I would rather to stick with someone I know is looking after a property than try to get that extra £50 a month with someone I don’t.
On the plus side of this approach, when tenants do eventually leave, if you are not currently charging the full market rate you are likely to seek this with a new tenancy – so this always provides a very nice boost in income at that time.
Should this all sound too much please contact me for a chat or if you would like P.I.A to facilitate contract negotiations or manage your property.
Happy property investing and renting.
Written By Bo Ibrahim – Working successfully investing and renting property for himself and his clients.