Rent Increase

Where about an are you?

in Dartford we’ve increased ours by about 12% in that time.

but rents are still increasing and I fear it’ll only get worse for tenants.

https://www.gov.uk/private-renting/rent-increases#:~:text=your landlord must get your,line with average local rents

I don't know if this is applicable to your situation/rent but at the very least check your tenancy agreement on how they are required to propose any increases to your rent. It will be in the document.

Just to clarify, it was a 10% increase last year, and a further 17% this year on top of that? That is far above inflation figures if that is the case so seems completely unreasonable to me

cantersaddick said:

Not quite on topic but I saw an interesting analysis a while ago where it basically said if a Landlord has a good tenant its better in the long run to not increase rent or only barely nudge it up in increments. 

In short the reasoning was that in potentially losing a good tenant there is a triple threat of 1) period of property being empty and so costing you cash, 2) cost of re-listing 3) risk of new tenant being a bad tenant and costing much more.

Their recommendation was to not raise or only very slightly raise when you have a good tenant, and then re-adjust to match the market rate when they do move on usually through churn. Did point out rent raises could also be used to rid yourself of a bad tenant. It did acknowledge different approaches needed for different property types. Flats in London and other cities have high churn rates so better to not raise rent on a tenant as they are likely to move on shortly anyway. Houses in suburbs have lower churn rate so will need to use the nudge technique.

Basically showed how taking this approach made landlords more money in the long run.

It very much depends.

if we have a tenant leave and the property requires minimum work it’s usually only empty for a week at most so makes very little difference.

i can only talk about 1 area, but when a tenant gives 30 days notice we usually have a new tenant signed within a week (so still at least 3 weeks before they can move in).

if your set rent level is sensible compared to the market you’ll have no real void periods.

Todds_right_hook said:

Surely it depends on the landlords circumstances.

if The property isn’t mortgaged, then the increase seems high

if the landlord has a mortgage and his mortgage rate has increased by 3%, then an increase in rent is fair

It’s a market, a landlord can’t get more than the market rate for their property, so circumstances don’t often feature that much.

cantersaddick said:

Not quite on topic but I saw an interesting analysis a while ago where it basically said if a Landlord has a good tenant its better in the long run to not increase rent or only barely nudge it up in increments. 

In short the reasoning was that in potentially losing a good tenant there is a triple threat of 1) period of property being empty and so costing you cash, 2) cost of re-listing 3) risk of new tenant being a bad tenant and costing much more.

Their recommendation was to not raise or only very slightly raise when you have a good tenant, and then re-adjust to match the market rate when they do move on usually through churn. Did point out rent raises could also be used to rid yourself of a bad tenant. It did acknowledge different approaches needed for different property types. Flats in London and other cities have high churn rates so better to not raise rent on a tenant as they are likely to move on shortly anyway. Houses in suburbs have lower churn rate so will need to use the nudge technique.

Basically showed how taking this approach made landlords more money in the long run.

Paragraph two I agree with in bundles.

Just to circle back on this I thought I'd give a little more context to my previous posts.

Rents (for varying reasons) have increased dramatically and at the same time demand for available rental properties has gone through the roof. In part I think that is due to a lot of landlords selling up. It's despite the rent increases not the profit generator it once was, especially with interest rates if it's financed and continual regulation and changes to taxation. Call it the imperfect storm if you like. Very few new entrants will be moving into BTL.

Sadly I can only see things from a cost perspective and availability worsening I'm afraid, the current government has made matters worse, I can only see that heading continually south. I think within 6-9 months we'll see a much worsening market for tenants with less availability.

There are good landlords out there, and I'd like to think I am one (to be transparent whilst I'm responsible for 54 properties as a Trustee of a friendly society, I don't own them just have responsibility for them).  

We have to comply with certain rules of the society, one of which is rents must be minimum 85% of market rate. Now I flex that as much as possible, for instance we will only increase rents at most bi-annually. That has/hasn't helped in some respects as it does mean a bigger jump in year 2 (i.e. instead of 6% this year and 6% next they will get 12% next year making the increase feel worse). We will also peg rents at the 85% hence why we get often over 100 applications on day one of advertising.

Working in certain ways as partly described above is also good for the landlord. Despite having 54 properties we have zero arrears and no vacant times (bar an odd day, week here or there but generally that's cleaning and maintenance between lets). The only arrears in the last 10 years was one tenant who did a midnight flip owning about £600, but even they've been paying that back at £25 a month and was paid off a year ago. A lot of the tenants have been with us for many many years.

Maintenance works aren't an issue, we repair anything and everything often over and above what we should.

However that all takes a toll, despite having no borrowing our net yield is sub 4%, if regulations for EPC's change further or there are rent caps and the like, we'll probably be forced to sell. (again part of the rules are we have to invest for the best return).

@charltonbob as mentioned I'd certainly go back and negotiate, although I suspect the Landlord and agent knows the going rate, which whilst disappointing is the market you are in. If you want to move to Dartford though let me know!  

HardyAddick said:

As a landlord, I don't like voids. I prefer long term tenants and will accept below market rents. A void is usually about 4 weeks but you then have costs to re-let is agent, decorating etc. 

However tenants have no loyalty and will say what you want to hear - saying they want to stay for 3 years and then give notice and leave after 6 months

A good long term tenant is worth their weight in gold. We have had 2 places trashed costing many thousands to sort out. One trashed the place in 2 years, then continued to pay for the next 3 years (funded by ex) without living in it after moving in with a new bloke. You can imagine the state of it plus in theory we would have been uninsured for 3 years. I know landlords can have a bit of a bad rep but tenants can be far from whiter than white too. The months deposit at the start doesn't touch the sides if you get  wrong-un.