Most landlords try to keep their rental rates as fair as possible, and don’t like raising prices for tenants. However, over time, it’s inevitable that you’ll need to put prices up; especially due to the recent tax changes, which will eat into your profit margins otherwise.
If you find yourself in a situation where you need to raise the rent, here’s a guide to help you.
Useful Information for Raising Rent
- Examine the market as a whole. Firstly, you’ll need to check that your rent rates won’t deter prospective tenants. Check what other tenants are charging in the area for similar properties, and work out what a realistic price increase would be. The last thing you need is to be perceived as too expensive, and thus not a viable option.
- Include it in the contract. Remember, if it doesn’t explicitly stipulate it in the contract, you won’t be able to put the rent up until the end of the tenancy. If you think you’re likely to want to push the rental price up before then, make sure you’ve got a clause in the contract that permits you to do so.
- Remember the Section 13 Notice. If your tenant is on a rolling contract, you have the right to raise the rent once every 12 months. However, you’ll need to provide your tenant with the ‘Landlord Notice of Intention to Raise the Rent’, which is also called a Section 13 Notice. This alerts the tenant to the fact that you’ve given them a month to accept the new rental rates. Your tenant is legally allowed to contest the increase; and you have the right to evict them if they refuse to accept them.
- Don’t increase dramatically. In our opinion, increasing rent by a significant margin usually panics the tenant, which can result in them making hasty decisions (such as immediately looking for another place to live). We recommend raising the rent slowly over an extended period of time; and being honest with your tenant about why you need to do this. Most people are understanding when it comes to tax matters, and will appreciate the reason behind your decision.
Should You Raise the Rent?
If your profit margins are shrinking significantly, then yes, you should. After all, you’re running a business, and you need to protect your interests. However, it’s important to see it from the tenant’s point of view. They’re working to a budget too, and if the rates are too high, this can have disastrous consequences for them.
Working with a Property Investment Agent
A good property investment agent will assist you with rental rates, offering insight into the current market, and ways you can attract more tenants to your house, even if your rates are slightly higher than the area average.
A great way to familiarise yourself with the market is to attend a property investment seminar; such as our free property seminars in London. To find out about the other ways in which The Buy2Let Shop can help you, simply visit our website today.