Tips for buy-to-let landlords to increase rent without the hassle
In this last article of a series of three discussing increasing rents in the UK buy-to-let market, you’ll read about six approaches that different landlords take when they wish to increase rents. You’ll notice how these approaches tie in with our advice about how to:
- Balance your emotional side and business brain to increase rents
- Raise rents legally in the UK buy-to-let market
At the end of this article, you’ll learn six of my top tips to help you make the rental increase process painless.
1. Never put off raising rents
Nichola tells us that she never puts off raising rents. “It’s never pleasant, but it is necessary. It’s a little like visiting the dentist. The longer you put it off, the harder it is. Then, when you do finally raise rents, it’s going to be even more painful.”
2. Always include a rent review clause in the tenancy agreement
Jason never lets a property without a comprehensive tenancy agreement, which includes a rent review clause. “I let the tenant know what the increase in rent might be in the tenancy agreement. It’s easier to raise rents this way because there is no surprise factor.
“Also, if I have very good tenants and my costs haven’t increased as much as I suspected they might, then I may not increase the rent by the amount indicated, or perhaps not at all. A review is exactly that, and I value my good tenants.”
3. Raise the rent in line with inflation every year
Shahid believes the easiest way is to simply increase rents with inflation each year.
“My tenants know that prices rise, and many get wage rises to match inflation. They expect their rent to rise. By increasing rents with inflation each year, my tenants’ rents increase gradually, and my extra costs are covered.”
4. Increase rents by 4% or 5% each year
“I’ve found that the general rate of inflation doesn’t reflect the increases in my costs,” says Imran. “I need to ensure that my expenses – maintenance and mortgages, for example – are covered. By increasing my rents by 4% or 5%, I make sure that my buy-to-let portfolio is doing what it should: increasing the return on investment each year and not suffering from higher costs to me.”
5. Always explain why the rent is rising
Jenny is proud of her relationship with tenants. She explains that she doesn’t automatically increase rents every year. “There’s a lot to be said for having tenants who really care about your property and look after it like it is their own home. I’ve had nightmare tenants before, and it’s not a pleasant experience.
“If I’ve got great tenants, I won’t automatically increase their rents. It may be two or even three years before I do. And when I do, I make certain that I explain why rents have needed to increase. I’ve never had a problem with this approach, and I’ve never had a tenant leave because their rent has increased.”
6. Follow the market, and let the tenant know
“You must cover your costs when you’re a landlord,” says Neil, “but you’ve also got to make a profit. I think the secret is to keep an eye on the local market – what rents are being charged nearby – and to keep in line with this. When I increase rents to a tenant, I’m able to show what the average rents are in the local area and position my rent just below.
“The result of this approach has been good for my small property portfolio. My returns are increasing, and I’ve yet to suffer a void period.”
You’ll notice that all of these different approaches have some things in common:
- Decisions are made rationally, without emotion
- All of these landlords clearly respect their tenants
- Rental increases can all be explained easily
Maintain a good landlord/tenant relationship when increasing the rent
It’s our experience that building and maintaining good relationships with tenants is one of the most important factors in running a successful buy-to-let business. Rental increases have the potential to burst this relationship. The following six tips help us to maintain good relationships with the tenants of our landlord clients, and this helps them to retain their tenants while increasing rents:
- Always give the tenant plenty of advance warning that rents will be rising
- Put the rent rise in writing (even if it is in the tenancy agreement) and make sure the tenant signs their acceptance
- Explain why the increase is necessary
- Ensure that the tenant understands that the rent rise is in their interest as well as yours – it’s purely business, and rising maintenance costs must be paid for
- It is better to increase rents little and often
- Remember the value of good tenants, and be prepared to give a little – either in a reduced increase or by offering a value incentive (a new washing machine or new carpets, for example)
Be objective and not subjective about your rental increase decision. Your buy-to-let property is a box to make you money, so don’t let your emotions cloud good business judgement.
Of course, you don’t have to be the one to break the ‘bad news’ of a rent increase to your tenant. As a national property manager, part of our job is to keep up to date with local rents and advise landlords on how much rent they should be charging to their tenants. Then we talk to the tenant on their behalf. To chat about this and other benefits of hiring us as your property manager, get in touch with the team at Ezytrac at +44 0 1522 503 717
Live with passion,