If you employ a managing agent to look after your property and tenancy, you needn't worry. Letting agents are at the coal face of the letting market, and so will be making sure that, as the market changes, the existing tenancies are kept up to date and all landlords receive the correct rent for their properties.
But, if you manage your tenancies yourself, you might not be making the most of your investment. The property market has changed dramatically over the last few years, with a shortage of rental properties leading to increased rental prices. Therefore, if you have not assessed your property for a few years, you could be leaving money on the table.
The average rental price for a property in the UK is £1190 (according to The Guardian in April 2023), which is an increase of 10% since last year.
Most self-managed landlords are either unaware of how much their property could be worth, how to increase the rent, or how to navigate the process. This could mean that most self-managed landlords miss out on potential income. So how can this income be unlocked? What is the approach to increasing the rent on your rental property?
Call in the professionals. The easiest option is to employ a managing agent. If your tenant is still in situ, you can outsource the management of your tenancies to a managing agent at any time, even in the middle of a tenancy, without any problem. The agent will perform a full audit to ensure everything is up to date and running correctly. They'll be able to provide you with an accurate rental valuation, and if the rent is too low, they'll be able to set a rent increase in motion for you. Nice and straightforward, and you will probably find that the rent increase will more than cover the monthly management fees for the agent.
Serve a notice - if you decide to go it alone, you'll need to serve a Section 13 notice, in writing, to your tenants, formally informing them of the increase in rent and issuing the correct notice period.
The key to a rent increase is to ensure you are fair. The tenants are used to budgeting for a set figure each month; if you increase by a substantial amount in one fell swoop, your tenant may not be able to afford the sudden rise in outgoings. It could cause your tenant immense distress if their monthly outgoings increase suddenly, particularly when experiencing a cost of living crisis.
If you've neglected to keep the rent in line with market value, you may have to take that on the chin and accept a slower rent increase process rather than a sudden jump up in price. Otherwise, regardless of the distress caused, you may find that the increase is unmanageable for the tenants, and they're now unable to make the payments.
You must consider that some rent, albeit at a slightly lower rate, is better than no rent and a complete breakdown of the relationship between you and your long-term tenants.
If the increase in value is only £25 per month, you might decide it isn't worth the upheaval and distress. After all, if your tenants move out due to the rent increase, you'll lose more income than you would gain by re-marketing the property. But, if the rent is £100's lower than it should be, this must be addressed promptly. Tread carefully, though and be sympathetic to your tenants.
If you need some guidance on navigating a rental increase with your tenants, contact our property experts today.
