Whether you’re renting out commercial or residential property, being a landlord is an expensive business. With costs rising all the time you may need to implement a rent increase for your tenants in order to cover your expenses and maintain your profits. But before you act, you need to be sure that the increase is a practical and sustainable move. Here are 3 important considerations that landlords should take into account when planning to increase rent.
Understand the market
While it’s important to get the best value out of your property by charging as much rent as you can, it’s even more important to ensure that you have tenants willing to pay it. If your rent increase is too high, you risk losing your rental income entirely, as tenants priced out of your property will look elsewhere in the area for more reasonable rates. Avoid the expense of replacing tenants too often (or worse, being left with a vacant property) by researching local rental prices and average incomes in your area, to ensure that your rent remains competitive.
You could seek advice about current market and competitor trends from a property consultant like David Charles. Property professionals have the expertise to guide you through the minefield of rental increases that walk the line between affordability and extortion.
Be aware of developments in your area
Many external factors can affect the rental prospects of properties in your area. Are new flats being built, or is the town being regenerated? Look ahead to help you predict any rises or falls in average rental prices. By taking the long view you’ll be able to make better decisions relating to a rent increase, such as:
- Refurbishing or redecorating your property in order to compete with newer and smarter builds appearing on the market
- Capitalising on any new developments by investing in more properties to rent
- Considering selling up if you feel you will not realistically be able to cover your costs and remain competitive. (Doing this far enough in advance will save you cash and stress)
Keep an ear to the ground by monitoring planning applications publicised in your local newspaper, and stay alert for any planned new developments in your town.
Give proper notice and understand your legal obligations
For commercial properties, you should ensure that your lease agreement is drawn up with the aid of a chartered surveyor, and that you understand your obligations to your tenants when the time comes to renew the lease.
For residential properties, you must give proper notice of a rent increase, to give tenants the chance to prepare for the change. Your tenancy agreement will contain details of the procedure you have agreed with your tenants. The Gov.uk website has more details about the landlord’s legal responsibilities when announcing an increase in rent.
You could consider hiring a property consultancy service to handle landlord and tenant issues, such as a tenancy agreement and rent increase.