To increase the rent?

[Dickensian]

Just that really. I'm an accidental landlord. Have lovely tenants - an elderly couple in their late seventies who have lived in the small house for 4 years. They are my first ever (and last) tenants. I will sell the house once they are no longer there. They love the place and expect to be there 'forever'. Before moving in, they had fallen on hard times for various reasons and would never have passed official rental agent tests, and a previously undeclared dog appeared (it's fine), but have always paid their rent on time. I have never increased the rent, they pay what they did when they moved in (£850). I don't have an agent but looking at market rents in my area I would say that £1000+ is the going rate for a similar type of property..

I actually have no idea about their financial circumstances but presume they wouldn't be able to/ want to buy the house.

The problem is that my BTL mortgage deal is coming to an end. From making a small profit, I will start to make a loss.

The UK inflation calculator shows that prices in general have increased more than 25% since they moved in.

My gut feeling is to look at an increase of 8-10% and absorb some of the cost myself. Or not increase it at all, but (being brutal) they might live in the house for another 20 years so that would be 20 years of loss which isn't very sensible.

So which option would you take:

1. No increase at all (and make a loss) YABU
2. Increase by 8-10% and review again in a couple of years
3. Increase by 8-10% and start reviewing every year to keep pace with inflation
4. Increase by more than 10% (up to 25% even) to bring rent up to market rent and nearer the price it was in real terms 4 years ago. Review annually in line with market rent.

Would a 5% increase cover any loss?

I’d do 2 or 3, have you done everything else properly? Deposit protected and official contract in place etc? What sort of tenancy do they have?

Increase every year with inflation.

Ultimately, their personal circumstances are not your concern.

What's written in your contract about rent increase?

Ooo it's a tough one.

If you want to run it as a business, the last option is a no brainier financially speaking to me.

However if you're not looking to run it as a business and it's more just about the rent covering the mortgage until you can sell, then I'd have an honest conversation with them and say that due to mortgage rates changing their rent will need to increase (you could offer here to sell it to them if you wanted) and that when you get your new mortgage rate through you'll let them know how much the rent will be increasing. Then only keep it increased for the mortgage term (no annual reviews) until it next needs renewing.

Or you could just sell the house anyway, give them warning and you won't have to worry about this?

I think you need to cover your costs. You’d of been better to put it up gradually over the years. Put it up to £950 and then increase with inflation each year.

You say if you don't increase the rent, you'll make a small loss- is that purely based on monthly mortgage payments? You also need to factor in any unexpected costs (eg broken boiler etc)- if you're already making a loss would you be able to afford repairs?

YANBU but may need to increase by more than you think.

I would increase to ensure i wasn't making a loss, based on the cheapest mortgage deal you can get eg an interest only, but not by more than that. You say you are an accidental landlord, so i assume this isnt about generating an income.

Landlords focus so much on the market but then its just like a race to the top - if people like you raise rent by more than you need to cover costs, it pushes averages up, the top end of the market then pushes up because they feel their property justifies above average rent, and its a never ending cycle of increases.

The focus should not be on pushing thr market to pay as much as people can possibly bear to get a roof over their head.

Also remember that if you increase the rent, you'll have to pay more tax on it through self-assessment. Are they any implications for you there if you're near a banding threshold? We are in a similar boat with our rental property - brilliant tenants and the rent just about covers the mortgage and tax due but it would have to go up if it didn't.

You need to be honest with them. We have just had to to the same with our tenants.

They know mortgage prices have increased. They see the news.

Just give as much notice as you can and say from this date it will go up to xxxx

If you are an accidental landlord , why have you got a BTL mortgage?

we were accidental landlords, we had bought our current house because it was in the area we needed to live in ( health reasons) and we couldn’t sell the original house because Covid descended. So we had to let it out to cover the costs. As soon as we could, we sold it. If you have a BTL mortgage, this surely isn’t your own home?

I think you may be better off unloading this house and looking at alternative investments ( interest rates and dividends are going up) because you have to have a hard heart to be a landlord.

Of course you have to increase it, you simply cannot make a loss. But some dope will be along in a moment to say you’re an evil shitbag for not just signing the house over to them.

I'm a liberal but I think this is true. If you make a loss then that means that you're a charity.

Have you taken into account paying tax too?
How much short are you?

If you are an accidental landlord , why have you got a BTL mortgage?

Most mortgage providers won't allow you to let a property out without switching to BTL product.

It seems silly to make a loss, though it's nice you won't want to make it unaffordable for your tenants. Increase based on your new mortgage deal with as much notice as you can. I wouldn't go too aggressive and match market average rents though. You could always sell up if you feel too guilty asking them to pay more!

I'd do 10% and review it annually if you can afford too.

I think you need to increase it to the point where you're not making a loss.

Im a landlord and am currently operating all my properties at a loss thanks to huge service charge increases and mortgage increases. I can’t sell the properties due to cladding issues so until they’re resolved I’m stuck. I don’t see why my tenants should suffer big rent rises so I’ll just carry on subsidising painful though it is.

agree with @TheGoogleMum - but make sure that in addition to covering the increased mortgage, you're building up enough for a "repairs fund".

You could be up front with them, discuss the upcoming increase and see what they'd intend to do - if they'd rather leave/won't be able to afford it, maybe it's time for them to move on and you to sell up?

Yanbu. Put it up to close to the market rate (maybe a bit under). If repairs to the roof or a plumbing issue etc happen then soon you'll be subsidising this rental.

As an elderly couple, wouldn't they be entitled to housing benefit if they had a low income?

I'd say 5% and advise them it will be an increase in future years in line with inflation.

If the mortgage increase means you’ll be renting it out at a loss, you should sell up, to be honest, because you certainly won’t have money for repairs and improvements. Why are you an ‘accidental’ LL?

It's up to you. If ur not worried about making a profit you could just increase it by what ur mortgage will be going up by and then tell them once the mortgage deal ends you will review it again. That's more than fair and quite generous of you.

Their circumstances aren't your problem though and if you want the market rate then you should apply it. I wouldn't be willing to subsidise it especially when it's you paying maintenance and repairs and insurance etc.