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.

I can't stand BTL, but I expect this couple are claiming housing benefit to help with their rent. However you putting up the rent may not equate to an increase in their housing benefit.

I think you should put it up, and review every year. I'd be inclined to go for around 5% a year until it is slightly below market rate.
5% on 850 would bring you to 892. So I'd go to 900 now.

I would go for Options 2 or 3. It's a tricky situation and I sympathise.

Why not speak to them first ask if they want to buy? Discuss with them your problems and ask if they could afford a rent increase. They will deffo appreciate the truth rather than it being sprung on them.

I'm also an accidental landlord so here in solidarity. I'm in the same boat with a friend renting my property at much below the market rate.
Mortgage rate due to expire next year which was a worry.

Shes let me know this week she's found somewhere to buy which is a relief.

We now need to decide whether to renovate to rent properly (rent will more than double) or sell and take a massive tax hit which we wouldn't have had but for a sale fell through in 2008 as was our residence.

People have little sympathy whichever way you look at it but I would love to get rid and not be out of pocket!!

Won't they be getting a 10% increase or so on their state pension?

Oh yes that extra £16 - £18 extra a week that has to cover huge increases in energy costs, food, travel etc.

Is that supposed to be a joke?!

3 or 4. You've been generous but it's silly to make a loss for their benefit. They snuck a dog unto your house without permission, they don't exactly hold the relationship in high regard. Obviously they want to stay there forever if they're getting a 25% discount on the rent.

Increase it so you won’t make a loss when your rate goes up and then increase in line with inflation each year.

How nice of you to actually think of your tenants before profits but you need to be able to afford the make repairs & maintain the house out of the rental income so I’m afraid an increase is inevitable.
Speak to them, explain what you ideally need to increase the rent to & see what arrangement you can make.
At the end of the day if you can’t pay the mortgage you could lose the house then they will be homeless so it makes sense for the rent to go up so their rental is secure for you both.

Just the mortgage fraud for you, then

I think 8% is OK. If you keep putting up by less the % of the % keeps getting less. If you sense they're struggling you could be more lenient.

And this is why private renting is shit. Being in your late 70s and having no security at all. From what you say OP they have had financial difficulties and would be unable to get another private rental. If they can't afford the increase they will have to apply for social housing which will not happen overnight.

You should talk to them and perhaps an 8-10% increase might be possible for them.

I hope you have protected the deposit and given them the appropriate information and also carried out all necessary checks.

I understand your position but I am afraid my sympathy is with the elderly couple who will lose their home and probably their dog and likely end up in a grotty flat somewhere.

There’s a fair chance the coupe are receiving housing benefit for most of the rent.

Unless you are a charitable organisation, I don't see why you should foot the bill for rises in inflation. You don't rent to be nice and compassionate. You aren't there to take a financial hit for the benefit of others.

@CandleCandleCandle "There’s a fair chance the coupe are receiving housing benefit for most of the rent."

HB is capped. In my area you get £600pm (ish). Average renting price for a 1 bedroom flat? £1000pm.

HB is capped. In my area you get £600pm (ish). Average renting price for a 1 bedroom flat? £1000pm
Thats why I didn’t say all of the rent, it’s capped at £780 in my area.

I would be lead by what you’ve put in the contract about rent reviews. As an accidental landlord I would only increase by 8% as I would do whatever I could to keep good tenants.

It's nice that you care about their situation and a generous landlord. However, no one really knows their full circumstances. They could just be humble and down to earth spendthrifts with a huge nest egg squirrelled somewhere! You could have a honest conversation with them about your options to sell the property, either outright or as a rental with them as sitting Tennant's. They would know full well the person who buys it wouldnt care about their situation and be able to command a market rate. Then a conversation about a small rent bump won't sound as harsh?

I would also be wondering about how things will be for your tenants as they age and possibly become unable to cope. Hoping it's their 'forever home' is sweet but possibly not realistic. If they're literally expecting to see out their days there that could be 20 years from now! When do you hope to sell? You sound like a decent landlord but can't make a loss and they must know that so you need to explain to them any rent increase and other options (they buy/move out?)

I also rent out a house and have had the same tenants for over 10 years now, I recently moved the day to day running over to a letting agency, I was surprised by how much rent has increased in our local area.
I have increased the rent to market value as advised by the letting agency, it's nice off you to think of the tenants but you really need to be making a profit so you can keep money back for repairs and general maintenance, id let them know you are in the process of reviewing the rental price and go ahead and give them a months notice that the rent will be increasing

I make a loss of about £100 a month on my property when you take into account the tax bill etc. also an accidental landlord. I’ve just increased the rent by £25 a month which will help me somewhat and will still be affordable to the tenants. Better a loss of £75 a month than an empty house. I just see it as a pension investment and try not to think about it!

Nobody rents out a property with the intention of making a loss unless it is a deliberate subsidy to a family member or close friend.

Most BTL mortgages are interest only, so the initial sum doesn’t decrease, and currently there is not even the eventual ‘carrot’ of increased equity, as property prices have started to drop.

I know that many landlords (including me) tend to keep to the initial rent. It can make sense if good tenants remain and there are no void periods.

You then get to the situation where the rent has been the same for 5 or more years and all the increased costs you are absorbing start to add up.

If the income from the rental isn’t covering your costs you need to increase the rent. It’s hard to do. Increasing the rent to the current market value, or even by the rate of inflation over the last 4 years will be a big jump. No tenant wants to be faced with that. Understandably people don’t have the mindset to think how lucky they are to have been paying a lower rent for many years, they worry about having a large increase.

Do whatever you can to make the increase as comfortable as possible this time, but manage expectations and advise the tenants that from now on the rent will be reviewed annually, and will always need to cover your outgoings, and an amount for contingency expenses.

There is absolutely no provision for a landlord ‘not being able to afford’ essential repairs, so you need a buffer to be able to pay for a new boiler, roof repair, etc. You won’t be able to raise it on your mortgage.

It might be that the couple are already considering applying for a council property ( assuming there are decent bungalows, etc nearby, not just high rise flats) as they will feel more secure in a lifetime tenancy.

There is a place for the private rented sector for people who need the flexibility to move for work, etc, but social housing is normally preferable for those needing a long term home.

I’d talk to them frankly about a rent review, suggest they look at sheltered accommodation or other social housing with council. Often it’s easier to get social housing for over 65s but the dog maybe a sticking point. If they were on a rolling monthly contract this would help them move into social housing if they can get offered something suitable.

what us the percentage rise in the tenancy agreement?