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 would have a honest conversation with them I’m sure they are aware mortgage rates are increasing - advise them that you are likely going to be increasing rent to cover this but don’t intend to profit off them and put the offer on the table for them to buy it at that point? If not ask if they are claiming everything they should ie/ housing benefit to help with the increased rent. I think that’s all you can do. Good luck

How can you be an Accidental Landlord if you have a BTL mortgage? You took a punt, you've clocked up three years of a major property price rise and now you want out.

What % would you need to increase it to in order to prevent you from making a loss?

I don’t understand the accidental landlord and be on BTL mortgage.
The majority of people renting are also financially on a knife edge …

Because when you become an accidental landlord, a lot of mortgage companies will transfer you over to a BTL product rather than let you stay on a residential mortgage when you are actually renting the house out

I just increased rent by 15%. The tenants gave notice (I hadn't raised it in over three years but rents have been exploding), and got new tenants within a day at the higher rent. Then the tenants new flat fell through and wanted to stay - I agreed as long as they paid the extra, which they readily agreed.
Another house, I've had same tenant for 8 years and I've never increased the rent as I know the tenant who has become disabled. But his housemate moved out and so I've lost his rent, and now the buy to let mortgage fixed rate is coming to an end. If I can't find a new mortgage at a similar rate I will have no choice but to sell - I can't afford tripling my repayments. But I do fear he will not move out!
I live off the rent - it's not just covering the mortgage.
You need to increase the rent, but check your lease as there might be a limit to how much you can increase it by. I would have increased the rent but have held off due to his circumstances, but there will be a time I need to do what's right for me, not him.

Not my experience at all, as a genuine accidental landlord who rented my home when work took me a distance away. I told the mortgage company and they said 'Fine.'

Never really understood how you'd find yourself accidentally letting a house and accidentally taking out a BTL mortgage. Sounds careless.

Anyway you can do what you want, so just do that.

You can find out from the council up to how much housing benefit they'll pay for that property for those people in that area. Then you'll know how much they may be able to afford.

Yes, usually for the remainder of the term of the existing mortgage

But I’ve never heard of a mortgage company that will let you renew at the end of a fix and remain on a residential product. They’ll move you to a BTL one

How do you accidentally rent out a house? You chose to this OP. Accept responsibility for your actions.

Because circumstances happen and it's the most sensible option at the time. Rather than she made a business plan that was buying houses and letting them out. Surely you aren't that stupid as to not realise that this is what an accidental landlord is?!

Im in a housing association property and yesterday we had a letter saying they are increasing the rent 7%. Apparently they can go to 11% but due to the cost of living crisis, the government have capped it at 7%

They will understand. We all know that everything is going up, including rent.
They will be expecting it.
Explain your mortgage interest payments have increased so you have to increase the rent to match it, otherwise you'd have to sell.
They may well be entitled to housing benefit?

They can approach the council for assistance if they can't make the increase. The council may help them out under homeless prevention scheme. It's worth looking in to. But essentially it isn't your problem. You need your costs covered one way or another.

What capital gains have you accrued in that time?

Why is that relevant?

The homeless prevention scheme will have major calls on it at the moment and will not be prioritising a couple who can just move to a cheaper house.

You should rent at £850 per month as that was what agreed and sell up when they’re gone.

The term accidental landlord is a stupid phrase which demonstrates adults not taking responsibility and owning their own decisions. The OP and others may make what they think is the most sensible decision. It is not an accident, they make a decision.

Is this not payable when they sell?
In which case it's irrelevant because no one knows what the price will be then?

It's not a popular view but everyone who wanted higher taxes for landlords, no mortgage interest relief, fees and costs to all fall on the landlord not the tenant etc were complicit in getting to this point where the margins are so low for BTL landlords. With the mortgage rises, it's unaffordable and landlords are editing the market or forced to hike rents.

I'm an 'accidental' landlord too but I have a residential mortgage (with permission to let from lender) and am operating at an annual loss. My tenants are also my first (and, like you, will likely be my last as I will sell when they decide to leave).

I offset the loss with the increase in property price. Even in the current market the area where my property is is still increasing (albeit more slowly nowadays), so overall I am still doing okay. I think given CoL increases, if you have good tenants, you should hold on to them.

When you look at the annual picture, rather than the monthly, does it add up? 8-10% is a big rental increase. In my situation, if my house goes up by just 1% a year that's equivalent to a 23% monthly rental increase.

Some estate agents suggest 5% per year if they manage the property

Do your research, how much do properties current rent for in your area ?

Running at a loss is not sustainable

The term accidental landlord means someone who does not do it for a business. Not they accidentally let a house out by accident. Of course they make a decision based on their own circumstances changing. Try not to be obtuse.

@peeweechigs But it is a business. There are laws to follow. Saying you are not doing it as a business would ring alarm bells with me that it was one of those landlords who hasn't a clue what they are doing and ignores the laws they should be abiding by.