Should I increase the rent?

[Everywheretwice]

I own a property that I rent to a lovely family, a couple and their primary age son. They both work full time. The wife's father also lives with them, he works full time too.

They've been in the property for 6 years, they have always paid £800pcm, on time, no issues, and I've never raised the rent. Market value now would be at least £1100.

I'm torn between raising the rent slightly to help cover increasing costs associated with the property, or leaving it as it is because I like them.

Market rents are that because other landlords have done unreasonable increases.
£50 isn’t a lot to increase and would be manageable £300 would be really unfair

I'm a landlord and I have only raised the rent on my place when new tenants have moved in. Personally, good tenants are worth their weight in gold (in my experience for every crap landlord there is an equally crap tenant) and if the family you have in are otherwise solid dependable people who look after the place I would either keep the rent as it is or raise it in line with inflation. Worse case scenario is that they move out and you have a few months void of lost rent, agency fees and possible decoration costs all for an extra £25 a month.

They’re ‘customers’ who are paying to live in a house, not to altruistically pay off someone’s mortgage. OP isn’t a charity. If she ran a shop and the price of her stock went up and she didn’t pass those rises onto her customers, she would go bust. There’s no difference here.

Their rent goes up with inflation, as do their wages . At the end of the day , they are paying RENT, to live in said property, regardless if it goes towards landlords mortgage.

You’re not running a charity OP. To be a good landlord you need enough money to maintain the property.

There are 3 adults in the house working full time, even if they’re all on minimum wage, they’ll have £4.5k ish going into the household.

You can absolutely see who’s who here. Of course I would accept an increase. But the point is that they wouldn’t do it just to be in line. And that’s why I know she’s a good person and so am I. Works well for both of us. Moving house would be about £400 a month more but I repair things when they break so I’m not actually costing her money and she’s negotiating that. Some people are just decent.

Split the difference & increase to £875-£900
£950 sounds a lot, (or a big jump from £800)

It's good you have a nice, mutually beneficial relationship going with your landlord. Contrary to popular belief though, landlords are not rolling in it (double debt usually) and it's not being a decent person to expect them to go without or not cover their expenses to subsidise yourself. There's a difference between raising rent just to get in line (which is their right to do, even if a bit harsh all at once and potentially unfair) and raising rent because you're no longer covering the costs of insurances, repairs, maintenance, and any other costs that come with being a landlord. If landlords can't cover their costs and it's hurting them personally, they will sell, then you'll be having to find more expensive housing on a more competitive market.

I put a new boiler and new radiators in just before they moved in, alongside new electrics and a new bathroom. I've got a good pot set aside for any unexpected costs :)

The kitchen is dated but functional, though. The added wear and tear is significant with 3 adults though, the bathroom certainly doesn't look new anymore but that's expected! It's their home, they're busy, and I factor in refurb/decoration.

I should have raised it but I have a soft spot for them!

I would like to sell the property but I'll wait until they move out, they were treated awfully with their last landlord who really exploited them (they're not from the UK) so I promised it would be their home for as long as they wanted it.

I am in the same position as you. Tenants have been in for 8 years without an increase. However, I am unlikely to get the same cushy mortgage rate when I renew this year, which would most likely mean the current rent doesn’t cover the condition of the mortgage.

OP, you do need to wise up.

It’s not unkind to increase rent or charge market rate. I also think you were silly to promise it can be their home for as long as they wanted. Your circumstances could change, you may need or want to sell etc.

That was a dangerous promise to make. Circumstances can change and then you need to sell up. It sounds like you're doing okay financially with the property overall, so a smaller increase to start seems fair. Alternatively, maybe they'd buy it from you?

It's a tough one isn't it...good tenants are hugely appreciated (especially when you've had bad ones before) so as long as costs are covered it's okay but when the balance tips into the negative then it's tricky.

I don't need to (or want to) raise to anywhere near market value but a little extra would help the balance. But then I could technically absorb it for the sake that they're great...

How much do you think you'll need to raise by?

I'm in a similar situation, OP, we haven't raised rent for 4 years.
I'm going to do a small rise this year and then an annual small rise.

It's not good business practice have a property let as substantially under market rate long term.

I appreciate it sounds dangerous! But luckily I'm in a position to have made the promise with certainty.

I did offer it to them at a big discount but they declined, they said they prefer renting and not to have the burden of mortgage or maintenance which is fair enough!

This.

It’s more than just about whether your costs are being covered. You need to be charging more and then putting the money aside for repairs/renovations/tenant not paying.

I paid 800 for ages or something like that and rent went up to 950. I was annoyed and upset - as EVERYTHING was going up, not just rent. But it's fine now, I pay and have a secure home I'm grateful for. Shrug. I'd raise To 900 or 950. Still below market rate like mine. I have less money but what can I do. Single income family here. Would be nice to have extra money and save which I can't really do but hey ho.

If covering costs is an issue, then you don’t sound wealthy enough to make that promise.

You should do small increases every year so your tenants know to expect them and can plan for it. Now the differential has become significant and it makes it hard to get them anywhere close to what they should be paying

When I first got the property, market value was £450. It’s closer to £650 now. She’s not a great tenant in the sense that she pays late a lot, but she always pays and keeps it in decent condition. I don’t want to risk her leaving, though, because the costs of it being vacant for a month or two, the admin fees, council tax, etc, wouldn’t be worth it.

Mortgage conditions state the rent must be 25% more than the mortgage payment, which it currently is, but my rate is only 2.5%. I was thinking £50 sounds reasonable.

@sheroku

shes not covering her costs. Why should she fund their holiday?

Of course they would prefer renting when it’s such a good price . ( sorry, couldn’t resist lol,)

It feels unkind! As I do genuinely like them.

It may seem silly, but financially I'm secure and it'd never be an issue. It's their home for as long as they need!

I will give notice of a small increase though as suggested, and then increase every other year to keep the balance, balanced!

They don't want the burden of it but it then doesn't become yours to cover for them. If you need to increase the cover the mortgage and maintenance, then that's what you need to do.

It's always risky to make promises as you never know what can happen in life that makes you want to shed the extra responsibility of the extra property.

@CarpetSlipper

so you're saying it should cost the landlord to let them live in it?

I agree it's hard to save a deposit while paying rent, however, they need accommodation, lots of people move in with family etc.

why should the LL fund their deposit??