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.

Oh my word! Why would they ever move out? Why make such a stupid promise?

I voted yanbu on the basis of raising the rent slightly, as you mentioned. They’ve had six years of no increases in a time of high inflation, after all. To whack on the full increase to current market rate would be unreasonable.
In terms of feeling bad, it really comes down to whether you need the extra money for upkeep etc and to make it worthwhile or are just happy to keep the rent low and know that you’re helping out a family who are good tenants.

Just explain you like them as tenants which is why you held the rate.
market rate is now £1100

you havent increased it in 6years so they benefited in that time but inflation/ costs mean rent will need to increase. Rent will be 950 from x
You then need to increase at 3-5% per year.

They are still getting a good deal as they are paying a couple of grand a year under market rate and ypu are mugging yourself off less.

I rent out a 2 bed flat that I inherited from my uncle, and when I had tenants in for 5 years I didn't raise the rent because they were excellent tenants, and the cost of turning a property over is very high - cleaning, agency fees, repainting (after 5 years), probably new mattress or sofa etc. etc. It costs a FORTUNE and it's also quite stressful when you're not a pro landlord who takes all this in stride.

My own costs did not go up in that time, or at least not really noticeably (v low service charge). I didn't hear a peep out of the tenants in the whole time, except once when there was a slow leak and it took a couple of months to ID it and convince the water co. it wasn't actually in the property, and was therefore their responsibility, not mine. The tenants were angels about the whole thing.

OP, I would weigh up the costs of replacing a good set of tenants, bearing in mind that if they leave, the next tenants might leave after 12 months, or default on the rent etc. Reliable long term tenants are the dream. Your actual capital profit is in the value of the property NOT the rent.

If you want to sell the property, that's a different kettle of fish altogether. You don't have any obligation to leave them there for decades! Keep the rent as it is, but warn them that you plan to sell in 2025, and that you will be serving them notice in September or something, if you feel really soft about it. They've had oodles of time to save for a deposit etc. if that's their next plan, which I presume it is at their age.

Without giving my full financial details and situation I know it's easy to come to that conclusion!

Privileged with security though; investments, other assets etc so it's not an issue, I'd never need to sell it.

@sheroku

so tight you feel increasing the rent will stop them heating or eating, nooo prevent them having a holiday, at the LL's expense.

it's not the LL's fault there's a lack of housing & continually punishing private LL's will to make them sell up resulting in fewer rentals or more expensive rentals. If OP should need to sell the house, it'll go back on the rental market for more like £1200.

It's not just about the finances though. If you, or someone you needed to care for, became seriously ill (which hopefully won't happen), you may get to where you want to look at how you can make your life less stressful. That may include letting managing a rental go. That's just one example. I know I wouldn't have the capacity to deal with a rental right now.

If the property is mortgaged, they must be charging 25% more than the mortgage in order to meet the conditions of their mortgage; it’s the same with all buy-to-let mortgages.

There are plenty of renters out there who are not looking to buy. Owning your own home comes with so many costs. Our fence got taken out by the storms last year. It cost us £2000 to replace. If my house was a rental, my landlord would have been out of pocket, not me.

@CarpetSlipper

that's where your thinking is wrong.

they can't save the deposit because they need to live somewhere, not because they're paying the LL's mortgage.

I know what you're saying!

I have back-up plans for most situations though if I couldn't manage it (I didn't add in my OP as it wasn't relevant but I have other property, though this is my only AST occupied property now).

That's probably at the crux of my dilemma, I can afford to keep the rent as it is and absorb the slightly negative balance, but should I?

It's so helpful seeing other opinions!

I think you should, at the very least, be breaking even. Unless you're like super loaded, but otherwise, you have to be sensible about your own finances. Just MO.

@houseproblemo

thise things you do (post on time, cause no problems etc) are what you should be doing. They're not over and above tenant responsibilities.

why should the OP (or your LL) be out of pocket?

where do you live (roughly)? Here (SE) that would be around £2500 a month.

We have two rental properties and both have long term tenants in there.
One pays £850 a month, the other £895.
Market rate is now at least £1100 but we have never increased the rent even when the mortgage went up £100 on one last year.

First rule of being a land lord, if you have a good tenant keep them at all costs.

@Everywheretwice

I agree with @ForestBather

My contract states how much the rent can't be increases and how often and what time of the year.

You have to be conscious that this is someone’s home and good tenants are worth their weight in gold.

The market rent is so high because of greed on the part of landlords taking advantage of short supply. If £800 more than covers your costs you are in a good position.

£850 seems fair as that’s a 6.25% increase, the fact that you’ve not put it up in the past shouldn’t mean your tenants take the hit.

In the nicest possible way, you need to get a grip OP.

If they found somewhere cheaper or their circumstances changed and they wanted to move, they’d be off without giving you much thought. They’re not your friends, they are your tenants. Are you usually a people pleaser?

But they aren’t just paying the landlords mortgage, in most cases they are paying vastly more to line the landlords pockets.

Shortage of housing & huge demand means tenants have to pay high prices. The renters can’t save because of the high rents they pay. They can’t get on the housing ladder due to low savings and high prices. It’s a cycle where the longer you rent the harder it gets, basic economics.

I think, in the nicest possible way, that you aren't doing yourself or your tenants a good service by not raising the rent.

It hurts you as you are not getting market value, and it hurts them as it will make the jolt much harder if / when they move.

I get what you say about good tenants though, and so would put the rent up by a small amount each year. Maybe inflation less 1%? That way you get to feel like you are doing the good deed and rewarding the tenant, but also not impacting your own financial position so significantly.

Unfortunately, circumstances can change, and even good tenants can suddenly become less good and you need to look after your own interests.

A 19% increase, on what grounds? This is someone’s home!

You sound like a great landlord OP.

That it’s still below market rate and there has been no increase for 6 years I imagine, and the fact OP isn’t a charity.

@Everywheretwice

even given the situation you're in, you need to increase the rent. I'd say £100 now & annual increases.

They are bloody lucky to have found you & been offered a home for life, you don't need to subsidise them to a point where it's costing you. (Being able to afford to, doesn't mean you should be)

given the 'promise of a life tenancy and paying so little for it, it's no wonder they don't want to buy it, why would they. The have the benefit of security and cheaply.

if you want to sponsor people, there are people more in need than your tenants.

£950 is fair between three working adults, especially if the market rate is £1,100.

I think that's a good compromise to help cover costs but keep good tenants.