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.

We've been in our rented house 5 years. The rent went up by £20 a month last year. Not all landlords are greedy!

Why don't write to them and let them know that you are now having to look at upping the rent incrementally on an annual basis to cover increasing costs. You could do this at a rate of £20-30 per year until you reach a rent that you are happy with. This gives them confidence in your intentions and helps them plan for the increase.

@HappiestSleeping

have you read all the updates?

she's told the tenants that they can have the house as long as they want it. It's £800 compared to market rent if £1100, they're not going to be going anywhere!!

Market rate of 1100 would be for new tenants so don't forget to factor in a couple of months empty, redecorating, credit checks and the hassle of advertising etc. Plus the risk of new tenants not paying/trashing the house.

No, you shouldn't raise the rent.

You own the property and are benefitting from that.

This family are renting and do not own property.

Absorb the increased costs yourself and help this family.

@Squiggles23

no, they're not, not the vast majority of private LL's. That's a misconception of people who don't understand the costs involved in owning/running a rental property.

it IS basic evonomics, it's a shame you don't understand them.

they might go back to their home country or buy somewhere or relocate within the UK. Just like anyone else might. Tenants wouldn't generally move round the same area just for the sake of it even if they were paying market rent so your point is nonsense. And it's in the OP's interests to have good stable tenants anyway, not sure why you are implying it's a bad thing if they don't go anywhere.

"market rent" applies to new properties on the market not to existing tenanted ones. It's not normal for houses with existing tenancies to have the rent raised in line with those on the market currently.

Then you need to increase rent. Would £100 per month cover it for you?

If you can afford not to, whether you choose to or not is really between you and your conscience. At the end of the day you're going to end up with a property that someone else has paid the mortgage for, and you could think, well, you know, that's good enough for me; so in the meantime as long as I'm not out of pocket I won't make a family £300 a month worse off just because I can. Alternatively you could think, I could make some additional profit along the way, it's everyone for themselves, I'm not a charity, I'm a business, and charge what you can get away with. It's really about values, isn't it?

@babaisyou

she has been for YEARS. She has also given them the security of renting the property for as long as they want to.

there are 3 earning adults living there, why should she continue to subsidise them?

OP isn’t a charity and has her own costs. The family have had years under market rate.

And if they owned their home they would have FA choice but the bank on a mortgage wouldn’t not increase the interest rate because they have a young family

I’ve had to find an extra £250 a month to pay the bank

If you could get £900 for it and you are charging £800 then you are basically handing them £100 per month - are you ok with that?
If you do raise the rent though bear in mind that if that results in new Tenants there are costs associated with a new Tenancy such as Referencing etc.
Look at it all from a purely financial perspective and then decide what to do

I'd put it up in line with inflation and do that on a yearly basis.

@PrincessTeaSet

🙄🙄🙄

yes they might go back to their home country

they might relocate to another area in the UK

But NOT increasing their rent ISNT putting them at a disadvantage as per the post I was responding to!

the OP has offered to sell the property to them. They didn't want to buy it, they want to rent it. (Unsurprisingly with a lifetime offer & well below market rent)

I'm not implying it's a bad thing if they don't go anywhere. I'm replying to a pp which you appear not to have read.

if they moved, they'd have to pay market rent. I don't know why you're even going on about it as it's not relevant.

Don't forget NMW has increased this month, and likely that will work through to slightly more senior positions. Equally NI contributions will drop 2% - there was also a cut last year.

I would put up by 8-10% minimum this year, ideally £80-100 as you have that buffer of NMW rising plus dropping NI coming in to peoples wage packet this month. If earning an average wage, they'll each get an extra £37.50 less each month to pay in NI - so should as a family be better off in April pay packet, and make your increase very affordable. If earning less than average, then they should get a good extra £1k each in NMW after deductions.

Strike now with their pay increase in mind, hopefully it won't have been allocated elsewhere yet.
You are not a charity, so why should you subsidise their lifestyle?

I genuinely thought you meant it until you got to the part about the tenants not going on holiday.

It also shows how so many people do not understand the ongoing costs of owning and letting out a property particular as regards the tax implications.

The market value ie new rent for a new tenant would be £1100 so £300 more a month. So any costs of new tenancy and referencing would be absorbed really quickly and in less than the first year.

@5128gap

thats an unfair summary & comment.

she IS out of pocket AND she has said from the beginning she's talking about a small increase to start to make up the shortfall of what it's costing her NOT £300 to take it up to market rate for the sake of it.

she had rented out a property and given them the security of it for as long as they want it. She has kept the rent low. It is now COSTING her money for them to live there.

she had other income, but why should she use that to subsidise their living costs?

it's like her buying their food shopping or clothing, just because she has other income.

So you think other people should subsidise them because WHY? I rented for years while I saved to buy and never once expected someone else to pay my way in life. I drove old cars, didn't go on holidays, and worked extra to save money and pay for what I wanted.

How do you know this family even wants to buy somewhere? What do you know about their finances, and their spending and saving choices?

They want to live in a house, they have to pay for it one way or another, and the OP does not owe it to them to pay their rent for them which is the only other option here. Are you campaigning for banks to not increase interest payments on mortgages because people will struggle with those increases among the rising costs elsewhere, or are people who have a mortgaged house fair game?!

No, it’s not about values. You wouldn’t go into business and then give away your service/product for free or at a loss to ‘help other people’. Why should landlords be expected to do it?

I looked at buying a rental property but with the current cost of mortgages, even after putting down a 40% deposit, it just wasn’t worth it. Most BTL mortgages are interest only, so contrary to what renters state, you aren’t “paying off your landlord’s mortgage” because the mortgage is never paid off.

I am one of those greedy landlords. The rent I receive covers the mortgage, insurance, agents, gas and electricity safety checks, plus a little left over for repairs. I have to pay tax of about £1500 a year for it too.

I have had the same tenant for 8 years and she has never had an increase because I have always secured favourable mortgage rates. She is always late with the rent but always pays and communicates. I am also too soft. If she paid a mortgage the way she pays her rent, she would be repossessed. Some people are bad with money and even though she gets UC for rent, she still can’t pay her £450 on time. Market value is £600-£650.

Houses in that area cost £70k for a 2-bed and £80k for a 3-bed, but no one wants a starter home anymore; they think they should go straight to the white picket fence house, and if they can’t, it’s someone else’s fault.

I am not greedy. I am just a self-emolument person with no company pension contributions who wants to invest in their retirement.

Do what you heart tells you

You are like many LL's inc us who appreciate decent teanansts and reward them in a big way as T's have saved thousands.

Have a chat with them, face 2 face and ask them what they think. If they are as good as you say, I'm sure they'd have no objection to 100/150 per month rise IMHO

Let me know how you got on

Its only an unfair summary if you focus on the first perspective I offered while ignoring the counter argument. Taking both together, its a balanced summary. I also said 'if you can afford not to' and 'if you're not out of pocket'. The original post said only that the OP was charging £800 and could get £1100 but she 'liked them'. I responded to that.

"Do what you heart tells you"

This is a very very bad way to make a Business decision. Its good to have compassion when its the Tenants home but you should do what your Head tells you