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.

According to the BOE inflation calculator £800 in 2018 is now £998.89.

If you calculate from 2017 it's £1023.64.

You should definitely put the rent up. Prices always go up with inflation. I don't see shy your business is any different.

In future you should do the calculation and put up in smaller increments every year.

100% raise the rent. There is plenty of income going in there. The husband, the wife, probably tax credits if the income isn't high or wife is SAHM, child benefit, income from the wife's father. I don't know if £800 was a bit high (or low or average in 2018,) as I don't know where you live, or what kind of house it is - must be 3 bed minimum with 3 adults and a child I guess. But yeah, you should have put the rent up at least 3 times in 6 years. (Some landlords would have put it up every year!)

Putting it up to £1250 is going to be a bit of a financial jolt for them, but on the other hand, they very likely won't find anything any cheaper elsewhere. Start by putting it up to £950 as a pp suggested... Or even £925. They will understand. Everything has gone up for everyone since 2018. Also, they would have had a number of pay rises in 6 years.

A 3 bed house near me would cost £1300 to £1700 a month. Even in the less desirable areas between 5 and 8 miles of me, you're looking at a minimum of £1100 a month. (For a 3 bed house.)

Raising it to £850 is a bit of a silly raise sorry @Everywheretwice Start with £950 - or even £925 if you feel a £150 raise is high. So raise to £925 a month, then raise it £75 every year. So it will be £1000 next year. £1075 in 2026. £1150 in 2027 and so on... You say they are really good tenants, but it feels like they are taking advantage of you.

Considering only 36% of houses are owned outright, that would be a very unrepresentative sample.

If you mean 'own' as either paid or with a mortgage, that alters the statistic to 64%, so half would also be an unrepresentative sample.

Yes, I’d increase it. You can’t keep it at £800pcm forever. I wouldn’t do a massive increase though; maybe an extra £50pm. Then review it each year and check rents for similar sized properties in the area. You’re not a charity and they have 3 working adults in the property. I think most of those saying don’t increase (because they might not be able to afford to go on holiday or save for a deposit- wtf?!) are projecting somewhat 🤔

I was in a similar situation with my tenants. The property agent said that actually in the long term I was pricing them out of the market should they want to move. So I have since then made a modest increase each year but it still remains good value for the tenants.

What jobs are they in? I realise you aren't a charity, and its already under market rate, however 800 is a lot of money already. Id be interested in knowing are you breaking even or taking it as a loss?

You should raise the rent OP but maybe not by a huge jump so £50-100 this year, then another incremental increase next year. I believe best practice is to do small incremental increases on a yearly basis and keep somewhat in line with local market rate. You can still be below market rate but not significantly below. This will ensure costs are covered and covers maintenance. Whilst you might not have to renegotiate a mortgage deal, if you do it's unlikely you will get the cushy rates of the past so will need to put rent up to cover that. Not raising the rent in line with market rates can trap tenants and makes it harder for them to move on when the time comes.

I have a friend who is rent trapped. She was renting a property off an old lady in a home. She's been there 8 years and has never had the rent raised, she's renting a 3 bed for £450per month. Sadly the old lady died last summer. The lady's family need to sell the house as they need to pay the care home. My friend cannot find anywhere to move for the same money (a 3bed now near us is minimum £800 a month). She is also reluctant to move as she now finds the going rate so high. She has adapted her lifestyle and working hours to suit the £450 rent payments. The council have told her to stay put until bailiffs come or they will not help. Housing Association rents are higher than her £450 as they have done incremental increases and then the waiting lists are very long.

I think in some ways you are confusing low rent with nice, good landlord. The two are not always the same. A good landlord makes sure repairs are done properly and in a timely manner. They make sure all the paperwork is above board and done in a timely manner. They have regular maintenance schedules to ensure the property is kept in good repair and updated on a schedule (kitchens, carpets, windows, extractor fans, bathrooms etc). They have the boiler serviced every year. When they raise the rent they are fair (not jumping by £300 a month in one go for example) and give the proper notice.

I would increase it slightly (with notice), and then review and increase (slightly) again every 2 years… Really good tenants who are reliable, pay in full and on time, look after the house and are easy to communicate with are a joy in long term renting. It is mutually beneficial for both of you to have them in the house. If you raise too much and they leave, you will have to spend quite a lot getting the house ready for new tenants - yes you could raise the rent at that point but there is no guarantee that they will be as easy to deal with or will stay long term. All good landlords know it is best to look after good long term tenants and don’t rock the boat!

What? You do a job for money presumably so stop being so sanctimonious! And unless you’re flipping superwoman/man, you didn’t care for all our relatives 🙄 I’d put your rent up just for that comment alone.

Er OK.

🤣 I like you!

Three adults working full-time for minimum wage is £5200 p/m based upon a 35 hour week.

They should easily be able to cover market rent.

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

The two don't haven't to be mutually exclusive OP; you can appreciate people and still have a proper business relationship, so a modest raise for each of the next few years is probably the way to go

I wouldn't bank on any appreciation for the lack of raises so far though; that way disappointment often lies

£800 really isn't a "lot of money" these days in the rental market.

My son has to pay £850 for an out of town, small, one bedroom unfurnished flat, and that's in a small Northern city, so not in the expensive London/SE areas.

I live in a run down Northern seaside town which is a very deprived area, and bog standard 2/3 bed terraced houses or semis are £800 per month in average condition.

Rental prices have rocketed virtually everywhere in the last few years.

Is that pre tax or post tax? What about NIC and student loan deductions, workplace pension deductions, etc.

It's net (take home) pay that would matter.

You need to raise the rent. £950 is still under market rent. Give them 2 months notice of the rise.

Anyone arguing that a family on minimum wage with a small child should pay an extra £300 a month to a lady who clearly doesn't need it because "the market" needs to take a hard look at themselves. I was on the phone to a friend on Friday night who has just had her rent put up by £400 and she was in tears. She can't afford to stay so she'll have to move her and her kids out of the area.

I'm a business owner and being a landlord is not the same. If I put my prices up then people will either go elsewhere or buy less. No one is getting evicted from their home. No one is pulling their kids out of school.

@taxguru

Being a 'taxguru', I'd expect you to know that the minimum wage incurs very little tax and it's also below the student loan repayment threshold.

Each person on minimum wage would pay £188 p/m in tax and National Insurance. So, the take home pay would be £4,629 - which is plenty to pay the OP's estimated market rent of £1,100.

They might, of course, be earning much more than the minimum wage...

This is why most people are saying 'raise in gradually. '🙄

A pp commented on this too and said it was around £4.5k which seems about right after tax and NI. It would probably be a bit more now since minimum wage has increased. That’s if they’re on minimum wage, they could be on a lot more!

3 x £20k ish salaries would pick up a lot more than one £60k ish one.

@Concannon88 · Today 12:10

What jobs are they in? I realise you aren't a charity, and its already under market rate, however 800 is a lot of money already. Id be interested in knowing are you breaking even or taking it as a loss?

I don't know where you live, but in 2024, £800 a month is fairly average (even LOW) in many areas, for a family home with 3 bedrooms. The tenants can always leave if they don't like the rent rise, and see if they can find another family home for 3 adults and 1 child, for less money!

@sheroku

There are three adults working full time in the property.

£1100 p/m rent is easily affordable on minimum wage - £367 per adult.

The tenants might be earning much more than minimum wage, anyway.

Just to add, they probably qualify for Universal Credit if they're on minimum wage, working full-time and have kids.

You are not a charity. It is only fair to you to increase the rent at a fair rate. I would increase it to £850 which is just over 5%. Any more would be too much.

Indeed. Why is anyone presuming they’re on minimum wage?

Even if they are, 3 full time minimum wages is more than £60k per year going into the household. £4.5k + per month yet, so should be able to afford £1.1k quite comfortably.

People haven’t stopped to work that out in their hate for landlords. Quite pathetic really.