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.

This.

Sensible good advice!

Can I ask a question?

Why do people assume tenants are often poor and on minimum wage? Is it because everyone's been fed the "poor tenant" narrative for years and that they're all downtrodden?

As a LL I don't accept UC so all my tenants are working tenants. I'm in the SE and have tenants on £300k a year, he's on a secondment from LA, owns property there. Another tenant who changes jobs every 2 years and doesn't want to be saddled with home ownership. Another tenant who took her family of 5 on 4 foreign holidays last year.

Not all tenants are poor, on minimum wage or downtrodden.

Some are but a lot aren't. As a LL of 25 years I've yet to come across a poor downtrodden minimum wage tenant.

It's a business. Give them a couple of months notice and tell them you are increasing in line with inflation (5%), and will continue to review at the end of each tax year. I do think smallish annual increases are much easier to cope with than one huge hike. Every so often you can "freeze" the rent if you feel it's too much.

Because it does against the narrative that some LL have which is that they are providing a service for the poors who just were not smart or hardworking enough to buy property as an asset.

I've not put up my tenants rent in the 7 years he's been there. I own the property outright so I make a modest profit every year £3000 or so. That £3000 is 250 hours that I don't have to work each year. It's currently about £400 below market rate per month but I don't care because he's looking after an asset that I will be able to sell eventually. People who buy to let are no better than companies like Thames water. They take an asset that people need, load up with debt then expect others to not only service that debt but to pay them profit on top for doing little more than being in the right place at the right time. Hopefully a future government will tackle the "market" in a reasonable way. Let councils borrow money to buy and build more house, get rid of right to buy, have a country wide flat rate of housing benefit and introduce some real competition to the market.

Don't forget the value they give you as reliable, long-term, non-problematic tenants. It's not "charitable" to factor that in, it's business. Be mindful of whether too steep an increase could see you lose their tenancy, and/or cause difficulties in them paying you reliably.

When interest rates go down will rents follow? Nope.

Will banks lend high loan to value thus pushing the market price up even more? Yes

Will most landlords ,40% of which own their rented homes out right ,push for the market rate? Yes.

Will landlords despite the possibility of relatively small annual yields benefit from an asset in the long term of astronomical value despite relatively little input when compared to most businesses? God yes

Is it also true that the odd boiler or set of windows adds to that properties long term value hence the landlord ultimately benefits from the investment? Yes

Hard to feel sorry for landlords to be honest.

I think if the OP raises the rent to below market rate that would be a humane act..

We rent out a flat for below market rent. It was a conscious decision we made so that we attracted lots of interest and were in a position to pick and choose our tenants, whilst also avoiding the property being empty for more than a couple of days between tenants.

If it were me, I'd set a target of £100 p/m below market rent and increase rent each year until you hit that target - e.g. £950 this year and £1100 next year (based upon market rents being £1200 next year). I'd then increase each year to keep it £100 below market rents.

My boss kept the rent below market rates for a while because she had good tenants. Unfortunately when she came to sell, it really affected the price of the sale. So be aware if you might sell any time soon.

I think I'd assess what needs doing. After 6 years I'm guessing possibly full repaint and carpets. If your going to repaint and carpet then put rent up to £900.

If your not going to decorate then £850

So where will rental properties come from if only those that are owned outright can be rented out? Half the population would be on the street.

its better to increase it as if you do need to sell it would be a big jump for them to go to current market rates.

Hahaha that is the WORST reason I have ever heard.

This. I’m a good customer at Morrisons but they still put the prices up and don’t give me a discount even though I pay for all my shopping EVERY SINGLE TIME and I’m polite to the staff.

And as for the “ paying someone else’s mortgage “ people - I’m paying my car mechanics mortgage when he fixes my car and my hairdressers mortgage when he does my highlights.

That’s how life works - we pay for goods or services and the person who sells them to us gets to spend the money on what they like. Does your boss tell your what to spent your wages on? No? In that case stop bitching about what others do with their own money.

The reason people say 'Paying off someone elses mortgage' is because when rents are too high, it stops people being able to save for a deposit to buy their own home.
There are plenty of people who earn a good salary and could easily afford a mortgage(because they are paying someone elses) but theres no real way onto the ladder without a fuck off deposit or inheritance.

THAT is why the system is unfair.

I'm not sure that's true.

95% LTV mortgages are available to first time buyers.

Even in London you could buy a two bedroom flat with a £15k deposit.

If you can't save up £15k, then you're probably not capable of paying off a mortgage.

How do you work that one out?

I pay above and beyond what the mortgage is for the property. How do I save a deposit when I am paying off above and beyond what the mortgage is?

If your finances are so stretched, from just paying rent, that you can't save anything, then you're not earning enough to get a mortgage.

How could you cope with a rise in interest rates? What about house repairs?

Good people do not harp on about being good people.

This. I’m a good customer at Morrisons but they still put the prices up and don’t give me a discount even though I pay for all my shopping EVERY SINGLE TIME and I’m polite to the staff.

Now imagine it's COVID, people have overbought so there's a shortage of supply. Morrisons costs haven't gone up but they decide to massively ramp up the price of goods because there's a market shortage, people have to eat and so that's what they can get away with. The rest of the supermarkets follow suit as that's the new "market rate". Would you say that's just "good business"? No you'd say it's profiteering. This is the exact state of our housing market right now.

Menomeno, you must have missed the bit about allowing councils to borrow money. The government spent 15.4 billion last year on housing benefit, money mainly going into private hands skewing the market. More council and not-for -profit housing would be a damn sight more beneficial to the country than the current system.

Rubbish. Have you seen the price of rentals? A 2 bed easily goes for £12-1300pcm here with many bidding over and above that. Mortgages for equivalent properties start at around £850pcm.

@sheroku so, price rises exactly like we've seen with food and energy over the past two years?

If your finances are so stretched, from just paying rent, that you can't save anything, then you're not earning enough to get a mortgage.

I bought my place nearly 3 years ago and if I were to be renting it I'd be paying just over double my current monthly mortgage payment

@sherokuso, price rises exactly like we've seen with food and energy over the past two years

Exactly. Energy prices started rising due to the war in Ukraine which increased wholesale prices. Then wholesale prices dropped but energy companies continued ramping up rates and started making massive profits. This was roundly condemned by pretty much everyone.