How to Calculate Fair Rent Increase...

paddytt

Hi. We rent a house locally and the tenants have been in now for three years. We agreed a rent review at this time. What's a fair increase over the past three years, given that interest rates have risen sharply? Is there any set formula?

thanks

michaels

I don't think your costs make any difference, rent should reflect the market rate. If you try to go far above this the tenant can ask to have it reviewed

Doozergirl

Exactly. You need to look at market rents, which may not have risen much in three years. You also need to consider that you have lovely, long term tenants in there and give them a bit of a discount on that because if they leave, the void and associated costs you incur (and perhaps subsequent costs from shorter term or bad tenants) will be much greater than a small rent increase.

real1314

you can't equate rent directly to interest rates, you have to look at the market rent in the area you're in.
also bear in mind that good tenants are better than bad ones.

if they were to leave you'd probably have a t least 4 weeks void and re-letting costs and a new tenant who may or may not be a good tenant.

those are the things you should bear in mind.

if they are really good, I'd negotiate and aim for 10% below market rent but let them know that this is on the basis of them being good tenants and being reasonable and flexible.

franklee

I'd agree with the others it depends on your local market rents for similar properties and on supply and demand but good tenants are worth keeping, so I would not rock the boat. See how much the fees and loss of rent for a few weeks would cost you, especially as the market slows in the run up to Christmas.

Round here rents have been static these last three years, and some have even gone down.

IveSeenTheLight

real1314 wrote: »

if they are really good, I'd negotiate and aim for 10% below market rent but let them know that this is on the basis of them being good tenants and being reasonable and flexible.

Like the OP said, they have good tenants, however it seems that if the tenants are still there and are happy for a rent increase, then they are happy with the landlords as well

As per the other posters, you have to do your market research an be very competative. Maybe drop the monthly rental by about 50 to 100 pounds per month (depending on how much the market rate is) in order to keep your tenants happy and you happy.

I read on here that a good approximation is 5% of the property value. Some came back with quotes saying they get for cheaper but the two properties I rent out are exactly 5% and 4.7% so its not far off.

The other option you have is like I am about to offer my tenants and that is to secure the rental for another 12 months at the same rental price.
I have good tenants and therefore it is in my interest to secure these tenants rather than try to get another 50 pounds from them per month and risk them leaving

sm9ai

paddytt wrote: »

Hi. We rent a house locally and the tenants have been in now for three years. We agreed a rent review at this time. What's a fair increase over the past three years, given that interest rates have risen sharply? Is there any set formula?

thanks

No there is no real set formula, you maybe able to get 2 or 3% but anymore than that the risks of them leaving are too great.

As for Interest rates risen sharply. Did you cut their rent when they fell? (2000-2003)

paddytt

10% (£100) increase agreed and 1 year contract signed.

Thanks for all the replies.

paddy

emsywoo123

Blimey, 10%...............I hope my landlord does not read this thread!!

JonnyBravo

emsywoo123 wrote: »

Blimey, 10%...............I hope my landlord does not read this thread!!

too late..... I've told him.....

PasturesNew

paddytt wrote: »

10% (£100) increase agreed and 1 year contract signed.

Thanks for all the replies.

paddy

I'd move out. There's no way I (or most people) could afford an extra £100/month.

My wages haven't risen for 10 years.