Landlords - would you increase the rent?

MultiFuelBurner

Mr.Generous said:

Hi, I'm interested in other people's opinions, not just landlords - the thread title was to give everyone a clue about the threrad.

I've got a 3 bed house rented out with a good tenant. Always pays the rent on time, been there almost 4 years. I put the rent up £30 last year - first rent increase - as it has fallen well below the market rent.

Last year the tenant gave notice to quit, and I thought I'd be able to get back to close to market rent, but she changed her mind and decided to stay. Since then she has spent quite a bit of her own money on new carpets and flooring, and done a decent job of decorating - after asking me if that was ok.

Now I wouldn't expect to renew carpets at 3 years old (house fully refurbed before tenancy) so it isn't an expense I would have had. The carpets weren't worn out or dirty, she wanted a colour change to match decor.

The current rent is £150 below the cheapest 3 bed property in the area, and less than a 2 bed in many instances.

The house market rent would be about £175-£200 more than the current rent.

Because I didn't increase it for 2 years I think the tenant isn't expecting an increase on this years anniversary but although mortgage free every other cost has gone up for me, landlord insurance, gas safe, electrical testing and of course and repairs both materials and labour have shot up.

So should I put it up? I'm thinking £15 to bring it up to the price I'm getting on a recently let 2 bed similar property. Does the fact the tenant spends their own money improving the house stop me - in that I'd feel like she won't want to move on having spent her own cash on the place.

No, tenants that make your property their home by spending their money on it are more likely to stay and pay rent in full and on time.

We have two properties where the tenants have put it £3-5k of their own money in and they are now paying £175-£200 per month below the rate we rent other similar properties for. The most they can expect is a £25-£30 increase but they had two years of no increases. Hope that helps.

They have never missed a payment in 7 years and we don't hear from them at all.

ThisIsWeird

Hi Mr G.
The facts would appear to be:
1) You have a very reliable tenant, who looks after your property, doesn't take the mick on trivial issues (I'm assuming), so it's a painless rental, and that is worth a lot.
2) They have just spent a reasonable (tho' unnecessary) sum on personalising the property - that suggests a longer-term commitment.
3) They almost moved out, but changed their mind - almost certainly they realised how fortunate they are!
4) They are paying at least £100 pm below the current rate. 
5) Your costs continue to increase.
6) but so do theirs (energy costs, 'living', stuff like that).
7) SHE knows she's lucky to have this place. YOU know you are lucky to have her. That suggests a 'compromise' on the rental sum.
It appears that you are a 'thoughtful' LL, who appreciates a good tenant and is prepared to reward them by asking below the market value. You can assume that if you charged 'full market', then the chances of having a more demanding and lax tenant would likely increase. You both appreciate the other. 
But, I think you also realise you are asking a bit too little - you are being a tad too generous?! And, almost certainly, your tenant knows this too.
I think - be honest. Communicate fully. Start a conversation. Explain that you are genuinely pleased she decided to stay, as you do appreciate she's been a great tenant, and - as she knows - you have deliberately kept rent increases to an absolute minimum over the years - way below even your actual increasing costs - as recognition of this. Had she moved out, you would have 'started again', and completely revised the rental sum to approaching the current market value for the replacement tenant, and that would likely have meant £100+ pm (whatever the sum is) to take into account your increasing running costs. However, since she chose to stay, you want to continue to reward her reliability, so have no intention of such a large rise - but the fact is that you are finding the pressure increasingly hard, so will need to raise it a smaller sum - and you feel that £25 (or whatevs) is very fair. 
And, should prices continue to increase, you may need to review this again next year. 
Point out that this is still £x below equivalent properties in the 'hood. 
She should understand - and appreciate - what you are saying. After all, it's the truth.

Mr.Generous

Some really interesting comments. I'd like to pose another question - but there's an obvious connection.

Those who work for someone, when you want/get/expect a pay rise is the value of the pay rise limited to only your costs in relation to work? Your travel costs, your work clothing for example. Or do you take into account the cost of living?

As a landlord, believe it or not, I still buy food, clothing, pay energy bills, council tax, car & house insurance and everything else. When the cost of living rises it's not just the tenants who feel the pinch.

Whether I have mortgages or not it's really interesting how judgemental people are. I should only put up the rent in terms of landlord cost increases and take a real terms cut in living standards every year. To do anything else would be unfair on my tenants because I am lucky enough to own property.

On this basis I presume builders only increase their prices in line with material costs and draw the same wage as they did years ago? Mechanics, electricians, decorators all the same. Somehow landlords are different.

MultiFuelBurner

Mr.Generous said:

Some really interesting comments. I'd like to pose another question - but there's an obvious connection.

Those who work for someone, when you want/get/expect a pay rise is the value of the pay rise limited to only your costs in relation to work? Your travel costs, your work clothing for example. Or do you take into account the cost of living?

As a landlord, believe it or not, I still buy food, clothing, pay energy bills, council tax, car & house insurance and everything else. When the cost of living rises it's not just the tenants who feel the pinch.

Whether I have mortgages or not it's really interesting how judgemental people are. I should only put up the rent in terms of landlord cost increases and take a real terms cut in living standards every year. To do anything else would be unfair on my tenants because I am lucky enough to own property.

On this basis I presume builders only increase their prices in line with material costs and draw the same wage as they did years ago? Mechanics, electricians, decorators all the same. Somehow landlords are different.

Private landlords are an easy target.

You posed a question and you got some answers. Whether or not this is a pro renters/pro Landlords or equal forum is worth bearing in mind.

Equally some long term LL's without mortgage can afford to look like the saintly ones keeping rents artificially low and equal parts the country needs this so that there'll are affordable rents. It's a minefield.

dinkylink

I'd put up, but only a token amount. So maybe yes £15-£30, and then perhaps continue to do similar every year now moving forward but ensuring the property is still well below market rent to reflect that you have a good tenant

RHemmings

If I was your tenant and the increase was £15, I'd be happy with that. I can't imagine ever redecorating a rented house however. The most I ever did in a rental house was (with permission) self-installing some extra loft insulation. 

Gavin83

Mr.Generous said:

Some really interesting comments. I'd like to pose another question - but there's an obvious connection.

Those who work for someone, when you want/get/expect a pay rise is the value of the pay rise limited to only your costs in relation to work? Your travel costs, your work clothing for example. Or do you take into account the cost of living?

As a landlord, believe it or not, I still buy food, clothing, pay energy bills, council tax, car & house insurance and everything else. When the cost of living rises it's not just the tenants who feel the pinch.

Whether I have mortgages or not it's really interesting how judgemental people are. I should only put up the rent in terms of landlord cost increases and take a real terms cut in living standards every year. To do anything else would be unfair on my tenants because I am lucky enough to own property.

On this basis I presume builders only increase their prices in line with material costs and draw the same wage as they did years ago? Mechanics, electricians, decorators all the same. Somehow landlords are different.

Personally I'd consider this forum as pretty anti landlord and a number of people have their own agendas on here. I'm genuinely surprised no one has suggested you reduce the rent or let them live there for free.

However you have had a fair amount of differing opinions. It's up to you what you listen to and ultimately it's your decision as to what you do. As I said earlier I think you're being too generous, others think you're being too harsh. However this is very much an opinions based question. So therefore what do you actually want to do?

In answer to the above my costs largely aren't my employers problem. I would however expect to be paid a fair rate for the work I do. If there was a massive increase in demand for my job and less employees with those skills I would expect my salary to increase substantially, even if my day to day costs went down. Similarly if demand went down I might expect my salary to decrease as well, although at that point I might well look for another role. If me and my employer can't agree then I might well leave. I'd need to find a new job and they'd need to find a new employee.

To apply this to the rental market I would expect tenants to be paying roughly the market rate for the property they're in. The tenants other costs or their salary are largely irrelevant and not the landlords problem. Similarly the landlords costs and salary are largely irrelevant and not the tenants problem. You need to agree a rental amount and if you can't then you part ways.

caprikid1

I think the argument of being mortgage free is irrelevant I have a BTL with no mortgage but a large mortgage on my personal property, I could switch the borrowing round and then increase the tenants rent to match those costs. Incidentally I rarely increase rent between tenants often in excess of 5 years, I could easily be getting an extra £500 a month but why give my tenants salaries back to the government in Tax !

As has been mentioned this forum is very Anti Landlord, truth of the matter is Landlords don't make the market , the Market is Supply and Demand quite simply. Currently not enough Landlords wish to supply property with the current interest rates, government legislation and hassle of being a Landlord. Don't blame the Landlords blame the government, let hope the abolition of Section 21 does not land as this can only make it worse with nervous new landlords not bothering.

BobT36

^ Great. Then there'll be more homes to buy then, and those will be cheaper due to greater supply, won't they? Surely....

Landlords don't "create" homes, unless they're commissioning them to be built.

lika_86

Mr.Generous said:

Some really interesting comments. I'd like to pose another question - but there's an obvious connection.

Those who work for someone, when you want/get/expect a pay rise is the value of the pay rise limited to only your costs in relation to work? Your travel costs, your work clothing for example. Or do you take into account the cost of living?

As a landlord, believe it or not, I still buy food, clothing, pay energy bills, council tax, car & house insurance and everything else. When the cost of living rises it's not just the tenants who feel the pinch.

Whether I have mortgages or not it's really interesting how judgemental people are. I should only put up the rent in terms of landlord cost increases and take a real terms cut in living standards every year. To do anything else would be unfair on my tenants because I am lucky enough to own property.

On this basis I presume builders only increase their prices in line with material costs and draw the same wage as they did years ago? Mechanics, electricians, decorators all the same. Somehow landlords are different.

You ask about whether those who work for someone want a general cost of living pay rise. Comparing yourself with an employee is a bit of a false equivalence here. You aren't working for your tenant. Actually, they're the one who is working for you. Their work is paying your living costs. 

Do I think landlords should be entitled to guarantee returns year on year? No. No other investment offers this. The fact that landlords rarely accept that some years they're up and some years they're down but will be better off generally in the long run is what leads to a distortion of 'the market' because everyone increases their rents to preserve their own position, generally at the cost of those who don't have much, if any, choice. 

You've had a range of views. You're clearly leaning towards increasing the rent. Do what you like.