When it comes to renting property, the amount of rent paid has to be one of the biggest considerations. Tenants feel that landlords have become greedy with rental price hikes over the years whilst landlords have seen their tax breaks cut. The driving force to this is that the cost of living is increasing which means that landlords costs are also increasing and so are rental prices accordingly.
Charging rent is how a landlord makes their investment worthwhile. But how often should rental prices be increased and how do you work out how much to raise it by?
How is a Rental Price Decided?
It sounds obvious but the best starting point for a landlord when trying to work out an appropriate amount of rent to charge is to look at the current rental market. Have a look at similar properties in the same area but remember that no two properties are exactly the same, even if they are in the same street, one might have an ensuite bathroom, a garage or a larger garden whilst another might have a brand new deluxe kitchen. A landlord does not want to price themselves out of the market.
There are also rental indexes and calculators online to help landlords find a rental price for their property. On these websites, the amount of rent that a landlord should charge is usually worked out on a percentage of the property’s market value.
Reasons a Landlord Might Increase Rent
There are many reasons that a landlord might want to increase the rent, below are a few of them.
- Rent in the local area is rising – It’s important for a landlord to stay within the local market prices, so once rental prices in the area increase, so should yours.
- Property maintenance costs – Landlords should always be investing in maintaining rental properties. If these costs go up, then the rent should too.
- Increased general costs – Landlords costs are increasing and eating into rental yields, this leaves little choice but to increase the rent.
There are also some reasons that a landlord shouldn’t use for increasing rent, higher rental yields being the biggest one of those reasons. Whilst a landlord’s ultimate aim is to make money, it’s never good to be too greedy. Tenants have the right to dispute rent increases so rent should not be increased just to make extra cash.
Raising Rent the Right Way
There are very strict rules for landlords regarding rent increases. It should generally be stated in the tenancy agreement when and how a landlord can review the rent and in all cases, it should be fair and in line with local market rents. A landlord cannot increase the rent without first informing the tenant. Once the tenant has signed the new rental agreement they have agreed to the rental increase.
As a landlord, you could always add a clause to your tenancy agreement stating that the rental price may increase after a fixed period. This way the increase is practically agreed upon before it needs to happen. Remember that the increase can still be disputed if it is deemed unfair.
What Happens if a Tenant Disputes a Rent Increase?
Sometimes even a small rent increase is too much for some to pay. If a tenant is disputing a rent increase then it is a good idea to speak to the tenant and try to explain why exactly you need to increase the rent. If rent in the area is increasing then the tenant will be more likely to be persuaded. Always try to resolve the dispute before it escalates, but if your increase is fair but the tenant refuses to accept the new rent, it might be time to start looking for some new tenants.
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