Back in April, I wrote an article about Gillingham having some of the highest growth in rents outside of our capital city. Currently the average rent price for a two bedroom property is around around £842. That’s a 39% increase over the last decade.
It raised a few eyebrows and for those who hadn’t reviewed rents recently, I’d hazard a guess it prompted them to. Leading me to think about how wise it is to actually do that. Of course investors want capitalise on their potential return, but how far should they go? I think there are a few things you should ask yourself before you raise your rents.
Firstly – and possibly most importantly – the biggest question you have to ask yourself is, can the market sustain this level of rental rises? If supply and demand are lesser contributing factors, landlords should beware of pricing themselves out of the market. Tenants don’t have bottomless wallets and it may be unfair to raise a rent based solely on the local market price alone.
And on the topic of affordability, it doesn’t matter how much your tenant loves the property, it they can’t afford a rise, they can’t afford a rise. In this scenario you have a few different outcomes to consider:
- The tenants don’t want to move, they agree to the rise but they can’t afford it and subsequently struggle to make payments.
- They refuse the rise, give you notice and leave you with an empty property.
- They refuse the rise forcing you to serve them notice.
Are you prepared for all these scenarios? Rental arrears, missed payments and subsequent evictions are messy and unpleasant for everyone involved. And in the worst case scenario, it could mean you go without rent even with a tenant in situ. If they leave following notice, can you cover the rental void while you repair, remarket and then reference a new tenant? That’s if you can get one at your new increased rate. Rental voids put fear into the most successful property investor. Best case your property could be empty for a couple of weeks. Worst case…well…
Some might argue there is something of a moral obligation here too. If your rent is meeting the demands of your mortgage and already making you a profit on top, is it entirely necessary to raise a rent? Greed could cost you a great deal more than the rental increase if you lose a good quality, long-term tenant that pays on time and causes you minimal trouble. If they already pay a fair price, would you genuinely be prepared to serve them notice and start over?
If you would like help managing your rental property or determining a fair rental price, I’m happy to advise. Email me at firstname.lastname@example.org or call 07944 726676. And if you’re not already subscribed but have enjoyed this piece of Medway Property News, be sure to subscribe to our newsletter to receive regular updates and property alerts.