Rent level management
It is clearly important to ensure the property is yielding the
maximum rent and generating the minimum costs. In fact, Buy2LetExpert’s
experience over many years suggests the best returns are actually
achieved when the rent is a little below the maximum possible ensuring
costs are kept to a minimum. There is no point having a £1000 per annum
higher rent if costs rise by £1500 !!
An example might be a 2 bedroom apartment in North London attracting a
rent for 2 sharers of £240 per week. An applicant might well be prepared
to pay £260 per week but in this scenario at least 4 will share by using
a sofa bed in the living room and/or a couple possibly sharing one
bedroom. The extra rent equates to £1040 more per annum. On the other
hand, the now four occupants will double the wear and tear on the
property. We must expect to paint more often, change washing machines
more, replace more chairs and tables etc etc. The £1040 quickly starts
to evaporate and remember the property will be overcrowded. Future
viewing with these tenants in situ will be tricky and so voids are more
likely. In addition, all or some of the tenants are likely to move
on more frequently causing additional costs and work. New contracts must
be formed with new tenancy deposit scheme costs and more. Soon the £1040
and more is lost. In short do not be too greedy on rent. Look also to
minimise costs and reduce risks of problems. There will always be more
admin and issues in a crowded house.
Many landlords spend a lot of time analysing and obtaining the correct
rent at the time the property is first let. A year or two down the line,
the rent is the same and the landlord rationalises this on the grounds
that 'they are good tenants' and 'a few jobs need doing'. In other words
a lower rent is fine! It is not! Buy2LetExpert will never let this
happen. Here is a guide to how we would proceed:
- The Buy2LetExpert
maintenance should be fully up to date during the tenancy
- It is important that about six weeks before the contract
expires, the rent in the locality of the property is checked. This
is easy investigated using the appropriate portals. Placing 'dummy
ads' to check demand is a possibility. If the rent has gone up
significantly, examples of properties that illustrate this are
printed.
- Buy2LetExpert consults the landlord as to whether the is hiked
rent now or delayed by one year.
- Assuming the decision is to delay the rent hike one year,
Buy2LetExpert writes a letter to make it very clear than rents have
risen in the area and were in not for the landlord’s generosity the
rent should now be £xx higher. We then attach examples collected to
illustrate this. Furthermore, we state that although we are ignoring
market conditions this year the rent must reflect the market in one
year’s time. Then the following year we are in a very strong
position to hike the rent without destabilising the relationship
with the tenant. Our new letter would enclose a copy of the previous
year’s letter.
- If a rent hike is proposed, it may be possible for Buy2LetExpert
to offer some improvement to the property that costs relatively
little. A comment like: 'should you wish to renew we could organise
garden clearance or decoration or some other such improvement'. As
discussed elsewhere Buy2LetExpert will always prefer maintenance to
be executed while tenants are in situ paying rent. Leaving it to the
end of the tenancy results in voids while the work is done and so is
a false economy.
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Maximisation of rental potential for
the minimal investment
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