How to Know How Much Rent to Charge Your Tenants
In tricky financial times, there are difficult decisions to make. One of those that landlords and letting agents have is how much rent to charge their tenants. The landlord must cover their costs, the letting agent needs a reasonable return, but you don’t want to put off tenants or burden them with a price they cannot afford.
Balancing a fair price for both sides of the equation is difficult, but not impossible. It should attract prospective renters when you advertise it and compare with similar properties in the same area, but also not put the landlord out of pocket. This article explains some of the factors that should go into your thinking when setting a rental price.
How Much Rent to Charge?
What is the value of the property?
When buying a rental property, landlords can get an idea for the potential rental income. Very simply, the value of the property as a whole has a bearing on the rental price. When looking for properties to rent, landlords should look at the price to buy and then work out what would be a reasonable rental yield. Think about what would be an acceptable percentage of the price of the property to receive each year and then work out what that means in terms of monthly rent.
This is only one factor in terms of considering what you can charge, but it is important to take into consideration.
What condition is the property in?
When thinking about how much rent to charge your tenants, you should look at what they are getting for their money. Realistically, you can charge more for a freshly decorated property with all the mod cons than you can for one that has not been refreshed for a couple of years and which features functional but basic features.
People’s first impressions are important, and to charge a premium price – especially in these economic conditions – you need to supply a premium product. The more you can wow at viewings, the more you can charge.
What is the location like?
The old saying is that the three most important things about a property are location, location and location. Since the pandemic, what makes a desirable location may have changed for your tenants.
Once it was all about transport links to town and city centres. That is still important for many tenants, but with the rise of remote working and the fact they will likely spend more time in the vicinity of the property, local amenities are also key.
When considering how much rent to charge, think about the type of property and what your target audience wantsfrom their location. A home for young families is worth more if it is near parks and good schools, for example.
The more desirable and fitting the location, the greater the rent can be.
What does the house offer?
If you have outside space to offer your renters, you can charge more than if not. Homes with more storage space, more bathrooms, a bigger kitchen and other desirable features will allow you to set the rental price at a higher level than those without them.
Other considerations include whether you furnish it and whether you include bills in the rental price.
Existing Tenants
You might feel like you need to increase the rental price for current tenants. It could be that the location is now more desirable, the market has changed or that they have simply been paying the same amount for a long time.
Firstly, you should make sure that you are allowed to do so according to the terms of the tenancy agreement. There may be a rent review clause or it might be time for them to renew. You should also communicate with the tenant and let them know what your plans are. You can discuss your reasoning so they understand why the price is rising.
However, in this current climate, be careful not to price your tenants out or make your property unattractive to prospective tenants.
Outsource Property Management
If you are thinking about how much rent to charge your tenants, you also need to consider how much time you take with renewals, creating tenancy agreements, collecting rent, conducting maintenance, carrying out checks and so on. However, all of these activities are covered by our property management service, which frees you up. It can actually save you money, especially when you consider the cost of your time. So take a look at the Make Lettings Easier page to find out more.
