Rent Increases Should be Little and Often
Rent Increases Should be Little and Often
I was reading a very good piece by Mary Latham, in “Your Property Network News (You)” magazine. She is an experienced and long-time landlord who I once met.
She was discussing rent increases and how often should you do them.
I agree with every word she said.
I meet a lot of landlords who do not adjust rents annually. They either forget or just feel “too nice” to the tenants – and just do not raise them at all, often for many years, with the result that the rents end up hugely shy of the market rents.
This can be part of a sort of Mexican stand-off in which the tenant would really like stuff done on the property but do not tell the landlord for fear that more expensive jobs may make him/her suddenly think about costs and then raise the rent, possibly by a lot.
I am not a fan of this approach because often what can happen is that the property needs maintenance, which if not done in a timely way, will end up costing a heck of a lot more in the future.
Plus, when the landlord finally does increase to more market rents, they often find the tenants are not grateful for or did not realise what a great deal they had been getting all those years. They may also start jibbing about maintenance not carried out for years, even if they were fully part of the aforementioned Mexican stand-off.
Latham’s view – which I agree with – is if you do not put up the rent at annual review – then at least tell them, you have reviewed it, but just decided not to put up the rent. That always goes down well. Just do not say nothing.
Stick to annual rent reviews and give the tenants at least a months’ notice of any rent change, preferably two months. And keep the rent increases moderate, ideally no more than the rate of general (consumer) price inflation. Eventually all tenants leave, which is your opportunity to get back up close to market rents with a new set of tenants.
We always try to be at least as cheap/ good value as the cheapest/best value equivalent property within 3 miles. After all, we do not want good tenants to leave because they feel they are not getting a good deal.
The plandemic did bung a spanner in the works of rent levels in our two more central London properties where rents suddenly fell, for a while, by some 15 per cent, around March 2020. They have fully recovered now.
We did not drop the rents at the time but would have done if the tenants in these properties had asked. They didn’t. But what happened was that for different reasons associated with the plandemic, they left London anyway – and we had to find new tenants. We then had to price at 15% lower to get new tenants. We had to accept the new situation, which has luckily, proved temporary.
Both new sets of tenants are still there, but though I could easily stick the rents back up to what they were before, a 15% increase, I have only put in CPI inflation level increases at the last rent review.
Why? Well, I am aware that they are also facing huge increases in rents and other costs as a result of the follies of most of the world’s responses to the plandemic – both the insane “lockdowns” and now the latest nonsense in the Ukraine. The tenants have a lot to cope with already. Sometimes if you can afford to be “a bit nice”, then be nice!
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