Being a landlord and owning an investment property has two main financial benefits; long term capital growth and short-term rental income.
We’ll discuss capital growth in further detail in a later blog post, but in short, providing you maintain the property, it should look after itself.
But what about rent? Of course you want to make a decent income from your property but setting the rent too high can put tenants off and increase your void periods, leaving you out of pocket. Even a seemingly nominal increase such as £25 can deter tenants.
Setting your rent at the right level can ensure a consistent return and regular profits to keep your portfolio ticking over.
Essentially, it comes down to a mathematical formula of sorts.
Location – You need to ensure that your rent is in keeping with the surrounding area. The easiest way to do this is to check Rightmove and Zoopla.
Tenant market – Each area is different and the market varies month-to-month but if you have an over-abundance (or lack of) of potential tenants in the area this can dramatically change the rent you are able to charge. For example, rental figures in university cities can drop by 10% outside of the usual student moving months (April-Sept).
Desirability – Everything from local amenities to the interior decoration of the property build towards the property’s desirability. This is something you will have to make a call on, again, by comparing to nearby properties on Rightmove and Zoopla.
Your costs – Of course you want to make a profit, but if you aren’t you need to seriously review your options. Perhaps a refurbishment of the property would bring in a much higher monthly rental? Gas central heating and double glazing is standard in much of the country, if you don’t have these, your property could be losing out on higher rental figures.
Remember, the rent you charge isn’t set in stone. If you find there is little interest in your property once you have placed it on the market, you can always drop the rent. Likewise, if you have been lucky enough to have found the perfect tenant, why increase their rent if it may make them consider moving?