Jump to content

Recommended Posts

I'm in a pickle! I have become emotionally attached to my tenant.

He's been a model tenant for about 10 years and i have a good relationship with him. He's never asked for anything and takes excellent care of the property, even making little improvements.

I currently charge him £475 but a recent valuation recommends £550. 

I'm happy with the rent I receive at the moment and would love to retain my current tenant, he could easily move on.

 i'm coming up to a remortgage and told this rental amount may effect my stress tests. 

I know I'm running a business and I'm calculating losing this tenant may cost more in the long run.

Has anyone been in the same situation? How would you approach raising the rent with his new tenancy agreement.

 

Many Thanks.

Rick

 

 

Link to post

If you have the opportunity to not to do this I would steer away from doing it.

A bird in the hand is worth two in the nest from a commercial perspective. From a moral perspective if you have a good relationship theres no point raising it. As we know it isnt just about making money it's also about helping people. That change could potentially make a big disruption to their life and if they have to leave you will have no idea who you will be getting in.

Just my opinion. 

Link to post
17 minutes ago, nicholas_b said:

If you have the opportunity to not to do this I would steer away from doing it.

A bird in the hand is worth two in the nest from a commercial perspective. From a moral perspective if you have a good relationship theres no point raising it. As we know it isnt just about making money it's also about helping people. That change could potentially make a big disruption to their life and if they have to leave you will have no idea who you will be getting in.

Just my opinion. 

Unless you are a Housing Association there is not a moral perspective this is a business!

I would say to your tenant that after 10 years you really need to increase the rent to bring it more into line with the market and you hope that this small increase of £25 pcm does not seem unreasonable after all this time.

In the last 10 years he will have seen everything else go up so why would he be surprised that his rent is finally going up. At £500 it is still a good deal so why would he leave?

Additionally in the last 10 years your costs have gone up - insurance, EICR, EPC, mortgage tax relief.

I don’t think anyone could argue that you are being unfair.

 

 

 

Link to post
1 hour ago, julia urquhart said:

Unless you are a Housing Association there is not a moral perspective this is a business!

I would say to your tenant that after 10 years you really need to increase the rent to bring it more into line with the market and you hope that this small increase of £25 pcm does not seem unreasonable after all this time.

In the last 10 years he will have seen everything else go up so why would he be surprised that his rent is finally going up. At £500 it is still a good deal so why would he leave?

Additionally in the last 10 years your costs have gone up - insurance, EICR, EPC, mortgage tax relief.

I don’t think anyone could argue that you are being unfair.

 

 

 

You don't need to be a Housing Association to have a morale perspective. 

If they want to increase it they can, if they dont want to then they dont. It was asking for opinions and I stated my opinion. Not sure why you seem so offended.

Some landlords are happy their homes are looked after, give them a nice income stream and allow them to benefit from CV growth with little problem. Commercially, 25pcm seems a big risk to that.

Link to post

@nicholas bYou seem to be forgetting that for some landlords, capital growth is not their main objective, yield is.

And as you are keen to address the commercial aspect, the buying power of that £475 ten years ago now equates to £350.

To keep pace with inflation, the rent should be around £613.

I am well aware that there are other factors at play, market conditions etc etc. Just a comment.

Link to post

Got a similar situation - tenant in a house we bought who'd already been there a few years. Rent was a bit below market rate, but then house was a bit tatty but difficult to do work with a tenant in it. As it was, they asked and have decorated it themselves. We have raised the rent once and will do again, although will probably leave it beyond the 12 months as they were furloughed for a lot of this year but still paid the rent on time (with the exception of an initial holiday when they were laid off before furlough, but they're paying that back). 

They're an excellent tenant, have probably added 10% to the value of the property with the work they've done to it and clearly want to stay long term. I'm therefore happy to make sure the rent stays below the market rate for the area, as just a change over of tenant would cost me at least a year's rent increase with a void, letting agent fees etc. If we charge them close to market rent, they could consider what else is in the market with that larger bedroom they've wanted etc.

We're not a charity, we need to make a profit and it's in the tenant's interest that we do - if we can't pay the mortgage, or afford to fix a problem, their life is likely to be affected more than mine. But they're a good 'customer' and I'll do what I can to keep them, as that's a lot cheaper in the long run than constantly having to attract someone new.

Link to post
7 hours ago, dennis hughes said:

@nicholas bYou seem to be forgetting that for some landlords, capital growth is not their main objective, yield is.

And as you are keen to address the commercial aspect, the buying power of that £475 ten years ago now equates to £350.

To keep pace with inflation, the rent should be around £613.

I am well aware that there are other factors at play, market conditions etc etc. Just a comment.

I'm aware people have different strategies, it isn't a case of being unaware, it's a case of going off the information to hand. The post stated they were happy with the rent being received which to me, implies they are already happy with the yield. 

I'm not sure I'm particularly "keen' to address the commercial aspect because I dont have an invested interest in the situation; accounting for inflation is important but the pragmatics of potentially losing a tenant for 25pcm has the potential to be a distant memory, not to mention the post also states the tenant does things to improve the house which I imagine is more valuable than 25pcm in it's own right. 

Link to post
23 hours ago, julia urquhart said:

Unless you are a Housing Association there is not a moral perspective this is a business!

I find this a strange comment, implying that a business and the manner in which the business is conducted must be free of morals (ethics).  The business is answerable to the owners whether they be individuals or shareholders, those owners can operate as they chose within the law.  This may not be to focus solely on compounded growth as the measure of success, but to consider a much wider measure of success.  Providing you are not making a loss, there is a genuine question and balance of pros/cons to be made.  

At a time of low interest rates, I'd personally value a stable client over modest balance sheet gain. 

Link to post

I also have a similar situation, although not so much of a big gap with rent being £490 and £525 being the recommended amount for the property by a local letting agent. I often wonder if I am doing the right thing, but I have decided to leave the rent alone in favour of a tenant who always pays the rent on time and looks after the property. That said, I do not currently have the dilemma of stress test to think about which may result in me changing my mind! Hope you reach a decision soon and the outcome works for you. Cheers Matt
 

Link to post

Hello all, I’m new here and is my first post. I currently only have one BTL and have itchy feet wanting another one in the near future. 

I’m in the same position; had the same tenant for serval years. When she first started renting she got it for slightly under the going rate (as I found my feet and learn’t as a landlord) after my last inspection I’m mentioned it to her that there will be a price increase once it’s time for agreement extension next year. For me I intend on still going to go slightly under the recommended amount to ensure she’s happy with the price as for me main thing is a good tenant?

I get more each month and she’s still getting a good deal in comparison to the local market.  
The way I see it everyone comes out happy?

Link to post
On 9/24/2020 at 3:06 PM, richannay said:

 

Has anyone been in the same situation? How would you approach raising the rent with his new tenancy agreement.

 

The original question was not whether he should raise the rent but how to approach raising the rent.

My original answer, to tell the tenant that after 10 years that you need to increase the rent to be more in line with market rents, was in answer to this question not the unasked question of whether to raise it at all.

I am not suggesting that a business should be run without due regard to ethics or morals, simply that the question of whether to raise rents to something closer to market rents is a business decision not a moral one!

If you have stacks of cash and don't need a mortgage, then by all means rent your property to your tenant for free, but the original poster clearly isn't in this position and the stress test demonstrates that mortgage companies want to see that the business they are lending to is viable.

Regular, small increases in rent in line with market averages is simply good business and prevents the scenario above ocurring.

 

Link to post
9 hours ago, julia urquhart said:

The original question was not whether he should raise the rent but how to approach raising the rent.

My original answer, to tell the tenant that after 10 years that you need to increase the rent to be more in line with market rents, was in answer to this question not the unasked question of whether to raise it at all.

I am not suggesting that a business should be run without due regard to ethics or morals, simply that the question of whether to raise rents to something closer to market rents is a business decision not a moral one!

If you have stacks of cash and don't need a mortgage, then by all means rent your property to your tenant for free, but the original poster clearly isn't in this position and the stress test demonstrates that mortgage companies want to see that the business they are lending to is viable.

Regular, small increases in rent in line with market averages is simply good business and prevents the scenario above ocurring.

 

The poster also said

"I'm happy with the rent I receive at the moment and would love to retain my current tenant, he could easily move on. "

Given that its perfectly reasonable for people to say 'leave as-is' or 'raise slightly' or 'raise to meet mortgage stress test' - all valid advice i reckon.

I take a similar approach in that I don't increase the rent if i am happy with tenant but do increase when i change tenants - though I am in the ortunate position of habving a well paid job so 100 quid eitherway doesn't reall matter as much as being 'hassle free'. having said all that, leaving it 10 years does seem a bit  excessive

 

Link to post
On 9/24/2020 at 5:15 PM, julia urquhart said:

Unless you are a Housing Association there is not a moral perspective this is a business!

 

On 9/26/2020 at 8:25 AM, julia urquhart said:

I am not suggesting that a business should be run without due regard to ethics or morals, simply that the question of whether to raise rents to something closer to market rents is a business decision not a moral one!

To me those two quotes seem contradictory. One says this is a business and there's no need for a morale perspective unless you're a HA and then the second says a 'business' should be run with ethics and morales.

 

As for addressing the original post I looked at it holistically when giving my opinion, taking the whole situation in to context. For me 25pcm personally wouldn't be a lot if it impacted the tenant's happiness and the relationship we had fostered. I am guilty of not being the most business focussed person in the world when it comes to lettings, so in my eyes I would leave it if the poster is able to do so (stress test dependent), that's why I like this hub because you get different opinions, but I wouldn't ever say there are no morales because its private and not a HA

Link to post
  • 4 weeks later...

I would like to thank everyone for the excellent responses received, I thought long and hard about the situation and took on board all the advice.

I decided to visit my tenant face to face to tell him how much I valued him as a tenant. I explained that due to inflation and rising costs, I had to adjust the rent and all efforts were made to keep the rise as low as possible. I added that there would be a careful assessment of the rent on renewal of the tenancy agreement going forward. He seemed very unhappy at the £15 pm raise, which is kind of expected I guess. I feel, he thought I was 'all about the money', another greedy landlord, squeezing their tenant for as much i could get.

This was my first buy-to-let, since this I have built a portfolio of three properties. I have learned a lot from situations such as this. I feel this is a now a business more than I did before, a business which I am intent on growing. Going forward, I need to clearly state my intentions of what I expect from myself and from my business. I need to make sure I have a clear plan of how I see the investment developing over time. I need to make sure everyone involved has a clear understanding of this, so there is no surprises or misunderstanding. All the information regarding any rent rises was clearly stated in past tenancy agreements and in future I will make more effort sit down with the tenant to discuss the document to check understanding.

Link to post

Hi Rich. I did something similar the other month, I hadn't been thinking of increasing the rent until a remortgage came around. I decided to increase by 25 per month. This is still slightly below market rent but enabled me to (hopefully) borrow additional funds against the property during the remortgage.

Going forward I am going to look to increase in small increments every 2 years. This means that there wont be a mad rush when the 5 year fix comes to an end to increase the rent.

I did feel a bit bad increasing the rent with the economic turbulence going on but as pointed out I am running a business. I did get the agent to check into affordability and was prepared to accept slightly less of an increase if the tenant could not afford the payment.

I think you did they right thing.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...