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Increasing rent currently 20%+ below market value


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My parents own some 1-2 bed flats in Kendal, Cumbria. They're a good size ranging from 34-47m2, are in good condition (despite being refurbished 20 years ago) and are fully occupied with good tenants. My parents are retiring and I'm taking over the remote management of the properties.

As part of taking on the properties, I wanted to understand the current rents being charged compared to the current market. LHA rates locally are circa £500/£600pcm for 1/2 self-contained flats respectively. Properties being marketed locally for rent suggest similar rates. My parents flats are being rented at around £420 i.e. circa 20-25% below the market value and therefore I'd like to consider how to increase the rent to a fair level however I'm conscious of timing given the impact of covid on people and the general economy. Also I don't want to come in like a the bull in a china shop and upset good tenants however I'm keen that rents are raised to fairer rates over time. Would anyone care to suggest what approach they would advise to raising the rents in this situation? 

 

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Clearly if a property becomes empty you can re-let at the new price, but with existing tenants you will need to raise the rent gradually over several years, I would suggest £25 per year. I would write to the tenants saying that the rents are significantly below market rent so you will be increasing rents gradually over the next few years to bring them in line with the current market. With a tenant who has been in situ for a number of years I would suggest that rates remain a little below the market rate as there is a significant benefit in long term tenants.

Going forward, I always consider a rent rise on an annual basis to prevent falling too far behind and I prefer little and. often rather than a big rise now and then.

Remember you tenants may not realise they are renting cheaply so there may be resistance to any rise, which is why it should be reasonable.

Good luck :) 

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