Do you want to be a professional property investor but you’ve got no idea how much rent to charge your tenants?
Well today, I’m going to reveal everything.
My name is David Sigler and I’ve been a property investor for over 30 years and I’m always getting asked by new investors how much rent should I charge my tenants? Because it is absolutely crucial that you get the rent roll right as it will affect the value of your investment and your monthly cashflow.
Som the first thing that you need to do is look at the rental market locally and work out what other landlords are charging for their properties that are a similar specification to yours and you can do this by looking on Rightmove or other property sites to get a feel of what’s going on in the market in your investment area.
Here’s a hint that you should incorporate into your deal valuation process, always go and speak to three different letting agents so that you know the correct letting value of your investment property. As you’re going to get three different professional views of people who are working locally in the market and then you will find the sweet spot between the three figures and It’s going to give you an idea of what you are going to get for your property.
Okay, let’s talk about the condition of the property because when you look at the letting locally what you’re going to see is very similar properties, but in very different condition, now, maybe your property is really really smart because it’s your first one and you’ve put a lot of love and time and effort and money into it.
But you always need to make sure that you’re not directly comparing it with something that’s on the market that’s tired and worn down and maybe the landlord isn’t in reinvesting the rent into the property to keep the standards up that will affect the quality of the potential tenant.
Now, here’s something I learned very recently. We are always learning all of the time, you see I have properties in an area where I thought I knew what the ceiling rent was but one or two of the houses I’ve done have an extensive refurbishment that have really lifted the quality of the house.
So how would I increase the value of the rent in order to compensate for the refurbishment?
Well, what I didn’t understand is, it’s not just about the ceiling rent in the street. It’s about the ceiling rent of the applicant, the person who wants to be your tenant. So, because I had always presented my properties in a particular way at a particular price, I always attracted the same type of tenant and they had a level in terms of budget. But what I discovered was by increasing the quality of the accommodation I would attract applicants who had a bigger budget.
So make sure that you don’t box yourself into a corner where you think there’s a ceiling rental for your properties when in reality, you got to think about your potential applicant and your new tenants value and what they’re ceiling is give them great value and it’s going to be a win-win because they get a property within their budget and you get a higher rent.
What is the tenant demand for your property? And how can you judge it?
Well, you need to evaluate your property and the area around it. Are there large employers nearby? Hospitals? Or factories? Is there a demand for your property from people who want to live there and build a life there? Are they going to bring their families to live there? You’ve got to find out what the tenant demand is and if there is infrastructure nearby.
The most important thing is that you’ve got a flow of tenants because tenants come and tenants go. It’s just the way of the world when they go, but how easy is it for you to replace them so that you get a continuous flow of rent.
Another way of increasing your rent roll is to consider letting your property on a multi-let basis and let the property by the room. So if you’ve got a three-bedroom house with a reception room, a dining room and the kitchen on the ground floor, maybe you could take one of those reception rooms and turn that into a bedroom and rent the rooms to fourmdifferent people, that is a house in multiple occupations. If you want to propel your rental income from £700 to £1,700 a month this is a strategy that you should consider for the future.
My final point is that you need to make sure that at all times you are aware of what the market value is for your property and when tenants leave you see the opportunity to have another look at the market and if it is possible to increase your rent.
But what do you do if you have long-tern tenants? Well, you should you just leave them at the the rent that you agreed to charge on day one when they moved in. Now, if they’ve been in the property a long time you can increase your rent incrementally either throug the letting agent or within your own contract perhaps on an annual basis but you need to make sure you keep good tenants if you have them so it is always a balance.
You need to make sure you’re getting commercial value rent for your property to serve your investment, but at the same time if you’ve got a good tenant you must look after your tenant because there is a loss in value in losing a tenant and having to go through a refurb and taking a month or two of a voids before you get the new tenant in