There are many things to think about when it comes to being a landlord. In this blog, we’re answering the question, how much should I charge for rent?
Even though being a landlord can be a lot to think about, we’re here to make life easier for you. Our expert lettings team are always on hand to answer any questions you have and provide honest, helpful advice.
When it comes to charging rent, you need to make sure that you’re getting a good return on your investment. However, you also need to ensure that the home is worth the rental costs, otherwise you will have little tenant interest and struggle to make money.
What impacts average rental prices?
We all have different circumstances, which means it’s difficult to suggest an exact figure that you should charge your tenants for rent. Here are some factors that may impact rental charges.
The local property market
It goes without saying that you must research the property market before you buy an investment property. This process will help you to see how much other landlords are able to charge and how easily they bring in tenants.
Property location
It’s helpful to know which types of property are popular in various areas. This can help you determine how successful your rental property may be. When researching, make sure to note down the best amenities in the local area, such as supermarkets and good public transport links. Make sure that the property value aligns with similar properties in the area.
Consider what’s included
Many landlords spend a long time debating whether to offer properties as furnished or unfurnished. If your property is furnished, has parking and other helpful features, then you can often charge more in rental costs. You still need to analyse the local market to identify reasonable rental rates.
Rental cost laws
Rental costs must also be fair for tenants. The Rent Act 1977 provides limitations on how often the rent can be increased and also allows tenants to challenge increases if they believe they are too high.
Landlords are legally required to adhere to these regulations regarding their monthly rental income. Adhering to the regulations also boosts landlord and tenant relationships.
How to calculate how much rent you should charge
In order to successfully establish a reasonable monthly charge for rent, you need to work out the property’s rental yield. You may be able to do this using a rent calculator.
- Establish the property’s current market value – this may be different to the property’s purchase price
- Identify a realistic monthly rent – consider nearby properties with similar features
- Multiply the rental amount by 12 to get a yearly rental amount
- Divide the yearly rental amount by the value of the property and multiply by 100 to get the rental yield
This will give you an expected rental income. You can also compare your rental yield to the local area.
What are the benefits of ensuring good rent prices?
Tenant satisfaction
Overcharging for rent can cause many issues, such as a high tenant turnover, poor relationships and even your property being empty for a while. It’s important to strike a balance when it comes to rental charges.
Tenant appeal
By pricing your rental property too low, you risk making a poor return on your investment and also risk appealing to the wrong types of tenants.
When choosing prospective tenants for your property, it’s crucial that you complete thorough tenant checks.
We hope this blog has been helpful regarding how much to charge in rental costs. By working out your rental yield, you can get a better idea of costs. Remember to factor in all of your own expenses, such as the mortgage payments, property management fees/agent fees and more. If the return is too low, you may need to increase the rental price.
Do you need landlord advice? Get in touch with our friendly team for support.
