Market Rent vs. Loyal Tenant
Landlords –are you getting the right rental amount for your property?
I was recently talking to someone at a networking meeting and he was asking me how much I thought a property he owned was worth on the rental market. It just so happed we had recently rented the identical property next door and after clarifying a couple of questions with him I told him confidently we would be able to achieve £1,500 pcm. He then proceeded to tell me he was already letting it out and getting £920 pcm.
It turned out the tenant had been living in the property for 8 years and had fallen on hard times five years previously and as a gesture of goodwill, he had reduced the rent by £75 pcm to help the tenant out, however, despite small increases each year he was not yet back up to the original rent. His next statement to me was …
‘but he looks after the property and he pays his rent each month on time ….’
How many times have you said this yourself?
I get it, I have been there myself and said those very words, but at what point do you turn into a charity? Whatever reason you have for now renting out your property – be it was an investment property, or your situation changed, or you saw an opportunity to keep your property whilst buying another, you did it because it would bring in an income (small or large) for now, it would be your pension later and the property would also go up in value.
Presently this landlord was receiving £11,040 per annum in rent. At the correct rental value of £1,500 pcm he should have been receiving £18,000, a difference of £6,960 per annum, if you add in the previous 3 years which should have achieved at least £1250 pcm..
he was down nearly £19,000!
That is a lot of money in everybody’s book! The market has been on a steady rental growth here in Poole and Bournemouth and a definite upturn in the last 2 years. If you have a tenant who has been in your property for over five years, you need a revaluation.
With the new tax changes, having an up to date rental valuation could be the difference in you deciding to keep your investment property or selling it.
On a final note, the statement ‘ he looks after the property and pays his rent on time’ are part of the terms of the tenancy and should be a normal statement and not a rare find. We let to so many professional tenants who wouldn’t dream of renegading on their commitment, just as you wouldn’t renegade on paying your mortgage.
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Don’t forget to ring me if you would like an up to date valuation - Have a good week!