At the end of a lease, every landlord has a fundamental decision to make. 'Should I renew the tenancy agreement at the same rate or should I increase the rent'?
It's a decision many landlords struggle with. But, there are good reasons why you should consider an increase. But what will your tenants’ reaction be when you serve notice of the increase?
Understandably, many landlords worry the tenant will leave with the property remaining empty. Or, they don't want to risk losing a tenant who always pays on time and never causes any problems.
Assuming you have taken the decision to increase the rent, either because of increased costs, to meet market rates or for any other reason is there a danger the tenant will simply quit?
Well, yes there is, and a tenant leaving is always a risk when you propose a rental increase.
But, here are five reasons why many tenants won't quit if you raise the rent:
1. Where would they find another landlord like you?
An oft-cited reason for tenants moving is dissatisfaction with their landlord. Building a professional relationship with your tenant Landlords: How to keep a good tenant can pay off in different ways.
Firstly, they will pay their rent on time and they will look after the property. Secondly, a tenant will be much more receptive to a rent rise if they know they are being treated well by their landlord, and receiving a great service for their money.
With so many less than perfect landlords out there, tenants are more likely to stay when they are settled and well looked after.
2.Lack of rental properties
It's a landlords market. There are not enough rental properties around to satisfy the demand from renters. Finding a new property can be difficult and, depending on the area, sometimes almost impossible.
The lack of available properties will make any tenant think twice before giving notice, particularly in high-demand areas.
3. Already in the perfect location
When initially looking for a property a tenant will focus on location. The convenience of getting to work, access to transport links, good-quality schools, and shopping & leisure facilities.
It is precisely these factors why, in the majority of cases, a tenant will want to remain in the property when it comes to renewing the lease. A fair rent increase is unlikely to cause a tenant to quit if they are already settled in their ideal location.
4. The hassle of moving home
Something everyone can identify with. The sheer hassle of moving home, moving furniture, arranging new schools and coping with a new environment is something no-one looks forward to.
Given the choice, most tenants will prefer to stay put. A small increase in rent is probably preferable to the stress involved with moving home.
5. The high cost of moving
Perhaps the biggest reason of all why your tenant won't quit if you raise their rent.
Aside from the inconvenience of switching properties which we expanded on in point 4, the sheer cost of moving is something which will mean the majority of tenants will not quit if you raise their rent.
It is estimated that the cost of moving into rental accommodation is typically over £1200. This is made up of agent fees, security deposit, advanced rent and removal costs. Yet a £25 per month increase in rent will only cost the tenant a quarter of that amount.
Aside from everything else we have mentioned, remaining in the property could make sound economic sense for your tenant despite an increase in rent.