How to set the perfect rent
Setting the rent is something private landlords can agonise over. You have to get it right. Set it too high and you will struggle to attract tenants with your property sitting empty. Set it too low and you may not meet your costs. Either way, you're going to take a financial hit. You need to find that sweet spot. Set the perfect rent to attract plenty of tenants whilst making you a profit. Which is easy enough to say but how do you go about it?
Setting the perfect rent
Rather than just plucking a figure out of the air there are a few factors to consider before setting your rent.
The local market
You can't be out of step with the local market. You don't want to be charging more than other landlords but neither should you want to pitch yourself too low. You need to find out the rents tenants are paying in the local area.
Check other private landlords' listings. But remember this is the rent they want to achieve. It doesn't necessarily mean a tenant will pay it. But it does give a good foundation.
Ask your letting agent if they have data on the rent local landlords have actually rented their properties for. But remember to compare apples to apples. There’s little point in seeing what a three bedroom detached house is going for if you’re letting a one bed flat.
Think about your property
How does it compare to similar properties in the area? Going with the one-bed flat example how does your property compare with others?
- How close is it to shops, transport links or schools.
- Furnished or unfurnished?
- Ground floor or high-rise?
- Which services if any are included?
- How does floor size compare?
- The décor and facilities in the property. For example, built in wardrobes.
When faced with the choice of two similar properties at the same rent a tenant will always choose the better appointed one. But if you're charging more for your property make sure you can justify it by your property having a higher specification.
Naturally enough you need to make a profit from your private landlord business. You can't do that if you set the rent without thinking about your costs. But it isn't just the cash you're currently laying out you need to build in other expenses. Consider:
- Mortgage costs.
- Letting agent’s costs.
- Insurance premiums.
- Maintenance costs including gas safety certificate.
- Accountancy fees.
- Emergency repairs.
Factor all these costs into your rent. If the rent you set isn't enough to cover your costs you'll be on a slippery slope.
Assess the demand
Supply and demand is as relevant for private landlords as it is for any other business person. If demand is high in your area you will be able to add a premium. You should also consider the type of tenant you're trying to attract. A property in an area undergoing gentrification appeals to young professionals and again you may be able to set a higher figure. Properties suitable for families close to good schools can also attract a higher rent.
However, you may struggle to find a tenant if your rent is high in an area with lots of empty rentals. Lower demand with high supply always equals lower rents, unfortunately.
Market your property
Void periods are a private landlord's enemy. Avoid them by aggressively marketing your property. You need to find tenants fast. List your property on the biggest rental portals like Rightmove.
Use a reputable letting agent. A good letting agent can make all the difference to your property being let or standing empty. MakeUrMove take only an average of 12 days to successfully let a property.
What's the reaction?
Gauging the reaction to marketing your property can tell you if you've set the perfect rent or not. A lack of response could be a red flag. Especially if people who view the property decided not to follow up their interest. This could indicate you've set the rent too high.
On the other hand, if you're swamped by prospective tenants eagerly pushing a holding deposit into your hand you've probably set the bar too low.
Always review the rent
Never think of the rent as a final figure. It should be a moving feast. Review the rent at the end of each tenancy and examine the case for raising it. If you're looking for long-term tenants always include a rent review clause in your tenancy agreement. And never be afraid to put up your rent.
Private landlords can find tenants fast by listing their property with MakeUrMove the original online letting agency.