Rent – Don’t be Greedy
Landlords obviously want to maximise their rents, that goes without saying….
However, after reading the blog of an old friend of Property Hawk and landlord expert, David Lawrenson, it got me thinking.
In one of his most recent posts and following a 2 week break in Mexico, he looked at the topic of rents.
“OK, there are some tentative signs that here in London more property is coming onto the market at more realistic prices which is good news for those of us looking to buy – and that includes me.
However, with RBS and Lloyds pretty well finished as independent banks and other banks severely hit too, that is a heck of a lot of people either out of work or with severely reduced assets. (Don’t forget that lots of city employees have shares in the banks they work for and the fact that these are now worth a fraction of what they once were means that people have a lot less to spend on things like buying property.)
Be sensible on setting rents
With more people turning to letting their property because they can’t sell it (at a price they want), the extra supply of houses and flats to rent means that many areas are now seeing a fall in rent levels.
LANDLORDS – keep track of all your rents in your own FREE digital rent book
So how do you establish a fair rent?
Well, you could ask a letting agent, though in my opinion some agents suggest you can get more than is actually possible. These types of agent know what the real rent should be but they hope that their optimism will mean you give them the business of finding a tenant rather than trusting your property to a more realistic agent.
I suggest you look at websites like Gumtree.com (good in London) and Rightmove (for everywhere) and look at rents that properties similar to yours are on for. Then take away 10% to get to a rental figure that will let your place fast with no empty periods – or “voids” in landlords jargon.
Why take off 10%?
Well, just think for a minute.
The places that you see advertised at sites like Gumtree.com and Rightmove are there because they have not been let.
Places that are available to let at more realistic prices will be taken down from these sites because THEY HAVE ALREADY LET.
Yes, I know it’s obvious but this very obvious fact is lost on a lot of people, including for a long time, me.
So be realistic and when you buy property to let, plan on rental levels that are achievable and will get your property let fast.”
Here’s the ‘math’…
Property Hawk agrees completely with David.
‘Here’s the math’ as the Americans would say.
Top rent £750 per month 12 month rental income £9000
Realistic rent £675 per month 12 month rental income £8100
If a landlord lets their property straight away on the realistic rent they will make £8100 in a year. To achieve the top rent a landlord can afford a void of 36.5 days before they start being worse off. With competition fierce as the rental market is flooded by accidental landlords then just over a month is not long at all. A smart landlord is better off getting in a tenant on a realistic rent and then after 6 month proposing a rent increase of say £25 per month. If accepted by the tenant the differential in annual rent received comes down to just 1 month.
How many tenants are going to up sticks and move for the sake of saving £25 quid per month?
In the current climate landlords need to be smart …not greedy!
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