How much rent to charge
Valuing the rent potential of a property
It is a good idea to base your proposed rent on similar rental properties in the same area. Be careful not to ask for an amount over the market rental value for the property, as this could increase rent voids. If you charge too much the tenant has the right to refer the matter to a Rent Assessment Committee. They can assess the rent and deem the value to be lower. You and the tenant will then be bound to this reduced amount for the next 12 months.
If you are renting to Housing Benefit Claimants the rent you will receive is determined by allowance the Local Housing Allowance LHA
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If you were a prospective tenant where would you look?
Renting websites as do local estate agents can provide you a good idea of local pricing for properties similar to yours. Some landlords will even pretend to be tenants and will view similar properties as this gives them an insight into local competition.
It is always worth remembering that market rents are determined by many factors, not least by a person's ability to pay! Therefore to maintain a high occupancy level for your property it is advisable to be realistic about the rent that you can charge. The loss of even one month's rent will reduce your annual income by 8%.
Do not be stubborn about setting the renting value. For the sake of foregoing a few pounds in the short term, you could be foregoing a long term gain. The mathematics is basic.
The example below is typical of how landlords lose money:
Mr Landlord wants to let his property out £160 per week. It is probably worth that much as neighbouring properties are being advertised for that amount (and perhaps a little more). Although he is aware that other properties in the area are taking a while to let, on principle he will not accept less than £160 per week, despite the fact that he has been advised to let slightly lower.
Scenario 1: Mr Landlord advertises at £160 per week and it takes 8 weeks to let
Scenario 2: Mr Landlord advertises at £150 per week and it takes 2 weeks to let
What does this mean in terms of the loss? Let’s analyse what Mr Landlord made over the course of one year:
In Scenario 1 the landlord made: £160 per week x (52 weeks – 8 weeks) = £7040
In Scenario 2 the landlord made: £150 per week x (52 weeks – 2 weeks) = £7500
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