November 26, 2023
How Much Rent Should I Charge?
Perhaps one of the most important questions new landlords ask is “how much rent should I charge?” It’s a good point, and raises several factors which need to be taken into account to give a full answer.
Charging the right rent ensures that you cover your costs, generate a profit, and attract reliable tenants. In this post we’ll look at the various points which undoubtedly affect the amount you can charge, and explain how to determine rent price.
Location of the rental property
The old adage “location, location, location” rings true when determining how much rent to charge. The geographical area of your property significantly impacts how to determine rental value.
Firstly, there’s the location within the UK. Major cities like London, Manchester and Edinburgh can always command a higher rental value than a property that is in the suburbs.
Secondly, there’s the proximity to amenities, transportation, schools and nearby town centres which can make a property more desirable, justifying a higher rent.
As a landlord, it’s important to research the average rental rates in your area, and reflect your pricing accordingly.
Rental property size and type
If you’re wondering how to determine rent price on your buy to let property, its size and type will certainly affect how much you can charge.
Larger houses and apartments typically command higher rents, reflecting the increased space and potential amenities.
The number of bedrooms, amount of living space and overall square footage will all influence your property’s rental worth.
Rental property condition
The condition of your buy to let property will also play a role in the setting of the rental price. Well-maintained, modern properties are more attractive to tenants, and can justify higher rents.
Properties that have been well looked after and have been recently renovated decorated can enhance appeal to tenants, allowing you to charge a premium price.
Furnished vs unfurnished rental property
When asking the question, “What is the rental value of my property?”, the decision to rent it furnished or unfurnished can play an important role.
Furnished properties often command higher rents due to the convenience and savings that they offer tenants. If you do choose to furnish your property, be sure to make good quality choices and select furnishings that complement the overall aesthetic.
However, you will need to factor in the costs of repairing or replacing any furniture you supply, as well as insuring it.
The availability of various facilities within your rental property will influence how to determine rental value.
Factors such as high-speed broadband, parking spaces, laundry facilities and security features are all added conveniences for tenants that make properties more attractive, allowing you to charge more for the enhanced living experience.
Market demand and supply
Understanding the dynamics of the local rental market is crucial when it comes to understanding how to determine rent price.
Be sure to take time to analyse the demand and supply for rental properties in your area. If demand is high and the supply is limited, you may be able to charge a higher rent. Conversely, in a market where there is excess supply, competitive pricing may be necessary to attract tenants.
How to determine rent price and rental yield
If you’re asking about “the rental value of my property,” then it makes sense to understand what would represent a good rental return on your property, and how this will affect the rent you charge.
The rental yield is the ratio of rent price to house value at the time you purchased the property.
To calculate your rental yield, divide the property’s annual income (or intended income) by the amount you paid for the property. The rental yield is expressed as a percentage, and is a useful way to compare properties on the market.
As an average, you should be aiming for about 4.75% rental yield, but you will need to bear in mind the factors listed above which will all contribute to how much you can charge.
How to achieve a higher rental price
We’ve looked at the various methods of how to determine rental value. So let’s now turn our attention to how you can boost how much rent you can charge.
Regular maintenance and upgrades
A well-maintained property not only attracts quality tenants, but also justifies a higher rent.
Be sure to implement a regular maintenance schedule to address any issues promptly, and consider making strategic upgrades to enhance your property’s value, such as kitchen and bathroom renovations, or installing modern appliances.
Implementing tenant-friendly policies can set your property apart from others in the market, and sometimes it can also justify a higher rate of rent.
For example, you may consider flexible lease terms or online rent payment options.
Another idea would be to consider allowing pets in your rental property. There is a distinct shortage of rental properties allowing pets, so by doing so you may be able to attract a wider range of tenants, and justify a higher rate of rent.
If you do decide to allow pets, be sure to establish clear guidelines regarding the size and type of pet, as well as whether you will charge any additional fees or deposits relating to pet ownership to cover your costs for repairing any damage, etc.
Décor and aesthetics
The visual appeal of your property can impact its perceived value. A well-decorated and aesthetically pleasing home is more likely to attract tenants willing to pay higher rents. Consider investing in tasteful décor; sticking to plain neutral colours which gives a light and spacious feel.
Modern fixtures and fittings will help to boost your rent price as will a clean and inviting environment. Keeping up to date with property decoration is useful. For instance, the current trend is for open plan living. Does your property reflect this, or could you update it to accommodate this trend?
Provide an appealing outdoor space
Properties with outdoor space such as a garden, patio, courtyard or balcony can command higher rents. Outdoor areas enhance the overall living experience and provide tenants with additional useable space.
It’s a good idea to highlight the outdoor features of your property when working out how to determine rental value. It’s also important to set clear guidelines as to who is responsible for what in terms of outdoor space maintenance.
Energy efficiency and EPC rating
Incorporating energy saving upgrades into your property not only attracts environmentally conscious tenants, but can also justify a higher rent.
A higher Energy Performance Certificate (EPC) rating indicates better energy efficiency, and can be a good selling point when determining rental value as tenants will be looking for lower energy costs.
Consider investing in double glazing, insulation, energy efficient appliances, LED lighting, and renewable energy sources such as solar panels. Combi boilers and air source heat pumps are also worth considering if your property uses an older style heating and hot water system.
Technology and smart home features
You may consider introducing more technology and smart home features in your property to attract tech-savvy tenants.
Smart home controls such as thermostats and lighting are very popular and provide excellent convenience for tenants. The same goes for smart home security and appliances. All of these not only enhance the property’s appeal, but also contribute to a higher perceived value.
Green initiatives and sustainability
It’s worth showing your commitment to sustainability by implementing green initiatives within your property. This might include energy efficient lighting, water saving fixtures and recycling programmes.
Tenants, especially millennials and Gen Z renters, are more environmentally aware and often more willing to pay a higher rental rent for an environmentally considerate living space.
Regular rent reviews
By regularly reviewing the market in your area, you can adjust the rent accordingly.
Regular rent reviews ensure that your property remains competitively priced and aligned with market trends. Consider incremental increases to avoid significant adjustments that could deter existing tenants.
Professional property management
Consider hiring a professional property management service to oversee the day to day running of your rental property.
A reputable property manager can handle all the day-to-day operations and maintenance, ensuring your property is well managed and attractive to potential tenants.
How to determine rental value? Take the easy route and consider a guaranteed rent scheme.
Deciding how to determine rent price can be challenging. There are lots of factors that need to be taken into consideration. However, if you go down the guaranteed rent scheme route, all the deliberation can be set aside.
With a guaranteed rent scheme, you let your property to a specialist agent instead of directly to a tenant. They then become your tenant, paying your rent every month whilst letting the property out, usually to local authority tenants.
During a set time frame, which is usually between three and seven years, you are paid a fair and agreed rental rate each month. The rate is determined by the specialist agent, and is based on current market value, trends and all the other factors we’ve discussed above.
Even if the property becomes vacant or tenants stop paying their rent, you will still receive your monthly rental payment.
What are the benefits of a guaranteed rent scheme?
With a guaranteed rent scheme, not only is the responsibility of setting the rental charge covered, but also the sourcing of new tenants is taken care of too. The guaranteed rent scheme agents deal with all the legal and administrative tasks involved with signing up a new tenant, which saves you time and money.
Throughout the length of the contract, the guaranteed rental scheme agents will liaise with tenants, handling everything from a faulty shower to collecting rent. Again, it saves you the hassle, and frees up your time.
Some rent guarantee agents, like City Borough Housing, are backed by a professional property management team, which mean you get the additional bonus of having any necessary repairs and maintenance dealt with, free of charge, ensuring that your property always meets the relevant legal and health and safety requirements, as well as keeping tenants happy.
Still wondering how much rent should I charge? Talk to City Borough Housing.
There are a lot of factors to weigh up when trying to answer the question “How much rent should I charge?”
From location and property size to facilities and rental yield, it’s important to consider all the elements and use the strategies we’ve shown here to enhance your property’s value and achieve a higher rental rate that attracts quality tenants.
The rental market is dynamic, so you will need to stay informed about local trends and continue to optimise your property which can lead to long-term success as a landlord.
An easier option is to consider a guaranteed rent scheme which removes the hassle and saves you time and money.
To find out more about how a guaranteed rent scheme works and to request your free valuation, please do get in touch. Our friendly team look forward to talking with you.