Setting your rental asking price
Do you set your rent higher than the local market average/nearest competitors to try and attract more discerning, respectful tenants? Or do you go for ‘value-for-money’ to occupy the property immediately and get your rent sooner? There’s a lot to be said for each argument, but which is the best option for the savvy property investor? It always puts a 6-month smile on your face when you land a tenant into your property who’s willing to pay a premium – especially if you’re currently on a tracker mortgage at the moment! But how long have you waited? And how much money will you have to spend making the new tenants happy (and feeling like they’ve got a good deal too) both at the beginning of, and throughout, the tenancy? When you have pride in something, whether it be your garden, car, or a favourite pair of shoes, you take ownership of it and put your time, energy and money into keeping it in tip-top condition. You won’t feel pride or want to put effort in if you resent the very thing in the first place!
I like to apply this theory to my rental properties, especially when you combine this with costly void periods. The shortsightedness of some landlords always amazes me. What’s the point of holding out for an extra £50pcm if you have to wait another month for it? Remember landlords and tenants are ultimately the same: you both want the most for your money. Don’t let the few rogue tenants blur these lines or distance you from your customer. For example, if you have asked for £650pcm, and someone offers you £600pcm to move in straight away, you’ll earn £7,200pa, not to mention the savings of council tax, utility rates, etc. By having your tenant take over those liabilities immediately, you don’t have to worry about it being broken into, an unnoticed burst pipe, or a pest infestation. If you want to get £650pcm (£7,800pa) you may have to wait another month. Bang! There goes your precious profit! Even if you manage to get another tenant straight away, if they feel like they’re paying top-whack, they’re going to want to get the highest specification and will be on to you in a flash as soon as something breaks down. They’ll also be on the internet the next month trying to find a new place as they’ve realised they’ve been taken for a mug. You then risk another void, may have to pay more agent’s fees, and will have more sleepless nights worrying that you’re going to have to fork out for the mortgage all on your lonesome. If they know you’re a nice landlord however, they’ll strive to be a nice tenant and will generally fix minor things themselves, often at their own cost, in order to avoid mithering you, and losing a cheap rental deal. They’ll also be looking to stay long term as they’ll not be able to find such a good deal anywhere else. When setting your asking price, think about how you would feel renting this property.
Let’s face it – if you’re a property investor/landlord, you’ll be pre-programmed to be a calculated and savvy investor. Would you pay the rent you’re asking? Do you think it’s good value-for-money?