Landlords, are you setting the right monthly rental price for your properties? Do you know how to increase rents to optimise your rental income?
Edinburgh’s private rental sector is thriving, with Citylets’ industry-recognised reports currently recording growth for more than 32 consecutive quarters – that’s more than eight years. As a landlord you need to realise the maximum potential of your rental properties and ensure that rent levels are in line with the market.
So, how do you make sure you’re setting the right monthly rental price, and how do you increase prices when appropriate?
In this blog we look at:
- How to find the right rental price for your property
- How to increase rent legally
- Private Residential Tenancy Statutory Terms
- Rent Pressure Zones – a future consideration
- Further information
Set the right rental price
Setting your property’s rent at the right level is important – and not just in terms of maximizing your monthly rental income. Set the rent too high and you risk losing out on good quality tenants – and an empty property is an expensive property. If you set the rent too low, you’ll be losing out on fair rental income.
Step 1: Look at the competition
In order to determine the right rental value, you first need to identify the range of rents for similar properties with the same number of bedrooms and bathrooms, in the same area. Looking at online advertising portals is a great resource for benchmarking.
Step 2: Take a closer look at property features
Now that you’ve identified the range of rents, you need to determine where your property sits within this scale. When comparing your property with those already on the private rental market, you need to look out for several factors, including:
- Type of property – new build or traditional tenement?
- Condition of property – external and shared areas and interiors
- For flats – which floor are they on?
- Is the property furnished or unfurnished?
- Parking – is there any? Is it on-street parking or private?
- Garden – is there a garden? Is it shared or private?
- Views – does the property have garden or street views?
- Amenities – how close is the property to public transport links, shops, schools?
Be realistic with your comparisons. You need to be objective with the positive and negative aspects of your property.
Step 3: Speak to a local letting agent
Once you have a better understanding of the local private rental market, it’s a good idea to speak to a letting agent. Professional knowledge of the rental market is invaluable – and an agent will be able to advise and provide recommendations to help you refine your proposed rental price.
A good agent should have access to databases of historical rental prices and will be aware of other influencing factors e.g. changes in legislation.
In addition, they will be able to give you a realistic view of costs e.g. budgeting for any required safety certificates, maintenance etc. A good agent will also be able to suggest improvements that will help you maximise the rental price.
Our knowledgeable At Home In Edinburgh property managers are here to talk you through the process, should you wish; with extensive industry experience, our team are true property experts.
If you’re unsure about taking on the research yourself, take a look at our free Buy to Let assessment service. We’ll consider the property’s target market, the average rental prices based on similar properties in the same EH postcode over the last 12 months, and then provide an estimated monthly rental price.
Get in touch if you’d like to find out more.
Step 4: Use some common sense
If you have good tenants in residence it is sometimes worth keeping the rent just below market level to retain them. If a rent increase is going to encourage them to give notice, you will inevitably incur a vacant period between tenancies and the costs associated with that.
Increase rent legally
Along with the introduction of Private Residential Tenancies (PRT) at the end of 2017 the Private Housing (Tenancies) (Scotland) Act 2016 set out legislation concerning how and when landlords can increase rents.
PRT Statutory Term 2: Rent Increases
Landlords can only increase rent once in a 12 month period, and before the rent can go up, a specific process must be followed.
A landlord must give their tenant an official rent-increase notice, which must be sent at least three months before the date the rent will increase.
Tenants can dispute a rent increase
If the tenant feels the increase is unfair in comparison to rents for similar properties, they can refer the rent-increase notice to a Rent Officer for consideration. This must be done within 21 days of receiving the notice.
It is important that a landlord has done effective benchmarking before setting the increased rent level so the increase can be justified.
Rent Pressure Zones – a future consideration
The Private Housing (Tenancies) (Scotland) Act 2016 also introduced rent pressure zones. This means that local councils can apply to the Scottish Government to designate an area as a rent pressure zone (RPZ) and can then set a cap on rents in that area.
Currently, there are no RPZ in Scotland, however landlords should be aware that they could be introduced.
An RPZ could be created if the local council can prove that:
- Rents in the area are rising too much
- The rent rises are causing problems for the tenants
- The local council is under pressure to provide housing or subsidise the cost of housing as a result of this
The Scottish Government has published several guidance notes to support landlords and property managers, including:
- Private Residential Tenancies: Landlord’s Guide
- Private Residential Tenancy Statutory Terms Supporting Notes and other essential housing information
- PRT prescribed notice forms
The At Home In Edinburgh team of property experts are also on hand to answer any queries you may have – you can call us on 0131 229 4001 or email [email protected].
As registered letting agents, we invest in staff training and continuous professional development to ensure that landlords can be confident that we understand the legislation regulating the private rental sector and we follow current best practice for compliance. This enables us to offer a comprehensive, accredited and trusted service – you can find out more about our services here.