I’m an accidental landlord renting a three-bedroom property — where I used to live — to a young family. The rent is low: £800 a month, compared with the market rate of about £1,200 a month. Keeping the rent down was feasible when mortgage rates were low, allowing for maintenance and a modest profit. However, the recent mortgage increases mean I’m now making a loss after securing a new fixed rate.
The low rent was also on the understanding that the tenants kept the property in good order, but I have had to ask them to tidy up the outside more than once. What would be a reasonable rent increase and how do I ensure that the tenants look after the property? The local housing allowance rate is £900 a month — is this a fair benchmark?
Amanda, Tenterden, Kent
As you’re renting out your former home, you’re naturally attached to it and want it to be looked after well. We often hear about arrangements where a lower rent is agreed in exchange for the property being looked after to a particular standard. It never seems to end well.
Your tenancy agreement may contain clauses about standards of upkeep (especially around gardens), and this is useful to point back to when making a request, but it’s legally unenforceable — no court will ever grant you possession based on something like this.
The baseline standard is the legal requirement to occupy “in a tenant-like manner”, meaning a tenant carries out the basic tasks any occupier would expect — like changing lightbulbs and unblocking sinks. Over and above this, a tenant is going to look after a property as they see fit. There’s not much you can do about that.
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The true benchmark for the rent is whatever is set by the market, which you’ve said is £1,200 a month in your area. If that’s accurate, there’s no reason you should settle for less. Your point about housing allowance is only relevant if there is something about the property that means it’s only attractive to people who rely on that benefit (in which case the market rent will be at or close to this level anyway).
In the case of your tenants, it’s a judgment call as to how quickly you can increase the rent towards the market level without losing them — or indeed whether you’re happy to lose them, accept the costs of the changeover and bring someone else in at the market level.
Ultimately you’ll need to come to terms with the fact that it’s not your home and you can’t dictate (beyond the very basics) how it’s looked after. Vetting potential tenants thoroughly is important. Take a deposit to cover any damage, and even offer a slightly lower rent than the market rate to give yourself the biggest possible pool of tenants to choose from.
Can I trust house price figures?
I keep reading about how property prices are going up again, in figures put out by Nationwide and Halifax. But I don’t see how this can be true — properties in my area are not shifting at the asking price, while friends who are selling tell me they could have sold for 10 per cent more a year ago. Halifax and Nationwide are both lenders so they have a vested interest in talking the market up. How much can we trust their data?
Henry, Berkshire
No method of calculating property prices is perfect. The most accurate report is put out by the Office for National Statistics using data from the Land Registry, which is comprehensive because it includes the final recorded selling price of every transaction. However, because of the time it takes for a transaction to be completed and recorded, it’s only really an accurate measure of the prices that were being paid a few months ago.
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Nationwide and Halifax data is more up to date because it samples prices at the point of a mortgage being agreed, which is far earlier in the process. However, it’s only based on each lender’s own data and misses out on the substantial proportion of purchases that are made without a mortgage.
It’s possible that what you’ve noticed is due to these limitations — but a big part of it is likely to be the subsection of the market you’re looking at. For example, over the past year southeast England has been hit hardest by the impact of rising mortgage rates: the latest Halifax data shows falls there of 2.3 per cent, compared with a gain of 2.5 per cent across the country as a whole.
Recent data from Zoopla, meanwhile, shows that larger houses are proving harder to sell than smaller houses and flats — again, this is probably because affordability is stretched due to higher mortgage rates. If you’re looking at larger family homes, this could be a factor.
Overall, UK-level data is good at grabbing headlines, and it can tell us something about broader trends, but what really matters is the micro-market you operate in as an investor — this includes factors such as location and property size. We’re as guilty of talking about house price data as anyone else, but you’re wise to be ignoring it (or at least treating it with scepticism) and keeping your ear to the ground in your own area.
Submit your questions for the two Robs at propertyhub.net/sundaytimes
Rob Dix and Rob Bence are the presenters of The Property Podcast. They also co-founded the property investors’ community Property Hub and the investment app Portfolio. Rob Dix has written four books on investing and renting, including Property Investment for Beginners
