Singing Pig

Well I'd love to say an inflation busting 5% YOY but in my local market (Sheffield) which is increasingly awash with amateur landlords - rents are going DOWN! I know of at least 2 other portfolio landlords having rent sales even though their housing stock is of a good quality like mine. In the last week I have let 5 of my properties all at discounted rents to simply get them away:

Prop #1 let solid for 5yrs @ £495 now £450

Prop #2 3yrs @ £525 now £460

Prop #3 10yrs @500-650 now £525

Prop #4 1yr @ £450 now £425

Prop #5 8yrs @ £500 - £520 now £475

It's going the wrong way! Mind you I did get a bad feeling a couple of years ago when I heard a couple of chavs talking of their BTL's on a bus when the likes of MX really opened things up for all and sundry to get on the bandwagon...  

housecatcher,

these times will pass ... !  the credit crunch is going to purge a lot of amateurs, when they find that their rent doesn;t stack at 85% and they need to remortgage at 70-75% to fit new criteria .... and even then rates are 7%!  if yield is rubbish, they won;t be able to remortgage at all (stuck on SVR ........ how long will they tolerate £200+pcm rental losses .... then a void, then a boiler breaks down .......), or they will need to come up with £10-20k per prop to lower the LTV ... and how many can do that?  the losses will knaw away at them, lots of negative media spin, a few tenant troubles ... and those that see this as a sideline will bail out.  fewer and fewer rental props & amateurs, rents will rise as supply falls (this will apply especially to lower-yield props) ...

how do i know this?  because we receive calls from distressed landlords who have had enough & want out.  last one:  wife on his case as prop loses £100 a month ... he needs £15k to lower his LTV to hit a reasonable remortgage deal ... only got 8-9k ... no real interest in property or being a landlord ... never really thought about what would happen beyond the initial 2-year fixed rate ... is now thinking of selling up ... he'll make 10k or so ... wife wants a new kitchen .... !!

Wise words Pod. I think the BTL tree is gonna get quite a shake but we won't just see amateurs 'folio's blowing up...

 I guess my point was that while it'd be lovely to keep raising our rents to keep pace with the ever changing mortgage market supply and demand will regulate this. In my sector the market seems to be satuarted and while rents will harden again as fair weather investors bail out there could be further downside as credit conditions deteriate further and people cannot re-finance or sell. Add to this all the folks who need to move on but cannot sell up so are forced to rent out the family home. I do not buy into the argument that rents will have to go up as more renters enter the market, these are clued up consumers also hit by rising costs of living and will not want to pay over the odds rent... Also property type is crucial - rent hikes for city centre newbuild....I think not!

I downloaded tenancy agreements from the internet and that just states that rents will increase in line with the Retail Price Inded (RPI) which currently stands at around 4.3% pa.

Like a few posters have said, rents have gone down in a few areas, but in my area, they have gone up by about 10% this year. Do your own research.

cbs7:

What some supposed professional landlords here don't seem to realise is that in a recession, rents FALL, they don't go up just because people are buying less houses. In a free market everything is driven by supply and demand, so even though demand for renting is increasing, rents can only rise as far as people have the ability to pay the increase.

Unlike buying houses with credit you generally can't pay for rent with borrowed money (credit cards being an exception but it doesn't last very long) so rents are always constrained by economic reality whereas house prices in last 7 years which were fuelled by huge credit expansion.

yuo need to stop thinking of rents as being a single entity that either rises or falls.  as a pro landlord you should choose property in areas of maximum demand now and in the future.  also, ensure that property size and type is in demand.  these choices are crucial. 

of course rents are constrained by ability to pay ... as is everything else in life!  as a landlord, it is one of the crucial considerations in tenant selection.  many tenants will insist they can afford a house, but my view has sometimes been that actually they can't!  again, as a landlord you have so much control over these things, it really does make me laugh to hear people say "rents will fall" etc ... choose the right size/yield/location/standard & i assure you, you will prosper.  virtually all my tenants have guarantors, and many are paid 70-100% by housing benefit (these are working families supported by some benefits .... not the old "DSS" and unemployed types). 

ultimately, you need to know yuor own local market to understand the local market rate.  then present yuor prop well & price accordingly.  you will be surprised how people are willing to stretch their budgets for a superior prop.  also i have found that supplying new white goods/installing new fitted cupboards/adding garden decking/tiling old lino .............. etc .......... also allows you  to raise rent over and above the cost of the works ..... capitalising on most tenants' natural wish to remain where they are.

well said pod

Rental properties need not be commodities - and therefore simply selected on price by buyers. You have to differentiate - and market well..and look after your customers..an alien concept to many n this business.

Amateur, one dimensional, landlords assume that everything (not just rents) fall in a recession (not that we're even in a recession yet if at all officially). this is just not true. It isnt written in stone - but some landlords will have the amazing ability to make assumptions like this to become a self fulfilling prophecy! 

The rent is not the only issue when a tenant considers to accept a rent rise or not. Funnily enough I have had 3 renewed tenancy agreements returned from existing tenants in the  post this week. they have been with me at least 3 years. Two are leaseback deals and the other is someone who came to me very distressed owing to a bad experience with a previous 'bad' landlord.

Basically, by returning their signed new agreements (one is at 4% increase, the other 2 are at 5% each, they are saying that they choose to pay my price. Now why might that be? Perhaps it could be because the house is well presented, the house is maintained well, they feel secure with me as their landlord etc etc.

In any event - as the airlines tell us -they had a choice.

They all expected the rises because they were told on day one that it would happen each year (get them in good habits). Yes they can change their mind and call my bluff. at worst I might decide to only increase the rent by say 2% as a gesture (very rare). but there is one thing for certain - the rent is going up! 

The important thing is to get tenants 'hooked' on regular going rates, then look after them as customers afterwards. Most people have either had bad experiences with bad landlords previously, or have heard of friends/family who have - we, as landlords, have a bad reputation generally - and people expect the worst.

So...when yo get them hooked...surprise them..treat them well...just look after them and treat them with courtesy etc..in other words give a premium service over the norm..then see if they flee at the first rent rise or not.

Its known as (very basic) marketing! 

I've just rented a brand new refurbed terrace at £565 per month. The 'going rate' for this is £90 less per month at 475. However it has been taken by the sister of a long standing tenant - who has been after becoming my tenant for ages - as she knows how happy her sister is. Her sister pays 'over the odds too'  So thats 19% OMV rent (on a house bought 25% BMV purchase)

To conclude, if you want to experience different results from the crowd, you have to behave differently, you have to market yourself better and have a better product too. Get tenants hooked at market rates, give them great service and a great house...then let the rents creep up over time.

I'm aware that this explanation blows the bubble up of those who act one dimensionally and simply follow market rents with pretty average properties and dont treat tenants like customers...then blame recessions that haven't yet happened....but I'm only saying it as I find it. 

Re above post

I have just received a timely text from the tenants who had a bad experience previoulsy with a bad landlord..

'Thanks so much for letting us have another 12 month contract - makes us feel so much more secure compared to what happened at our last place - we appreciate what you've done for us and love it here - couldnt wish for better neighbours too... we have changed our payment  at the bank  for you' 

I cant see them quibbling over a annual increase in rent!

What did I do for them? Nothing special - just treated them like the good, paying customers that they are, and let them know that they are secure there until they want to leave. I treated them in exactly the opposite way that their previous landlord treated them.

Its not difficult is it?