For landlords, deciding whether to increase the rent can be more complicated than simply looking at what similar properties are currently advertised for.
If your property is achieving £900 per month but comparable homes are now being advertised at £1,050, increasing the rent can seem like the obvious decision.
But what if the tenant has lived there for several years, pays on time, looks after the property and rarely causes problems?
Is the extra rent worth potentially losing them?
At Conrad Estate Agents, we manage rental properties across Barry, the Vale of Glamorgan and South Wales, and we believe landlords should look at the overall return from the tenancy, rather than focusing exclusively on achieving the highest possible monthly rent.
Sometimes a rent increase makes complete sense.
Sometimes, keeping an excellent tenant slightly below the maximum market rent is the better investment decision.
Why Landlords Should Review Rents Regularly
Leaving a rent unchanged for many years can create problems.
A property initially rented at £700 per month might eventually have a market rental value of £900 or £1,000.
If you don’t review the rent regularly, the difference can become substantial.
A £150 monthly difference represents:
£1,800 per year.
Over five years, that’s potentially £9,000 of additional gross rental income before considering any other changes.
Regular reviews can prevent a landlord from suddenly discovering that the property is hundreds of pounds below market value.
However, reviewing the rent doesn’t automatically mean increasing it every year.
The review should establish whether the current rent remains reasonable compared with the market.
Market Rent and Maximum Rent Aren’t Necessarily the Same Thing
One mistake landlords can make is finding the most expensive comparable property online and assuming theirs should achieve the same figure.
An advertised rent isn’t necessarily the rent achieved.
Properties also differ.
Condition, location, parking, garden space, energy efficiency, furnishings, bedroom sizes and overall presentation can all affect rental value.
If several similar properties are available between £950 and £1,000 per month, marketing yours at £1,100 simply because one other landlord has done so doesn’t establish a new market value.
The best rental valuation considers the wider evidence, not the highest advertised figure.
A Good Tenant Has Financial Value
Reliable tenants are valuable.
A tenant who pays the rent on time, communicates properly, reports maintenance issues appropriately and looks after the property reduces risk for the landlord.
Don’t ignore that value when reviewing rent.
Suppose the current tenant pays:
£950 per month
while the property might potentially achieve:
£1,000 per month on the open market.
The difference is £50 per month, or £600 per year.
If increasing the rent to £1,000 causes the tenant to leave, the landlord could incur costs associated with reletting, a possible void period, preparation work and the uncertainty of a new tenant.
Suddenly, chasing an extra £600 per year may not look as attractive.
Calculate the Cost of a Void Period
Void periods can quickly wipe out the benefit of a rent increase.
Imagine a property currently produces £1,000 per month, and the landlord believes it could achieve £1,100.
That additional £100 represents:
£1,200 per year.
However, if the existing tenant leaves and the property remains empty for one month, the landlord has already lost £1,100 of rent.
There could then be additional costs for cleaning, maintenance, compliance, marketing or preparing the property for a new tenancy.
In that scenario, it could take more than a year for the higher rent to recover the cost of changing tenants.
This doesn’t mean landlords should never increase rents.
It means the decision should be based on the net financial outcome, not simply the headline monthly figure.
But Keeping Rent Too Low Isn’t the Answer Either
There is another side to this argument.
Some landlords become so concerned about losing a good tenant that they don’t increase the rent for many years.
Eventually, the property can become significantly under-rented.
This can affect the landlord’s ability to absorb increasing mortgage payments, insurance, maintenance and compliance costs.
It can also make a future rent review much more difficult.
Moving from £800 to £825 is easier for both parties to manage than eventually trying to correct a rent that has fallen £200 or £300 behind the market.
For this reason, smaller and more regular reviews can often be preferable to infrequent large increases.
Property Costs Have Increased Too
Tenants understandably focus on the rent they pay.
Landlords, however, have experienced increases across many of the costs associated with owning rental property.
These can include:
- Mortgage interest
- Buildings insurance
- Contractor costs
- Repairs and maintenance
- Electrical work
- Gas safety
- Compliance
- Service charges
- Property management
- Replacement appliances
- General refurbishment costs
A landlord therefore needs the property to remain financially sustainable.
Keeping rents permanently frozen while underlying expenses rise may eventually make the investment unviable.
A fair rent review should therefore balance the tenant’s position with the landlord’s increasing costs and the property’s current market value.
Condition Has a Major Impact on Rental Value
If a landlord wants to achieve the upper end of the rental market, the property needs to justify it.
Tenants will compare properties in exactly the same way buyers do.
A recently decorated home with a modern kitchen, a good bathroom, efficient heating, an attractive garden, and parking may command a premium compared with a tired property nearby.
Landlords should therefore sometimes ask:
Would improving the property create a better return than simply increasing the rent?
Spending money on sensible improvements can potentially increase rental value while also protecting the property as a long-term asset.
Tenant Retention Can Improve Long-Term Returns
A landlord who retains a reliable tenant for several years can avoid repeated costs associated with tenant turnover.
There may be fewer void periods, less marketing, fewer changeovers and potentially less refurbishment between tenancies.
Long-term tenants may also develop a stronger sense of responsibility towards the property.
That doesn’t mean every long tenancy is automatically good.
Properties still need inspections, maintenance and appropriate management.
But where the relationship is working well, stability has genuine value.
When Does a Rent Increase Make Sense?
Several situations make reviewing the rent particularly sensible.
If the property is materially below comparable market rents, a review may be appropriate.
Likewise, if the rent hasn’t changed for several years while the wider market has increased substantially, leaving it untouched indefinitely may not be financially sensible.
Improvements to the property can also justify reviewing its rental value.
The important point is that the increase should be supported by the market rather than chosen arbitrarily.
When Might Keeping the Rent Lower Make Sense?
There are circumstances where accepting slightly below the absolute maximum market rent can be commercially sensible.
For example, the existing tenant may have an exceptional payment history and take excellent care of the property.
The difference between the existing rent and current market rent may also be relatively small.
A landlord planning substantial works in the future may similarly prefer stability until those works are undertaken.
The decision should consider the individual tenancy rather than follow a blanket rule.
Rent Reviews Should Be Part of Portfolio Management
Landlords with several properties should ideally review rents as part of a wider portfolio strategy.
That means considering each property’s:
Current rent
Estimated market rent
Mortgage payment
Management and maintenance costs
Upcoming compliance expenditure
Condition
Tenant history
Long-term investment plan
A property can produce a healthy rent but still perform poorly if maintenance costs are consistently high.
Likewise, a property with a slightly lower yield might be an excellent investment if it requires very little intervention and has a reliable long-term tenant.
This is why we believe landlords should focus on net performance, not simply gross monthly rent.
What About Rent Increases in Wales?
Landlords in Wales must follow the requirements of the Renting Homes (Wales) Act when changing rent.
For periodic standard occupation contracts, rent changes must follow the appropriate legal process and notice requirements.
Landlords shouldn’t simply tell a contract-holder that the rent is changing from the following month.
Landlords should follow the correct notice and procedure, and consider the terms of the occupation contract and current Welsh legislation.
Where a property is professionally managed, the agent can help ensure rent reviews are handled correctly and appropriately documented.
Communication Matters
How you communicate a rent increase can have a significant impact.
A tenant who unexpectedly receives a large increase with no explanation may understandably react negatively.
Where appropriate, explaining that the rent has been reviewed against comparable properties and remains fair relative to the wider market can provide useful context.
The objective shouldn’t be confrontation.
A successful landlord-tenant relationship benefits both parties.
Our Approach to Rent Reviews
At Conrad Estate Agents, we don’t believe landlords should automatically chase the highest advertised rent available.
Instead, we consider the individual property, comparable market evidence, the existing rent, condition and tenancy history.
If a property is substantially under market value, we’ll advise the landlord accordingly.
If the difference is relatively small and the landlord has an excellent tenant, we may recommend a more measured approach.
Property management should be about maximising the long-term performance of the investment, not simply maximising next month’s rent.
Is Your Rental Property Achieving the Right Rent?
If you own a rental property in Barry, the Vale of Glamorgan or elsewhere across South Wales, it may be worth reviewing whether the current rent still reflects the market.
That doesn’t necessarily mean increasing it.
A proper rental review gives you the information needed to make that decision.
Conrad Estate Agents provides rental valuations, tenant-find, rent collection and full property management services for landlords.
Contact our team if you’d like us to review your property’s current rental value or discuss managing your rental portfolio.
This article provides general information only. Landlords should ensure any rent change complies with the occupation contract and current Welsh housing legislation.
