By James Davies
You've found the perfect property, sorted the mortgage, the redecoration and that endless paperwork – and now you're ready to find a tenant. But first, you need to decide what rent you're going to charge them.
The key to buy-to-let success is making sure that your property is always tenanted. You can find out how to "avoid the void" [link to the article on Upad.co.uk with our url suffix]with this guide to finding a new tenant.
You'll soon know if you've set the rent too low or too high. Too low, and your phone won't stop ringing; too high, and the only people who'll be calling are telemarketers. How do you set it just right?
Start by finding out the average price for your area. Our rental index helps you find the average rent for your area by the number of bedrooms in the property. This gives you a good ballpark figure to start working with.
Take a look at similar properties available in the same area. Our price search will let you select a range, rather than a specific price, so it's best to look both above and below your target rent. Whether you're looking online or at traditional agents, get to know your local rental marketplace. Which properties get snapped up immediately by eager tenants? Which sit there, month in, month out, empty? Can you find a "sweet spot", where the rent is as high as it can be without putting tenants off?
Time of year can also play a part. Spring is a popular time of year to move house, so if you're advertising from February onwards, you might obtain a higher rent than if you need to let your property urgently in December.
It's not just about determining the average in your area and charging that: don't sell yourself short. If your property offers extra facilities like off-street parking, a garden or even broadband, those will all increase the desirability of your property and mean that you can charge a higher rent. Decent decor, flooring and furnishings, of course, also improve rental value. Be sure to mention these features in - and photograph them for - your online ads: buyers browsing need to see that they're going to get good value for their money, and if you're charging more than the average, why they'd be justified in paying it.
Some landlords recommend setting a rent just below the average for your area. That way, tenants always feel like they're getting a great deal, and are less likely to move on to someone else, tempted by the thought of saving a few pounds a week. In areas with a high supply of property and lower demand, this can work well to ensure that good tenants stay much longer than the average rental period.
You can't always get what you want…
Consider the effect of lowering your rent on void periods - any times when your property stands empty. You could be better off in the longer term charging less rent and having your property tenanted 12 months of the year, than holding out for the full amount but having a couple of months where you earn nothing at all.
Tenants charged a lower rent are likely to stay longer, minimising void periods and keeping your income stream going. Higher rents will earn you more while a tenant is in the property, but you may find they move out more quickly and that filling their place is more difficult.
The strategy you use here will depend on demand for accommodation in your area, so again, it's worth keeping an eye on the local market to see how quickly property is let and just how much rental supply is available. In areas where there is a plentiful supply of rental property, setting rents lower to keep your rentals competitive is probably the best advice.
James Davis is chief executive officer of Upad.co.uk, the UK’s largest online letting agent.
