How to tell a great tenant the rent has to go up a third?

The tax change hasn't come in yet.
They save you loads of money by being great tenants and no voids.
Put it up by a little and then make small incremental increases over the next 4 years.
Listen to your obvious conscience !!

Can you provide details of what your increase in tax liability in respect of this property will be? It isn't going to be £600 pm on a rent of a £1,000.

It seems that it is your choice as to if, and how much, you increase the rent by and if you wish to continue to have a hassle free tenant in return for a lesser rent than what the market would pay in that area. In addition if you evict them you will have a void period for at least a short period of time which I would factor in to any calculation.

I have tenants where I am below market rent and at this stage have not made any decision regarding rent increases due to the tax changes.

I would maybe tell these tenants about the implications of the tax changes, and how it will affect you as it begins to be enacted, and see if you can get them on board with the campaigning by writing to their MPs or the government, or Shelter, or anyone who might listen. In the meantime, if all your other rents are at market rates, hopefully there is no immediate urgency to increase their rent in the near future, while you work out your long-term strategy. They would probably understand if you just initiated a small affordable increase on an annual basis meantime, but I wouldn't want to increase it by much, especially if they have likely saved you quite a bit of money and a lot of hassle by doing their own repairs etc. I do sometimes worry about tenants doing repairs though in case they haven't done it right and I might end up accountable, especially on things like electrics and plumbing.

Look also very carefully at if they might be eligible for housing benefit - you may be able to estimate yourself based on your knowledge of their situation with the online calculators available.

Many people will tell you never to rent to tenants on benefits.

However, this family are unlikely to go mad because they are in receipt of state support and start trashing the place.

I would do as follows:

Find out what the market rent is. Inform the tenants what the market rent is and tell them that because you have a great relationship that you'll offer them a 10-15% reduction. You'd probably spend this amount on fees, void periods and then there's the hassle factor anyway so you'd be no worse off.

You are running a business at the end of the day and whilst they may be making improvements, I would think is it anywhere near £7,200 worth each year? I would also say that if these tenants can afford to make improvements then you would also think that they do have some disposable income for an increase...

Given that they have children I think it would be nice and fair to give them plenty of notice or do increases over a longer period as you've suggested. If you do plan to increase it in several increments I would make it clear from the offset that the first increase is one of several - again in the spirit of being fair to them to give them time to move if the 'final figure' is not affordable.

If you're literally only doing this because of the tax changes, as SE landlord mentions, it is unlikely that the changes will make such a big difference. Certainly not £600 worth!?

Unless this is being used as a smoke screen to put up the rent which I'm sure many landlords will be doing anyway..

Or you could do what many of my landlords have done that manage their own properties... Give it to your an agent to manage and have them do it all for you!
The increased rent pays for their fees and then you're not getting involved with the awkward discussions and negotiations that us Brits find so hard to do!

Dan Sawyer

Cherry Picked Properties

Simply talk to your tenants. Tell them what the market rent is, tell them that you need a more realistic rent from them and ask them what they can afford, whilst making them aware that if they don't offer you enough then you won't be able to continue their tenancy.

Good tenants are worth giving some discount to for many reasons. Long term tenants who look after a property might be worth 15 to 20% discount in my view. There is likely to be a point somewhere between the £1000 and £1600 which is agreeable to you both. Why not start off by suggesting £1400, pointing out that this is £200 below market rent in acknowledgement of their long good standing, and see how much they counter offer.

Good tenants were key uptill a year ago, the rental market has turned around so much, especially where I live in St Neots, demand is so high that I can be far more picky about tenants, and command good rents.
My attitude has hardened especially since the chancellor started attacking landlords. Now I am gunning for every penny I can get.

I personally would do all I could to keep good tenants, have you ever been cursed with bad ones? I would take into account the advertising for new tenants, vetting them, any voids before new tenants move in etc. It sounds like you have a good working relationship with them, talk to them, explain your situation and suggest putting the rent up gradually so it's not a shock to them - I'd keep them.

If they have been good to you, you should be good to them.

I would go half way within a year so £1300 in Nov 2016 and then £1600 in Nov 2017 that is if they want to stay.

Its is reasonable it gives them a good amount of time. Also you will probably not get £600pm extra you are more likely to get 55-60% of that depending on your marginal rate of tax. So although you gain £330 they lose £600 and the chancellor gets the difference

Reply to the comment left by "Bob Plumb" at "06/12/2015 - 12:24":

"My attitude has hardened especially since the chancellor started attacking landlords. Now I am gunning for every penny I can get."

My experience is that it is much better to have a good landlord-tenant relationship, if you start playing hardball and go for the last penny, tenants might do it as well and if they stop paying you might have a bit of a problem. For some tenants a raise will mean they will leave the country, good luck tracing them down and recover your losses.

Unfortunately there is no good solution here, I am sure they can imagine spending the rent on their children instead of giving it away, so they might not take the news well. I think giving them a year warning in advance is definitely a very good idea and will truly help them (also makes it easier for you to look into the mirror).

I would also ask below the market rent, 1300 sounds OK to me and I think they will stay around this rent level. Also don't forget they've been taking good care of the property, they've saved thousands and a lot of hassle for you already and there is a good chance that the next tenant who would pay the max rent would not give a sh.t about the property and would be much more eager to demand boiler change, redecoration etc...