[Closed] Renting out a flat - moral dilemma

2. If costs genuinely have gone up, and explain that to them.

2 at the very least - you are not a charity.

Probably somewhere between 2 and 3 though.

Dave

Capitalist Pig-dog! You is like Fred Goodwin, innit?

I'm starting a campaign to get your knighthood revoked

2) no brainer. Unless you want to subsidise their living costs.

2 probably but you have said nothing about their circumstances.
They may have had a good or a bad year for all we know

Probably worth keeping good tenants though all other things being equal

Good tenants are probably worth keeping, so option 2 would be the best bet, best deal for both of you.

world would be a better place if there were more like you TJ, if you are comfortable with your profit then leave it alone but if you need more from it then show justification to your tennants and im sure they will be Ok with it.

I'm in the same position. Rent has gone up only £25 per month in 9 years. The tennant will however, probably stay on until she can't manage the stairs or die. For the sake of £500 a year (or one months rent), it's not really worth putting it up.

[i]2) moderate rent increase - costs have gone up ( we pay the heating bills)[/i]

But if you were lucky with the mortgage, its probably the lowest it has ever been and likely to be ever again!

EDIT: The only issue with sitting tight, is that it then becomes more difficult to increase the rent at all. Maybe a middle ground is a £5 a month increase every year.

2

You only need it to be empty for a couple of months before your profit is wiped out, imagine getting 3 wrong and them deciding to move out...

thoughts?

It's an ethical dilemma.

For that reason, I'm out.

We have a rental property too so often ask this.

My immediate response was option 1. You say you make enough so why do you need more? However, when I thought on it a bit more I realised this is not the right attitude. We're in uncertain times financially so you should not be turning away opportunities to - relatively easily - make more money. Who knows what the future holds. Major renovation work? A burst boiler? etc

You could put their rent up and at the same time explain what plans you have for the property in terms of renovation. That way both parties are sort of winners.

They work really hard in fairly basic jobs - both do two jobs. Saving for their future I think - young couple

I simply do not know how much the costs have gone up - the only cost rise is the gas I pay and as it is in with my bill and I don't monitor how much it is I don't know how much over the year it is worth. Not noticeably excessive.

Even if I don't put their rent up I am still making money on it.

2 Definately,

At the end of the day if it is in line with other properties in the area they can hardly complain. I'd be wanting enough to cover mortgage, insurance and bills if you are paying for them plus enough to build a small slush fund to account for any modernisation/upgrades/repairs that may be required in the future. on a 3% profit margin if you had to replace the boiler for exmaple it could be a year or two before the rental price covered the repair.

Is it worth asking (telling) them to pay their own heating instead of a rent increase? May work out about the same and they'll just be paying for what they use?

Movin' up on second place, behind Nicholas van Whatshisface...

You could put their rent up and at the same time explain what plans you have for the property in terms of renovation. That way both parties are sort of winners.

I want to do some fairly major internal work that will IMO improve the value by rearranging the internal layout - they prefer it as it is so I have put my plans on hold.

I like sadexpunk's suggestion.

[img] [/img]

IanMunro - Member

I like sadexpunk's suggestion.

Unfortunately it can't be done - communal heating system probably £50+ a month which would be a 10% increase

Lols @ binners

[b]2 [/b]is fair and necesary.
If you do not you may feel that they "owe you a favor" and would possibly not act as fairly towards them if they came to you with a problem that requires your financial input.
You don't want to allow it to become possible that you ever use the excuse "they're already getting it cheap!" in future dealings.
I am in no way suggesting that you personally would ever think like that, just giving an opinion of why its in [u]their[/u] and your best interests that a fair rise happens.
It would not be unfair to conduct a little market research and apply some of option 3 if you like, but would be in the best interests of the relationship that this is minimal.
Always remember that if you put them off and they move out, and end up with a month without rental income then your percentages will be massively out.

I never increase the rent while I have sitting tenants. Only when there's a new lease.

I prefer to keep a good tenant rather than squeeze an extra £20 out of them a week.

In fact one tenant that I liked was made redundant a few christmases ago, so I gave him 50% discount on his rent until he was back in work. took 3-4 months ISTR. he stayed for another 9 months before he moved in with his partner. He had been a tenant of mine for about 3.5 years.

My last tenant I didnt know at all and only stayed for 9 months and they are moving out at the end of Feb. My agent, however, says that every cloud has a silver lining as rents have increased quite a bit since last year and a new letting will be about £50 a month greater.

Find out the market rent, depends where the property is. In my experience of the South East market rent is about 2.5% to 3% of current property value. That does not include landlord paying bills like heating, tenants pay bills and council tax.

I am not surprised they are good tenants, they are paying half the market rent, no ?

Or.....

"we feel bad as our landlord is subsidising us being here. The rent is lower than it should be and he pays for our gas, so we have the heating on all day. It seems only fair that we pay a little extra each month, which wouldn't be difficult for us. What should we do?..."

2 TJ. As said bird in the hand etc...

We make a small profit - maybe a bit over £1000 a year which is 3% return on what we have invested but 1% on the value. ( the value has gone up a lot since buying)

So in the long term you've made a lot more than 3% a year on your initial investment?

TJ,

If only been in 1 yr and you put it up they will assume this will happen every year and may be more likely to leave (now or at end of yr2).

How much were you thinking of increasing it by? Anything more than inflation would be cheeky unless you can really justify it.

The other thing to consider is giving them plenty of warning. If you put up rent with effect from next month that can screw up their budgeting if they are not rolling in cash - but if you tell them that you will need to put up rent in 3 or 6 months time that at least gives them a chance to prepare.

Beware if you claim it is simply because fuel costs have risen - there is some sign that they are starting to fall again and I doubt you would be so quick to put the price down!

half the market rent, no ?

No- maybe £50 a month below market rent but I think its outrageously expensive. Its £500 a month ( including heating and hot water but not elec and council tax) for a very nice studio flat in a great location. Worth around £100 000- £120 000

Oh the stress of maintaining one's ethical purity in an unkind world. The price of Hummus in Edinburgh is simply a scandal.

moral dilemma

not really; but you know where you heart is at

A few things..

TJ your own situation (hopefully not) could change. I think you should ask for market rate.

After all, do you really know this couple? What they spend the money on etc etc? Do they give to charity?
Its a business transaction. Keep emotion out of this.

What if there was a big bill from the management company for repairs to the building? It'd soon wipe out any nominal profit. What if your boiler blows because (human error/accidently didn't check) the bar pressure was allowed to drop- after all, its not their boiler.

You need to put something by for those unexpected bills IMO.

I'd stick with 1), for the following reasons (obviously this is highly personal, and not recommended best practice):

- You've said in the past that this flat is your pension. I'm in the same boat, and I don't consider rent from my flat to be income to be used/spent for day to day living, although your view may differ- as long as I break even in the long term I'm happy. Obviously this won't make me rich.

- You've revealed some sympathy for the couple's situation- be nice, it's a hard world, they're working and saving hard, give them a break, but let them know what you've done- that if something breaks and needs replacing you might need to put the rent up to cover the cost.

Otherwise 2) would be the sensible option- you don't want to spark a break in occupancy, however brief.
After they leave, do the work you want to, and move to market rent.

We're all [i]rentiers[/i] now, as George Orwell might have said 😉

£500 a month is 6k pa or 6% of the property value, that's double the rental return I mentioned. I rented a place out for 3% return which is about the market norm, you are getting double that (less of course the utilities you mention). Either way you are doing very nicely it would seem.

Capitalist pigdog!
Property is theft!
Workers unite and throw off the shackles that bind - landlords are all scum! Milking those too poor to buy and consigning them to a life of debt!

Well someone has to don't they? This is a TJ post after all 😀

jambalaya - thats a cheap rent for what it is. We had a queue of folk want it when we last let it. Local market is differnt to London I guess.

Even if I don't put their rent up I am still making money on it.

Until the boiler blows up and you have to replace it sharpish.

No 2 seems sensible option at present, try to get up to market rate in future, if you're that concerned about overcharging you can always give them some back at end of tenancy if you make more than you want to.

As someone in a similar position - we rent out MrsMM's old place.
Rent also not reviewed in a while as we have a lovely family in there.
We make a small profit, all currently reinvested - new doors / windows etc.
Thing is though, they pay all the bills...

So, gotta go with #2, TJ - as said above - it's not unreasonable to ask them to pay for what they're actually using (that said, gas is coming down at the mo?)

Oh, can I be the first to say..
What helmet for negotiating a rent increase 🙂

I don't see what the moral dilema is. You presumably bought (or keep) the flat as an investment/income opportunity so why get all hippydippy about it now?

Good tenants are worth keeping though, as even a months loss of rent can take a very long time to recoup.

An increase in line with inflation seems only fair for all parties and I can't see anyone objecting to that, as it would be far more expensive for all concerned to move or get new tenants.

Woody - Member

I don't see what the moral dilema is. You presumably bought the flat as an investment/income opportunity so why get all hippydippy about it now?

We didn't really - Its all rather more complex than that - its Mrs TJs flat really and has only been rented at commercial rates for a few year of the 18 we have owned it - at other times we have used it or pals have had it at cost.

Ok, it's all well and good if it makes you happy to let it tick over but as has been pointed out above, there will be maintenance and unforseen costs + your plans are on hold.

It's a nice asset to have, so if you and your conscience are happier with things are they are, then fine. There are also tax implications (presumably) due to changing circumstances and I would assume you have taken that into account.

Certainly a better investment than a pension fund etc.

Even if I don't put their rent up I am still making money on it.

From a moral point of view you have already crossed the line where you make money because you have had the money in the past to invest and others don't have that money. We all do it if we earn any interest on savings, have a pension or rent out a property.
So as you are already comfortable with making money because you have money rather than as a direct result of your labour this becomes a purely economic and practical decision and option 2 would seem sensible and you won't loose sleep over an imaginary moral dilemma.
In fact the only real moral dilemma you might face is what to do with it if you decide to sell as it could be bought by a landlord who would charge the full market rate.

Even if they can afford an increase, and even if they really like the flat they're in.... changing the rent is unsettling, especially after just a year - it sets the expectation that rent will increase every year. Even if they can afford this years increase they'll begin anticipate they'll incrementally get priced out of the property. The increases will also make them far more critical of the property, anything that niggles them will start to niggle them more.

They'll start to notice better deals too. No matter what the going rate is the perceived value of the flat is the price it was marketed at and that the tenant agreed to. Even though every contract I've had over the last 20 years has had a clause stating the rent may increase, and in some cases say the rent [i]will[/i] increase annually, a landlord has only increased my rent twice in all that time. Seasoned landlords (I often rent from the nobility) know better than to bother their tenants in any way at all. Although the increases were reasoned and affordable - it spoils the property and it spoils the experience of living there. Although I accepted the increases as they were fair and affordable - it just gives you itchy feet - I left soon after...... Only to see the property marketed again at the price I was originally paying.

Just bump it to £520 a month.

They'll be happy and you should have covered the extra heating costs.

If you're still covering costs and it's going to be a cashout for retirement (sorry haven't read all the thread apologies if I got that wrong) I'd keep it as it is.

Surely much better to have long-term tennants you know and trust than £20/month extra?

I'd go with no.2. We used to have a flat in Durham which had tenants who changed every year (targeted at the University - foreign students and staff) and only put the rent up once over 6 years - a decision I disagreed with. One year we didn't anticipate getting stiffed by the taxman who took all of our profits!

As someone who rents, definitely 1! 😀 Be the good guy.

6% gross return is ok,but i wouldn't be paying the heating bills at that.
As most people have said look at the long term and letting without interuption.When the people move out you can re-look at the figures and an agent would probably get you more money.
If i was looking to buy more investment property 8% gross return would be my minimum figure.

i'd go for somewhere between 1 and 2. As someone who rents a house in Sheffield due to circumstances (We moved to France and couldn't sell in time).

Maybe ask them if there is anything they would like doing to the flat with a relatively low cost to you. New front door? New Shower? something like that, for a moderate increase in rent that would cover the cost of the above, plus increase in cost that you are covering at present.

Then when new people move in consider a higher rent increase.

Ta folks

Surprised no one went for option 3 🙂

Dunno what we will do - I will have a chat with Mrs TJ but probably 1. I will ponder if I can be content with that.

You live in rented accomodation IIRC, TJ. Put their rent up by the same as yours has increased over the same period.

#2
I have a 50% with my sister in a small house that we paid for outright about 9 years ago. It came with sittnig tenants that used to work with my Mum. They pay a low rent but are always on time, recently we've increased it about 5% but that was the first rise in about 5 years.
Wouldn't push them any more as we want them to stay.

#2
Small increase if you are paying the bills to cover cost of heating etc.
I rent out a house and the rent has been the same for 3 years. I make enough out the house and times are tough. As long as the flat is in good condition and all maintenance is kept up to date they have a pretty good deal.

I rent out as well. We've actually given our tenant a rent reduction by cutting out the estate agent, who was charging a management fee for collecting the rent each month. We cut the saving in half. The tenant is excellent and has been in the flat for ~five years. I'd much rather have a tenant like that - worth it in terms of a complete lack of hassle.

Do you have to ask? No. 2.

Or if you feel guilty please let me know or send me a cheque as donation for greater depletion of mankind.

😆

Surely if the price of evrything is going up , and the value of money, due to inflation, is going down. By not puting the rent up at all you are not standing still but actually giving the tennants a rent reduction?

Long time since school, but doesnt fiscal drift dictate money not keeping up with inflation is loosing value , therefore a 3% increase , inline with inflation and utilities increases keeps everything in balance .

PLus small rises are easier to ask for by you, and easier to budget for by them rather nothing for 3 - 4 years then bham ,big increase.

TJ - I'm confused, you say £500 is cheap, £550 is market ? What's your dilema, the two prices are only £50 a month or 10% apart ?

Jambalaya

Yes its cheapish at 500 - market rent would be 550+

I am happy its below market rent as it means we get plenty of choice of tenants and no void period.

A 10% rise would be harsh tho for sure

I'd leave it for the second year.

I rented a basement flat for three years or so, rent stayed at £500 the whole time. Like your tenants, we were a young couple trying to save. If there was a rent increase I'd have definitely looked about to see what else was available, and would have been happy to pay a bit more for more space. But as the rent stayed the same there was no trigger to make us even think about moving to another property.

If you increase it and they just look about to see if its still value for money and find somewhere they like, you could go a month or two without rent, plus your next tenants could be a nightmare and trash the place, just after you've done your improvements to the layout!

I would increase the rent in April.
This is how my housing association works. Every April my rent goes up, whether I want it to or not.

Unless you are running a charity, it is not your concern if they can afford the increase is it?

Option No. 1.

You are making enough, there is no reason other than personal gain to put the rent up, and you get the satisfaction of doing someone a good deed.

If you feel you must put it up, do it by £10 and make it clear that the money is going to Shelter or some other charity.

Be the change you would like to see....

4) Surprise your tenants with a rent reduction for being all round good eggs. I'd say that an increase after a year would be unwise for reasons already mentioned. Less of an issue after say 3 years imo.

I'd say there is an option 4 - rent reduction of say (for sake of argument) £10PM * BUT * pass the responsibility of paying all bills on to the tenants. That way you could engineer it such that the reduction is what the rates were last year (before the rise in prices). You are morally in the clear as any increase is down to the big bad energy companies.

2 seems fair, but, you do need to offset the possibility of loss from not immediately filling the flat if they had to move, and the possibility that the next tenants will have "hell" as a previous address.

All I can echo is that I am in a similar position - I rent a small flat in a town where they let fairly quickly - and I at £580 a month am porbably £50-70 light per month - but have been here 6 years. I don't demand renovations, indeed, the landlord and I have a "understanding" that the carpets were shagged when I moved in, and that if the rent doesnt go up, I don't mind a bit of wear and tear unaddressed. He knows a void month or two from a non paying tennant or if there was a slump in rents and I moved out would be greater than any increase. I think as he's never had a complaint about me, and on one occasion my quick thinking in draining down all water services on a failed pump probably saved hundreds in renovations.

He likes me because I pay, and make few demands. I like him as my rent is cheap and he leaves me alone. Its his flat, it's my home. It helps that he's a semi/commercial landlord and takes that view.

matttromans - Member
I'd say there is an option 4 - rent reduction of say (for sake of argument) £10PM * BUT * pass the responsibility of paying all bills on to the tenants. That way you could engineer it such that the reduction is what the rates were last year (before the rise in prices). You are morally in the clear as any increase is down to the big bad energy companies.

seosamh77

Yes - I guess it would be £50 a month to heat the flat.

Jujuuk68

Thats sort of teh position we are in.

Interesting comments from folk here and less "go for the money" than I was expecting. More folk saying no increase than I ever expected

You guys may just have saved them a few quid a month 🙂

Think it really comes down to; are you making enough from the property? if the answer is yes, I'd stick with the status quo, if no then, I'd be looking at adding a few quid to the rent. Really has to come down to your thoughts on the matter, after all it is an investment, but clearly you don't want to be ripping the proverbial. I don't think after so many years a slight rise is unrealistic or will come as a surprise to the tenant, just make sure you give them plenty of notice.

I've been 2.5 year in this place with no rise either, I wouldn't be upset if in a year or 2 they decided to up it a little. tis the way of the world, money is worth less as time goes by. As I say you just need to look at what you are getting from it.

these tenants have only been in a year.

But yes - I make enough profit from it - in some ways more than I am comfy with but then the flat is below market rent and we are good landlords.

We will make our own decision but I have been interested to see people responses to this

It's times like this, I like to think. "what would Renton do?"