Hi, this is Tom Soane with a drive-by episode of the anonymous landlord and today. I’ve got a quick tip for landlords when it comes to rent and the amount of rent that you should charge versus the amount of rent that you will lose, so I see so many landlords put their properties on the market for just a little bit too expensive and it might be just 25 quid too much. We’re not talking big numbers here because generally speaking rent valuations are quite easy to do even if you don’t use a letting agent, it’s quite easy to calculate a rent valuation, right?
So what I see a lot of landlords do is try and squeeze a little bit too much and again, I mean it a little bit so for an example if your property’s worth 875 quid per month the temptation is to put it on the market for 900 per month and I can understand you know, obviously you want to try and make as much profit as possible and you want to try and generate as much income as possible of course you do, so you put it on the market for 900 25 could too expensive and you haven’t done your due diligence and I’ll tell you about that in a second and you’re just a little] a bit too high in comparison to the other properties on the market so you end up having an empty property for a couple of months, so let’s think of it like this if your property is empty for say two months, then that means you’ve just lost about I don’t know about 1,800 quid, 1,750 quid. 1,750 quid for the sake of trying to increase your rent by 25 quid.
Now, the common mistake is that a lot of landlords feel that if they put it on the market or if they accept a lower rent straight away, then they’re going to miss out on that extra income forever but that’s just not right. Actually, you can drop it down to 850 and then increase it your first rent review and if you do that properly, then you could actually save your property from being empty for a couple of months rather than it being empty for two months. You can just accept 25 quid less or 50 quid less per month for a couple of years and then increase it anyway, so really what are you losing? Your not actually losing anything as long as you keep your eye on the rent values, so like I say, I see a lot of landlords sacrifice income because of fear that if they accept 875 instead of 900 or even 850 instead of 900 and that’s going to be the rent from there on and they’re not going to be able to change that but that’s kind of what I wanted to tell you is that you can change it.
The important thing is to generate income to get someone into that property using the property and paying for it and then you can start optimizing that profit in the future. Now, let me just back this up by saying I’m not telling you all to go and accept low offers on rent, right? There is an element of due diligence that you need to do to make sure you’re getting the right rent and then you allow yourself a little bit of margin a little margin for error if you like it’s just like the sales marker, isn’t it? You put a property on the market for 200,000 knowing in your mind that you’d accept anything above 990, so it’s the same with renting but renting is much more difficult to get right or the rental values so in this same instance, you put it on the market for 900 you don’t get anyone looking at it for a month then you drop it down to 875, then you get someone interested, then they’ve got to go through that whole process so you end up with an empty property for two months, like I said earlier on you’ve just lostall that money, you can prevent that by doing some due diligence.
Now, the first thing I’d like you to do if you’re going to put a property on the market for rent is of course check out the competition. Which properties are competing with yours and there’s an obvious and simple way to do it, put yourself in the tenant shoes and if you’re looking to rent your property out somewhere in the region of 850 to 900 that’s the area that you’re looking at have a search and have a look at what a tenant could rent with the same budget, so if you puta three-bedroom house for an example up to 900 quid within a half-mile radius, then hopefully you’ll see a nice list of a decent number of properties and have a look. I mean I use a spreadsheet so I then put all of the rent values into a calculation which shows me the average and then I set my rent price accordingly so if you can see that there’s loads of properties at 875 there’s a couple of 850 but there’s none at 900. I mean using very rough examples here then, you know, if you put your property on the market at 900 it will be the most expensive in that category and in that price range, so you have to work out how you want to do it. Do you want to take a gamble for an extra 25 quid and be the most expensive property on the market or do you just want to get it rented, get the profit coming in, get the money coming in, get it rented out well, that’s ] what I would do. I’m all about safety and security, low risk and profit that’s what I’m all about. Other people are more about taking a gamble trying to go for that extra profit, squeezed the juice as they say, so that’s the first thing to check.
Check out the competition, where is your property going to be positioned in amongst your competition market, so again going back to the competition if there are let’s say 20 other three-bedroom houses similar to yours in the same price category and you price yourself out of that market than the other 20 or the other 19 are going to get rented out first before yours that means you wait, that means you lose, that means you lose money and it’s not even a monthly thing. Your property could be on the market for an extra week and you still lose a week’s worth of red, so yeah have a look at the competition to see where about your property will be positioned. The next thing to do once you’ve got that big list in front of you all those properties in your category going to filters and select include let agreed.
Now, it’s going to show you how popular that area is and how quickly those properties rent out so for example, if you can see that there are 20 properties on the market for let at the moment and there are also 20 properties let agreed, you know, this is a fairly active market and then you can be a bit more confident of putting your property on the market in a certain price category. Again, I don’t normally recommend going at the top end of the price category personally. Like I say, I’m more interested in safe and secure, reliable, low risk and profit but you know what if you can see that it’s a highly active market you might decide rather than 875 you might go 890, right?
Certainly don’t go to the top of that category by the way unless you’ve got the tip-top most pristine, prestigious premium property in that category then, by all means, go for a bit more money, but the golden rule is to put yourself in the tenant shoes and work out for yourself, what can my target tenant buy for the same rent for the same money? It’s actually the same in the sales market that’s why I keep saying buy because in the sales market you’ll do the same thing you’ll have a look and see what can buyers buy for the same price bracket that there that I’m looking to achieve, so yeah, check out the competition. You could also have a look at the sales market and you can normally make a direct correlation between how active the sale market is and how active the lettings market is because there’s always a good try not to squeeze the juice too much because you’ll end up with an empty property for two months10 years and you leave that property empty then you would have lost a decent chunk of money and that decent chunk of money could have paid your mortgage for a few months or it could have got you gas safeties covered for the next few years, you know, so anyway, that’s all I wanted to say little tip for landlords about not losing money on the rent and pricing the property for rent properly. I hope that helps to speak to you all soon.