I have great tenants, but I have left a painful conversation overdue, any tips?

Hi, I'm in the same position as you. I decided now was the time to put rents up last Friday.
I phoned each tenant one by one and explained the situation. I have given them all a few months to prepare and the rents go up in January. I have now sent them all a follow-up letter.
Everyone was OK. They know we are all in the same boat as far as the cost of living is concerned.
Plus, all my rents will still be under market value.
I just hope we can all survive!!

I was in the same boat.
But..
1. You are actually doing the tenant an injustice by not raising rent, as they get "trapped" with you in a bubble not trying to improve their own income etc.. A bit like charging your own kids rent to stay at home. It's a part of life.
2. They'll be expecting it. It's on news 24/7.
3. it's not going to change anytime soon, especially energy and they need to play their part in our reduction of waste. Raising costs of energy is the best way to focus that.
So I wpuld say a letter with a couple of reasons for increase, with the NLA form to keep it official. Not appologetic but more along the lines of weve held out as long as possible but need to bring things into line.. This is what youradditional cost looks like.
You can always see if they kick back with any reasons that could delay their increase.

Two lovely Landlords!

And these are the guys pilloried by the Government and some LAs!

I was in the same position as you in 2020. I increased rent in London when tenants changed, averaging 3 years, because I could afford to because it was not my main income. But I had not increased rents for 5 years for my Yorkshire flats. Then, one tenant simply stopped paying at the start of lockdown, and £20k+ arrears and costs later, it had destroyed my relationship with BTL. I have since sold that flat and will sell my remaining flat. But, I started to raise the rent in January, and have just issued a S13 for next January. There is no easy way. This is a single mum who has never missed a payment in 4 years, despite losing her job. But, I am now retired and my mortgage has rocketed.

I am in touch with the tenant, and previously sent a simple text message (supporting the S13) explaining my situation, and saying I am maintaining her rent at below the market rate, even though it does not cover my costs. Unfortunately, I will soon follow up with a S21.

Reply to the comment left by Blodwyn at 08/11/2022 - 10:23
And not to mention all the Tenant action groups.
Perhaps they would rather tenants' rental homes were repossessed?

I have put 5 rents up in the last few weeks. I tend to review every 3/4 years to give peace of mind to them and reward good behaviour and longevity with a discount to market.
4 have received it well and confirmed whilst one has not replied to my email 7 days ago and a follow up WhatsApp msg yesterday ( I see it has been read). Obviously I need them to confirm. Next steps ?

I did the same & was open/honest with my tenants about why I reluctantly had to do this. Have to hand the market rent you could get (you can get an indication on Rightmove) versus what they pay & explain you're still happy for them to pay below market rent (BMR) but you nevertheless need to increase the rent by Xpm to cover a small part of your increased costs; mortgage payments have gone up by 2.25% since before Covid hit = Xpm extra pm and buildings insurance has increased by 20% too, and repair costs are now much more than before, but just both these two alone add up to Xpm more which you can least afford if you don't increase the rent. If they're on benefits, check the LHA rate for their post code https://lha-direct.voa.gov.uk/ as they will possibly be able to get an increase in their Housing Benefit element. If they're not on benefits but still in employment, although any increase will be a pinch as they've got used to paying a low rent for years, if they know they're still paying BMR they won't go elsewhere.
With one of my tenants, they were paying £950pm which was £400pm BMR and I asked we meet halfway at £1150pm in 2 incremental increases over 2years. They were more than happy with this.

If you’re renting flats with service charges explain that these have gone up as well.

I have been in this situation very recently. I was remortgaging early this year (thankfully before the rises). Rising the rents before the remortgage was particularly difficult because their rent had largely remained unchained for 6-8 years.

I simply completed a rent increase form and accompanied it with a cover letter explaining our reasons for increasing the rent - increased expenses that have grown exponentially in recent times due to higher than normal inflation. I also calculated the overall percentage increase, and how this would have equated per year to try and lessen the blow so to speak. Largely my tenants accepted these raises although I did give one a 3 month phasing in period to help them organise their finances. I was relatively confident the tenants would accept these raises as we remained very competitive with the current offerings on the market and most people would prefer not to go through the ordeal of finding somewhere new just to make a point.

It is not a nice conversation to have, but it is very important to have sooner rather than later. Given the current economic uncertainty I have decided that I can no longer reward good tenants by not increasing rent annually as we do not know what is around the corner. Thankfully all of my mortgage products do not expire until between 2025 and 2027 so I have a few years to allow for an increase every year of to try and soften the blow so to speak when higher rates no doubt are presented to me.

I believe that record low interest rates are now behind us and I have an action plan to protect myself from AVG 4% interest rates by 2025.

This is an increase of around 2.5 times what I am paying at the moment - scary - this will reduce my income by 85%. In the meantime if I can increase my turnover by 5% a year - this will be an increase of 15.7% by 2025 and 27.6% by 2027.

By 2027 when all of my remortgages will be completed if they are all at 4% my decrease in profits will then be 58.5%. Much more bearable than 85%, although indeed still very disheartening for all my sacrifices I have made over the years to build this portfolio.

I am also diversifying my portfolio with furnished holiday let’s and adding new properties (even emptying my garages to let those) all in an attempt to meet those losses. Whilst I was hoping to increase my financial freedom it looks instead that I will just be fighting to maintain what I already have built. Obviously I will reassess the financial situation each year as perhaps our economy will outperform my predictions in which case we can all take a sigh of relief and I will rethink my rental strategy.

I think it’s a very important time to consider your position critically and plan for the future. Do not wait to increase your rents! I am also keeping a sinking fund for worst case scenarios where I might need to pay off debt in the future.

Hope that helps.

I'm in the same situation and have come to regret not putting rents up before. When interest rate were so low, I was making more than enough and didn't neet to put rents up. I too have lovely tenants who stay for years and I contacted them all personally as I know them all personally. We've had good chats and agreed increases.

However, what has become apparent is that had I already been charging market rate, I'd have been able to put them up more now as there is quite rightly a limit to how big an increase anyone one can take in one go. I've given my appologies I had to raise them at all and everyone understood. I have also warned them that from here on, I'll have to keep things under review and to expect regular increases from here on in.

Jamie