10:13 AM, 22nd March 2012, About 10 years ago
Have you ever made the same mistake I did – and set the rent too high?
I remember when one of my first properties became vacant some years ago. I carefully researched the local rental levels on Rightmove and all the 3 bedroom properties were marketed at between £575 and £599 per month. Mine was in good condition so I asked £599. Several viewings and three weeks later I secured a new tenant, who moved in a month after that, and I congratulated myself on doing such a good job.
Easy this property management stuff isn’t it?
A few weeks later I was chatting to an experienced Landlord at my local Landlords Association meeting and he explained how in fact I’d got it wrong!
His target was to take no more than two weeks between advertising and moving a tenant in – and to achieve this he always offered his properties “below market value”.
In the example above, he pointed out that my total void period was 7 weeks, which equated to lost rent of £968.
He’d have offered it at £539 (10% below full market value) and because it was the cheapest, he’d have lots of applicants straight away. Just as important, he’d expect to be in a position to select one who could move in quickly rather than wait for someone who had to give a month’s notice.
I’ve changed my strategy since then, and at NPG we explain to our Landlords that, typically, a month’s void caused by aiming for full market rent takes about 18 months to recoup.
Anyway, after the first year, and every year after that (as stated in our AST’s), we are able to increase the rent by 5% (nice ‘n’ easy by direct debit). So within 2 years we are getting full market rent anyway.
Makes you think, doesn’t it?
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