This article gives you a complete overview of the most important factors determining the market rent you should charge for your property and may be a useful guide for you when deciding what the rent will be.
What is market Rent?
Market rent is the amount a landlord might reasonably expect to receive, and a tenant might reasonably expect to pay, for a tenancy.
Before planning to rent out your property, remember to obtain the necessary consent from freeholders/ head leaseholders, insurers and mortgage lenders if required.
How is market rent determined?
To find the fair market appraisals of your property we consider the following factors together:
- The property style and localization
- The market
- Your requirements as a Landlord
The Property and its localization
To find a fair rent you should charge of your buy-to-let investment, several factors need to be considered, like its style, construction and local market demand.
The quality and condition of its construction may have a significant impact on the rental value, where properties in good external and internal condition will let more readily a higher rent.
Another important factor is the size of the property and the number of rooms. Not only does the number of bedrooms affect the rental value but also the number of bathrooms compared to the number of bedrooms. Also, if the property has an adequate size of the kitchen and reception for the needs of the tenants.
Despite it may vary some with the area, you might achieve slightly higher rent, 5%- 10% by offering furnished property than unfurnished. However, in some area, it may be less demand for furnished properties, while other areas are facing a shortage.
If you consider renting out fully furnished, remember that the furniture must comply with The Furniture and Furnishing (Fire) (Safety) (Amendments) Regulations 1993.
Accessibility of the property to local amenities like shops, public transport, schools and parking facilities, can be an important factor affecting the rental value. However, to understand how this factor may affect the rental value, type of property and the type of tenant need to be taken into consideration.
While younger tenants may prefer to rent a flat or studio close to trendy bars, restaurants, shops etc, families may in comparison prefer to rent houses or semi-detached houses located close to schools and grocery shops.
Since most people relying on commuting to work, easy access to rail stations or motorway are often considered as a major advantage and often make it easier to rent out, especially into large cities.
When you consider the current market forces you should both take into consideration the national circumstances, such as demand and supply of properties but also the local market in your area by asking the following questions;
- How is the demand for this type of property?
- How many similar properties are on the market right now?
- How does this property compared with similar properties currently being offered and let?
- What type of market will this property appeal to?
- How long time did similar properties takes to let?
Taken these factors into consideration, you should then start to compare comparable properties with a similar style, in the same area recently let, or are under offer with your own property.
The length of the tenancy you wish to let your property and the time of the year that the property is available may also affect the market appraisals. For instance, if you only wish to let out your property during the winter when you are abroad, this will affect the opportunity to let due to the restriction on the length.
In contrast, if your property is available to let consistently the next years, this will have a positive impact due to more flexibility for tenants and will have a broader appeal.
The rental values will rise and fall as market conditions change. Rents usually rise during the peak period ie. the beginning of May to the end of September while property can be harder to let during winter.
Either you have invested in a buy- to- let property, or you will like to rent out rooms in your own home, you should always have a good background check of your prospective tenants.
However, even though it may not affect the rental value, you may be more anxious renting out your own home and imposing more restrictions on tenants that may affect the rental figure.
Development of the Rental Market
During 2019, we saw rental demand increased by 8 % and the supply dropped by 4 % compared to 2018. This trend can be explained by new investment in private rented housing falling since 2016.
One of the explanations is that Government has during the last years been steadily reducing the amount of mortgage interest tax relief landlord can claim from 100 % down to 25 %. From April this year, it will be replaced by a 20 % tax credit for mortgage interest. This will directly leave Landlords facing higher tax bills, but also indirectly, affecting Landlords by pushing some into a higher rate band.
This changes come on top of other tac changes during the last years, like the end of the ‘wear and tear’ allowance and the introduction of the extra stamp duty, 3 % for investing in second home/ buy- to – let properties.
These changes have made it less attractive for landlords and have led many landlords selling up.
Get a Free Rental Valuation
Abito Homes is a regulated Hybrid Estate Agency. We can offer you a free market valuation to find the current rent you should charge for your property.
We offer our tenants renting fully managed properties a unique loyalty program. This loyalty program offers tenants rewards for taking good care of your property, paying the rent on time and incentives for long term tenancies.
Financial incentives are increasingly used and have proven during the years to have a significant effect by reinforcing the desired behaviour.
We strongly believe that by offering tenants renting fully managed properties through us Loyalty Rewards, will benefit both Landlords and Tenants that will result in long term tenancies.
Read also: AH Loyalty Program
Contact us today for a FREE Market Appraisal
Call: 07757 744440 or email: Info@abitohomes.co.uk