How Much Rent Should I Charge My Tenants?

A regular income of rent is one of the joys of being a landlord. Not only does it help your day-to-day living but it’s also essential to the healthy maintenance of your portfolio. So how much rent should you charge your tenants to rent your property? The answer’s far from simple but with a bit of guidance you’ll be on the right track.

There’s a serious problem that comes with discussing rental costs. If you get this wrong, it can have a detrimental effect on your entire business. Also, it’s notoriously difficult to increase the rent when you’ve already set it. Opt for too little and you’re facing a potential loss. Charge too much and you may struggle to fill the property.

Research the Market

This is your best way to gauge an appropriate price. Look at properties of the same size in your surrounding area. If most rentals charge a similar amount then you’re going to have to be competitive.

When researching the market, consider where your property sits. If you can offer something significantly better than your competition, it’s worth placing your property at the upper end of the spectrum. Alternatively, if your house/flat is lacking in a few key areas then it might be worth dropping your price.

Work Out Your Rental Yield

So this isn’t the most attractive part of the landlord role though it’s an essential one. The income is the biggest draw of buy-to-lets. You need to work out your rental yield. In layman’s terms, this is the percentage of your purchase price which you take each year.

There’s a simple formula to work this out. Deduct all costs from the rent you receive. Then divide this into the property value (including any additional purchasing costs). You’re then left with the rental yield (make this a percentage). For example, if the annual rent is £10,000 and your property cost £200,000, you’re left with 0.05 which equates to 5%.

If you’re hunting for the next addition to your portfolio, it can be a headache to go through this equation over and over again. If you’re looking for a quick fix, head over to This is Money and give their Buy-To-Let Yield Calculator a try.

Before you settle on the rent you charge, you really ought to work out your rental yield.

Biggest Factors Affecting Rent

There are numerous key factors that dramatically affect the rent you can charge. Here are some of the most important points to think about:

• Location – If you own a one bedroom flat in central London, you can charge more than you could for a four bedroom house in Manchester. Don’t consider the national average, think about the immediate area.
• Is it furnished? – If you’re including furniture in the deal, you can charge more. Depending on the quality of the furniture, this difference can be huge.
• Pets – Many landlords don’t allow pets into their properties. If you choose to let to pet owners, it’s perfectly reasonable to charge more rent.
• Tenants – If you’re aiming for a specific type of tenant, you can target them with the rent you charge. This effectively opens doors to some tenants by undercutting the competition or alternatively pricing some tenants out the market. Be cautious with this approach.
• Amenities – What’s close-by? The facilities that surround your property play a big part in the price you can charge. Is it close to a school, has a great access to parking, is near a parade of shops, etc.?
• Desirability – What’s the state of the local property market? Are rentals being snapped up as soon as they’re on offer or are they lingering for months?

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