I need to get some new tenants in by late June, and obviously the Renters’ Rights Act has come into place on the 1st of May.
One of the key points in the act is that landlords are not permitted to enter into a bidding war, which is fair enough.
In light of that, though, have landlords here changed the way they price (i.e., increase their rental amount) in order to factor in negotiation down?
Nope. Same as always: when the current T leaves their rent is typically a little BMV to keep them happy. I always then simply use market rate for the new ad. I know what this is because I have alerts from rental portals sent to me whenever a new property comes up for rent in the areas where I have property. I thus have a very good idea both of prices and availability.
No. You would be very lucky to expect a bidding war normally in last few months (unless you were underpricing in first place and in an area of strong demand) and esp now as these are no longer actually legal. If you set too high assuming you may have to reduce you simply won’t get any bids till you reduce. And you will end up getting less than you wanted. People who price too high and belatedly reduce are in a weak negotiating position people will see it’s been on market longer and reduced and it’ll drop down the search results too.
Just set at what you want to achieve that is realistic (perhaps a ‘little’ optimistic) and based on what offers come in decide whether willing to reduce. Exactly same as previously
Good luck
If you overprice the rent for a new tenant, they can challenge it within the first 6 months and get it reduced to market rent backdated, so no point setting above market rent.
But how do you determine market rent? If the area has thirty year old tired properties and the market rent on those tired rentals is £1000/month, and you bring to the market a new build, and this is the only new build available and want to charge £1250/month, is that still market rent?
Erm the market rent is whatever rate people will pay for it.
Get some agents to value it for you (if you want good enough for a BTL mortgage provider get an ARLA letter) remembering some will value too high to try to get your business. Use the online tools from Zoopla rightmove and openrent. Look at the ads for similar properties in the same area or neighboring areas. Look at official statistics eg Housing prices in Manchester
Exactly the same as you would do if selling the property. Of course if you have something that is rare or unusual it’s harder to value accurately and if at top end of market there will be fewer folk able to afford so it may take longer to get a bite.
Good luck
My question was a rhetorical question. It did not require a specific answer. Lol
Well, for the purposes of rhetoric, it’s not particularly helpful. Market rent is defined pretty clearly as we’ve explained on more than one thread.
Rent tribunals use specific criteria when judging whether a rent is too high or not. Those criteria mean that each rent is determined on its own merits versus what is currently available on the market. Thus, there’s no way to take a hypothetical example and say whether it’s valid or not. In fact, it’s pointless to even speculate. You have to deal with the reality on the ground.
And (rhetorically) we are supposed to know that how?
“NObody expects the Spanish Inquisition.” 
Best
I added 12% to my rents to cover the extra costs, other properties are cheaper but those landlords will need to cover the extra costs soon. No shortage of tenants there are months of section 21’s to come so not enough properties.
I think pricing high to avoid negotiating down is not something I’ve ever done, I don’t negotiate, on the grounds that if the tenant is trying to do a deal at the start, they’ll be trying to do a deal every time there’s a rent increase. I don’t want these dealers.
Is anyone pricing higher to cover the risk of sub prime tenants? Self employed tenants or tenants with CCJs or with no references – tenants where there’s an increased risk of arrears or other breaches of contract. These risks will be more expensive to manage under RR.
I won’t take them on at all, but I know there are people who’ve made profitable businesses out of renting to them, and I wonder what they’re going to do.
@Howard1 that is an interesting point about the risk based pricing. I do not think I would charge more just because a tenant is self employed. In my experience the income stability of a self employed person depends a lot on what they do and how long they have been doing it. A contractor with three years of accounts is quite different from someone who started six months ago.
What I do instead is ask for a larger deposit where the referencing comes back borderline, or ask for a guarantor. Under the Renters Rights Act the deposit cap is still five weeks for higher risk tenancies, so there is some flexibility there.
On the broader pricing question, I agree with the approach of not negotiating. Setting the right price from the start and sticking to it also avoids complications later if the tenant challenges the rent at a First Tier Tribunal. You want to be able to show you set a genuine market rate, not a high anchor price.
been self employed since I was 21 …3 years accounts all good… ,6 months avoid
The thing about self employed tenants is what happens if they get ill. They may have insurance, they may not, I can’t ever know that. Employed people can get ill too of course, but an employed professional has a bigger safety net, so I’m taking on less risk.
Take out rent insurance
But equally the self employed wont be sacked by an employer during a downturn.
Would be interesting to see research on which sorts of tenants actually are more likely to end up in rent arrears- I’d guess low paid low skilled may be much more likely than a skilled well paid self employed person (like an experienced builder, perhaps)
Best
I take out non payment of rent insurance plus legal cover. If they don’t like the price and decide not to pay the rent or argue the toss. It’s a simple case of selling the property especially if they’re on a rolling AST as only 4 months is required. I like the new reform act. I believe it placed landlords (providing you keep a nice home and have all your documents on order ) in a much stronger position. I don’t think the government has thought this one out.!!
In Zola’s L’assommoir a highly skilled well paid builder falls off a roof and then becomes an alcoholic. I bet he didn’t pay his rent either.
It’s exactly because people quote theoretical risks or fiction that it would be better to have better properly collected research evidence on what actually happens so we can judge the risks better
That’s literally what insurers do for a living so simply ask them.
Great novel though.