So you're considering a buy to let property but not sure how much rent you should actually charge. Too high and you will deter possible tenants, too low and you will have managed to work out a bad deal for yourself.
A well thought out rental amount will also allow the lender to deal with your buy to let mortgage application without to many questions and hence faster.
So how do you figure out how much rent you should charge?
Location. Location. Location.
Certain details about a location will make it more admirable, e.g locations which are next to transportation infrastructure such as underground stations or bus stops in an area where bus stops aren’t within a 20 minute walk A location with a short supply of property to rent and overwhelming demand will naturally require a marginal rise in rent prices to match demand in the area.
In areas where supply outweigh demand then your best bet might be to undercut rental prices for similar properties in the area. How do you know when supply outweighs demand or when demand outweighs supply?
To know when supply outweighs demand you can simply look at how many properties are available on the market for a 90 day period. If over 60% of those properties remain available you can reasonably assume that there isn't huge demand. You can also make about 10 calls to different estate agents working in the area to get their opinion as most requests for homes ( renters and landlords)will come through them.
Your target market and their disposable income will also generally determine how much rent you can charge. If the area you have your buy to let property in is dominated by students then you will have to adjust your target rent price to their expected disposable income.
Level of property
The level and general quality of the property on offer will also determine how much you can charge for it. If the property requires a lot of renovations then you can't expect tenants to pay typical prices.
Level of service
If you look after communal areas, or provide a management service or have bills included then you should charge more for this service to cover your costs.
In some cases your lender will insist you charge a specific rate for them to lend to you. Ensure you will find a suitable tenant at this rate.
If you are plugged into our mortgage management platform(like ours) our technology will send you an update towards the end of each tenancy agreement with a rent review report detailing proposed future rent, market trends etc.