Setting a rent at the correct level is quite a demanding task, whether you are a landlord or a letting agent. As one of the established Edinburgh letting agents, we have been serving a variety of landlords. Some are portfolio landlords with many properties. Many are investing in residential properties – with their main interest being in maximising their rental yields. Others are individuals who inherited their property or used to live there. Quite often the latter results in an emotional attachment to the property and when such landlords consider a suitable rent, their mortgage payments should be used as a guide. What other factors should be taken into account when setting rent levels?
How Much Does the Property Really Cost You?
Your rental property is a form of investment, so in the first instance, we recommend you calculate how much this investment has cost you. You should take into account all fixed or constant expenditure:
- Mortgage payments
- Landlord insurance
- Letting agency fees, either Full Management or Let Only
- Potential factor fees
Setting Your Rent
Typical range of rental valuation: minimum, average and maximum rental values.
It shows quite a broad a rental range and three values: minimum, average and maximum. So how can you tell if you are asking for the correct rent? The answer is quite easy – analyse the market!
If you (or your Edinburgh letting agent) are inundated with phone calls and email enquiries from potential viewers flowing like a river, then most likely the advertised rent is too low. Obviously, the most sought after flats (for example, 1 bedroom flats in Leith, Gorgie or Morningside) will generate more leads than larger apartments in more remote (e.g. Gilmerton or Newhaven) or less fashionable areas (such as Granton or Wester Hailes). Hence, the property location must be taken into account.
If you are not receiving many enquiries and your potential tenants tend to cancel viewings, it suggests that the advertised rent may be too high. Another tell-tale sign of rent being on the high side is the abundance of ‘higher risk’ viewers. If all your calls are from undergraduate students, new arrivals with no credit history or individuals in need of guarantors, then you have likely priced the property too high. You may be fortunate enough to let your property anyway, especially in the busy season, but your tenants will likely move out sooner rather than later, if they realise other comparable properties could be let at a lower rent. Your property is likely to end up back on the market – and voids cost money. One month of an unnecessary void amounts to around an 8% rent discount, assuming that tenancy lasts 1 year.
If the market response is somewhere in between, the advertised rent is within market expectations and you should be able to let it quickly to quality tenants looking for a long term rental.