Setting the right rental price is one of the most crucial decisions you’ll make as a landlord. Charge too little, and you risk losing out on potential profits. Charge too much, and you could turn away great tenants. So, how do you find that sweet spot?
Don’t worry—this blog will walk you through everything you need to know to get your rent price just right. And, to save you from the hassle, we’ll even show you why consulting a letting agent could be your smartest move.
1. Research the Market Like a Pro
The first rule of thumb when setting rent is to understand the local market. Rental prices can vary massively across the UK, so it’s vital to know what’s going on in your area.
According to HomeLet, the average rent in the UK as of June 2023 was £1,229 per month. However, this number is skewed by high-demand areas like London, where rent can skyrocket to an average of £2,077. For properties in less competitive, out-of-the-way locations, the rent will likely be much lower.
How to research? Start by checking property listing websites like Rightmove and Zoopla. See what similar properties in your area are charging, and use that as a benchmark.
- Location matters: Properties in bustling cities or near transport hubs will command higher rents. But in quieter suburbs, the price might be more competitive.
- Unique selling points: If your property offers standout features like off-road parking, a big garden, or modern appliances, you can aim for the higher end of the price range.
2. Know Your Rental Yield
Your rental yield is key to making sure you’re covering all your expenses and making a profit. It shows you how much income you’re getting compared to the property’s value.
How to calculate rental yield?
- Take your monthly rent (e.g., £1,200), and multiply it by 12 to get the annual rent (e.g., £14,400).
- Then, divide that by the property’s market value (say, £200,000).
- Multiply the result by 100 to get your rental yield (e.g., £14,400 ÷ £200,000 = 0.072 = 7.2%).
A 7% rental yield is generally considered good, but it varies depending on your location and property type. If the yield is too low, you might struggle to cover your mortgage, maintenance, and other costs.
3. Furnished or Unfurnished?
The question of whether to let your property furnished or unfurnished is more than just about style—it impacts the rent you can charge.
- Furnished properties typically command higher rent because they come with the convenience of ready-to-use furniture and appliances. For young professionals or students, this is especially attractive.
- Unfurnished properties are often preferred by families or long-term tenants who want to make the space their own.
While furnishing the property might increase rent, it also comes with maintenance costs so, weigh the pros and cons carefully.
4. Pet Policy—Is It Time to Open the Door?
One of the most common tenant complaints? Not finding rental properties that allow pets.
If you’re open to allowing tenants with pets, you might just find that you can charge a bit more rent. A whopping 78% of pet owners struggle to find pet-friendly homes, and they’re often willing to pay a premium to live in one.
So, consider adding a little extra for pets—but be clear on your expectations. Ensure you have a pet clause in your tenancy agreement that covers potential damage and responsibilities.
5. Location, Location, Location
We’ve all heard it before, but location really is everything. Your property’s location plays a huge role in determining how much rent you can charge.
- City centre or transport links: If your property is near a popular area, transport hubs, or amenities like schools or shops, you can justify charging more.
- Quiet, residential areas: Properties in suburbs or smaller towns may not command the same premium but could attract long-term tenants looking for more space at a lower price.
6. Talk to a Letting Agent
While it’s tempting to go solo and figure things out yourself, a letting agent can save you a lot of time and effort. And they can certainly help you set the right rental price.
Here’s why:
- Market knowledge: Letting agents are experts in the local rental market. They know exactly what similar properties are going for and can offer you up-to-date advice on pricing and this will also ensure that you don’t increase your void periods, which can significantly impact your annual yield figures.
- Tenant expectations: Letting agents combine compliance with trust. Renting through an agent provides a tenant reassurance that both the property and their future interests will be protected – and this in itself, can enable the best return on your investment and also the best security for your tenant.
- Legal insight: With ever-changing rental laws and regulations, having an expert on your side ensures you’re compliant and avoid costly mistakes.
Even if you’re just doing research and not yet ready to market your property, a conversation with a letting agent can be invaluable.
7. Don’t Forget Additional Costs
When setting rent, don’t just think about covering your mortgage—factor in maintenance costs, insurance, utilities, and any management fees (if you’re using a letting agent). Remember, the higher the rent, the more you’ll need to maintain the property and keep it in top shape for tenants.
8. Be Flexible
Sometimes, the market doesn’t quite align with your expectations. That’s why flexibility is key. If you’ve priced your property too high and it’s sitting empty, consider dropping the rent slightly to get it rented faster.
Equally, if you have a highly sought-after property in a hot market, don’t be afraid to increase the rent a little—just make sure it’s reasonable and in line with what tenants are willing to pay.
Ready to Set Your Rent? Here’s a Quick Checklist:
- Research local rents: Check Rightmove, Zoopla, and similar properties nearby.
- Calculate rental yield: Make sure your rent covers costs and provides a healthy return.
- Furnished or unfurnished?: Consider tenant preferences and the impact on rent.
- Pet-friendly policies: Charge more if you allow pets—but cover your bases with a pet clause.
- Know your target tenant: Are you aiming for young professionals, families, or students?
- Talk to a letting agent: They can provide expert advice and ensure you’re in line with market conditions.
