In a Real State

Rupert Smith of Complete RPI questions why estate agents in the United Kingdom are so averse to raising rents on property you own

Welcome to my fourth article discussing the hot topic of residential property investment, letting, management and sale in the UK. My name is Rupert Smith the founding Director of Complete Residential Property Investments Ltd (hereinafter CRPI). We are a specialist property investment company offering a unique and results-orientated commercial approach to UK property investment.

Established in April 2001 I have built up the business based upon a results-orientated, commercial approach to the ownership of UK residential investment property … a far cry from your traditional estate agent I am pleased to confirm.

Following on from last month’s article I wish to cover the topic of rental values and market conditions, amongst other topical issues.

Rent levels in the UK are at an all-time high and occupancy rates just the same. Your typical rental agent will I am sure tell you to re-let at the same level to the same tenant because that is the path of least resistance.

To put things in perspective, the British newspapers have in recent times been full of headlines like, ‘Rental prices hit record levels in the South East’; Rents in London increase to highest amount on record’; 'We are experiencing the highest occupancy levels on record'; 'UK rents rose by 6.3% between last year and this year'.

I could go on, but the point I am trying to make here is actually most relevant to the last market comment: “UK rents rose by 6.3% between last year and this year”. This point is very, very newsworthy as the majority of estate agents are just happy to leave the rent level as before … why change? ‘Surely you should renew to the old tenant at the same rental, sir?’ Well, no actually, Mr Agent: sweat my asset like any other investment I have; I expect you to maximise my return!’

Sound familiar? To be frank if I was to walk down the high street and interview 10 agents and ask the question, “What was my ROI last year please?” methinks you will be greeted with a rather dumfounded expression …

Do not be afraid to tell you agent to increase rental, a typical tenancy will have a clause that allows the landlord to serve notice on the tenant in the last 60 days of the tenancy. If your agent is worth his salt he will ask the question 90 days prior to the end of the tenancy and ascertain whether the tenant wants to renew and at what level. Generally speaking the contract, which don’t forget you can dictate the terms, should allow for an increase at the point of renewal generally in line with RPI (Retail Prices Index).

In our contracts we stipulate a minimum of 3% to a maximum of 5% increase, however we increased our rental income for clients by some 7.5% last year which if you do the math is considerable.

We are asked to evaluate clients’ portfolios often (a portfolio can consist of just one rental property by the way) and I am constantly amazed by how many properties are consistently underlet.

Complete RPI will overview a myriad of elements as a matter of course, including rent levels, gearing, void periods, maintenance costs, etc and are happy to review your portfolio at no cost.

It is fair to say that rents will indeed ease at some point but the market is very postcode sensitive, occupancy levels and demand is very high so work on the basis if you don’t ask you certainly will not receive.

Most people don’t realise that price movements and rents often go in the opposite direction, but as prices rise due to higher demand, the future looks bright for renting, as it means renting becomes increasingly affordable versus buying, especially if tenants need to maintain flexibility.

Speaking of tenants this leads nicely to the next topic.

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