Should you include bills in your rent?15-02-2023 | Financial
Are you seeing more and more rental offers including bills? It might have you thinking if you should include bills in your rent.
There’s a reason the most searched term for renters is ‘bills included’ at the moment, reports The Guardian and it has everything to do with the cost of living.
You might be curious however as to why landlords are opting to include bills in their price with increasing interest rates.
Let’s take a look at how this inclusion of bills affects the yield percentage and impact your rental property as a whole.
What does ‘bills included’ mean?
You may have seen this displayed as ‘all bills included’ as well. ‘Bills included’ means that the amenities such as council tax, heating and water are lumped together in one cost and added to the rental fee.
Is it cheaper to have bills included?
For tenants of all demographics, having the all-inclusive bill package appears more popular than ever. With the hard hit of the cost of living crisis, bills included properties are helping tenants navigate the uncertainty of bill prices.
Although this may be a good way for tenants to gain a bit of control in an uncertain economy, landlords are often left footing the unforeseen jumps in costs.
However, your prospective tenants may notice a spike in the rental prices in general making it overall more expensive to rent and be a landlord. This obviously isn’t the news either party wants to hear.
Is it better to have bills included in rent?
Understandably, more tenants are finding it attractive to be able to budget having bills included but where does that leave landlords should the energy companies land them with an unforeseen hefty bill?
Rightmove reported that average private rents have reached new highs up to 20% in locations such as Manchester and 15% in London. This clearly suggests that landlords are quickly responding to rising interest rates and hiking up rent in order to balance their bill costs.
Should you include bills in your rent?
The rental market is more competitive than ever. Tenants are having to make major decisions within minutes after viewing a property. With this in mind, you can see why tenants are leaning towards an all-bills-included situation. Typically at the moment, they are harder and harder to come by.
So, if you’re looking to attract tenants in a property which has not had the quickest uptake of interest, adding the ‘all bills included’ might just tickle the fancy of a new tenant.
Why you shouldn’t include bills in your rental price
Looking at your ‘why’ is important. Why are you including bills? Is it because your energy provider has assured you your energy bill will stay at a fixed price? Is it because you’re having to remortgage or facing the end of an assured shorthold tenancy agreement?
These are all valid reasons that need to be considered. You may have to hike rent prices to accommodate the bills. But you may also have to slink prices down to allow your tenants to have a chance to pay their rent.
Whatever your reason, know your ‘why’. A ‘bills included’ package has to work for your property and cash flow. If you’re about to switch providers or have noticed fluctuations in the location of your rental property, bills included may be a risky move.
However, you can adjust your rental price to match the cost of inflation. By offering a rental price, which is still deemed fair, but also relates to the recent increases in rates, you can balance the difference out.
The aim of the rental property game is to obtain a high yield and increase the profit from your property portfolio year-on-year. By staying flexible and understanding the market, you could create a rental package that attracts retainable tenants as well as protects yourself from unexpected costs and energy bills.
See The Rental Reform 2022 to understand a fair rental price and why it is important you don’t overprice your rent.
Understanding utilities for landlords
If you have further questions about how landlords can and are meant to help and advise their tenants with utilities, see our advice page. From energy bills to changing names on accounts, we’ll walk you through the best practice.
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