How to price your rental (and why raising rent by £50 can cost you money)

Most landlords set the rent on a new tenancy with one of two methods: copying the neighbour (“the flat upstairs is asking £1,300, so I’ll ask £1,280”) or aiming high (“at that price someone will bite, and if not I’m in no rush…”). Both are bad for the same reason: they ignore that the optimal asking rent isn’t the highest price someone will accept — it’s the price that minimises rent lost to voids.

This guide walks through how to find that point with a worked example on a typical UK 2-bed, and why raising your asking rent by £50/month often makes you less money, not more.

This is exactly what the rental yield calculator computes when you change the “months let per year” field. Here we explain the logic step by step so the trade-off is visible.

The mistake: thinking only in monthly rent

Picture a 2-bed flat in a UK city where comparable lets sit between £1,150 and £1,400/month. You check Rightmove, see listings at £1,300 and £1,400, and conclude: “mine is worth at least £1,300”.

What Rightmove doesn’t show you is how long each listing took to convert. A flat advertised at £1,400 in an area where the real “let-agreed” price sits at £1,250 can spend two to three months on the market — and during that time the cost is brutal: every empty month is a full month of rent lost, not a small discount you could have avoided by pricing slightly lower.

That’s the trap: portal prices are asking prices, not let-agreed prices.

The arithmetic almost nobody does

The numbers for the same flat at four asking prices. Assumption: higher asking → longer to let.

Asking rent	Months let/year	Effective annual income
£1,200	12 (lets in days)	£14,400
£1,250	11 (2 weeks void + 2 weeks discount)	£13,750
£1,300	10 (takes 2 months to let)	£13,000
£1,400	9 (3 months on the market)	£12,600

The flat at £1,200/month earns more than the flat at £1,400/month, even though the second one would put £200/month more in your pocket “on paper”. And the flat at £1,250 earns £650 less per year than the flat at £1,200, even though it might feel like you’re “leaving money on the table” at the lower price.

The concrete sum: raising from £1,200 to £1,250 gives you +£50 × 11 months = +£550, but costs you one month of lost rent = −£1,200. Net: −£650/year.

And that’s before the hidden costs of a void: during empty months you still pay council tax (yes, the landlord covers it on an empty property in most councils after the first month), service charge, ground rent, insurance, and the mortgage if there is one. Plus you raise the odds that the next tenant is a weaker covenant — because you’re now under pressure.

The practical test: at what price does it let in a week?

The right question isn’t “what price will the market accept?”. It’s: “what price gets this flat let in 7-14 days?”.

Why that window:

• Under 7 days = you’ve underpriced. The first viewer takes it without negotiating. If after the first viewing day you already have firm offers above asking, push the next renewal up one notch.
• 7-14 days = right price. Real interest, you can pick between 2-4 applicants, and the AST starts within three weeks.
• 15-30 days = starting to hurt. Each extra week is roughly 25 % less income in that cycle.
• Over 30 days = priced wrong. Dropping £30-£50/month and re-advertising usually lets the flat within a week, and you recover the cut in under six months.

How to find the real let-agreed price (not the listing price)

Portals show asking prices on active listings. What you need is the agreed rent on signed tenancies. Three ways to approximate:

1. Rightmove “Let Agreed” filter + listing history. A listing that’s been live 60 days at £1,400 is not evidence of a £1,400 market — it’s evidence of an unlet property. Let-agreed history is more reliable than asking-price history.

2. Call five comparable listings as a prospective tenant. You learn the real price in two questions: “is there any flexibility?” and “when’s it available?”. A flat advertised three weeks ago and “available immediately” is one nobody wants at that price.

3. Ask a local letting agent (free; one phone call). Agents earn from let-agreed prices, not asking prices, so their honest estimate tends to come in 5-10 % below what you’d have asked.

Once you have a sensible range (say £1,200-£1,250), start at the lower end and raise on renewal if the tenant wants to stay and the market supports it. Pushing rent up £30/month on a good tenant at renewal is worth far more than asking £30 more on launch and risking two months of voids.

Three legitimate upward adjustments

From your base range, three reasonable adjustments push the asking price up:

• +5-10 % for fully and recently furnished (working kitchen, washer-dryer, sofa, bed). Attracts the tenant who stays 3-4 years and reduces turnover.
• +3-5 % for bills included (water, broadband, or sometimes service charge). Reduces voids because tenants compare against a “total monthly cost” budget.
• +5-15 % for genuine exclusivity: balcony, secure parking in a central area, top floor with lift, EPC rating C or above (matters more every year — and from April 2028 new tenancies need an EPC C minimum unless exempt).

And three downward adjustments rarely applied although they should be:

• −5-10 % for no natural light, ground floor on a busy street, no lift above the 3rd floor, or persistent noise (pub terrace, bus stop under the window).
• −5 % for a strict no-pets clause in markets where pet-friendly is becoming standard. The Renters’ Rights Bill makes blanket pet bans harder to enforce anyway.
• −5 % in August/December. The two months with the least rental demand in most UK cities. If you must let then, advertise at the off-peak price, not at peak-month optimism.

When you SHOULD raise

Not every answer is “go lower”. Three cases where a rise is justified:

• Your current tenant has been in for more than two years and you haven’t reviewed the rent. A Section 13 notice or a CPI-linked review (~3-4 % in 2026) on £1,200/month is £36-£48/month more — and tenants rarely leave over that figure.

• You’ve done a real refurbishment (new kitchen, new bathroom, full redecoration, EPC upgrade from D to C). A £15,000 refurb that justifies £100/month more pays back in 12.5 years and improves the resale liquidity if you sell.

• The market has moved 8-10 % up in your area in the last 12 months and your rent has lagged. Here a 5-7 % bump at renewal is reasonable — even if the tenant leaves and you spend one month void, you come out ahead if the next tenant pays £100/month more for 24 months.

When to lower (three signals)

Three clear signs your asking price is above market:

1. Under 5 viewings in the first 2 weeks, assuming decent photos, accurate description and adequate portal promotion. If the listing is well-presented and viewings still don’t come, the filter is the price.

2. Plenty of viewings, zero offers. The flat convinces but the price doesn’t. Dropping £30-£50/month usually closes the let the following week.

3. Every offer is below asking by the same amount. If every interested applicant negotiates down by ~£50, that is the market price. Accept it and save two more weeks of an active listing.

Common mistakes

• Anchoring to what you asked 3 years ago. The market can fall, not just rise — especially in areas with new-build supply coming on stream (new stock caps your price).

• Asking what your mortgage costs. The market sets the rent, not your monthly interest payment. If your mortgage is high, your problem is the finance, not the rent.

• Confusing “opportunity” price with fair price. A weak-covenant tenant accepting £1,400 doesn’t mean the flat is worth £1,400. It means you’re being paid a premium to accept a tenant the market filtered out — and that premium typically gets eaten by an arrears claim within 18 months.

• No rent review clause in the AST. Without an explicit clause, mid-tenancy increases require a Section 13 notice (which a tenant can challenge at the First-tier Tribunal). Build a CPI-linked annual review into every new tenancy.

The bottom line

The optimal price isn’t the highest someone will pay, it’s the one that maximises your effective annual income:

Effective income = Monthly rent × Months let per year

And “months let” depends on the price. That’s the equation to write down before deciding.

Three practical rules:

1. Start at the bottom of the market range and raise on renewal, not on launch.
2. If 14 days pass without firm offers, drop £30-£50/month and re-advertise — don’t wait “to see if anyone bites”.
3. Review annually in line with CPI rather than landing big increases every 3-5 years. Less abrupt for the tenant and almost never triggers a move-out.

---

If you want to see how your real net yield changes when you vary the asking rent, try the yield calculator — change the “months let per year” field and compare scenarios. And if you’d rather have it tracked per property each month, with void history and renewal reminders before each tenancy expiry, take a look at Livra.