Should landlords embrace long-term tenants or prioritise turnover to increase rent?
Quick Answer
Prioritise attracting and retaining long-term, high-quality tenants. While rent increases are appealing, high tenant turnover often leads to significant costs and voids that negate potential gains.
## The Financial Rewards of Nurturing Long-Term Tenant Relationships
As a landlord in the UK, the decision between fostering long-term tenancies and frequently increasing rents through tenant turnover is a significant one. From my experience building a £1.5M portfolio with less than £20k, I can tell you that stability often trumps short-term greed. Focusing on retaining good tenants provides tangible financial benefits that far outstrip the perceived gains of regularly hiking rents.
Here's why embracing long-term tenants is a smart move for your property business:
* **Reduced Void Periods**: Every day a property sits empty, it's costing you money. A long-term tenant ensures a consistent stream of rental income. Imagine you own a property renting for £1,200 per month. If you have a two-week void period between tenants, that's £600 in lost income. If this happens every 18 months, those losses stack up quickly, often eating into any potential rental uplift.
* **Lower Re-letting Costs**: Finding a new tenant isn't free. There are typically marketing costs, referencing fees, and often agency commissions. If you use a letting agent, a common fee could be a month's rent plus VAT, potentially £1,440 for a £1,200 per month property, or sometimes higher. These costs are completely avoided when a tenant stays for several years.
* **Minimised Wear and Tear**: Long-term tenants tend to treat a property more like their home, leading to less wear and tear and fewer urgent maintenance issues. This saves you money on call-out fees and repairs. If you have tenants moving out every year or two, you're more likely to face a higher refresh cost, perhaps needing to repaint, replace flooring, or even carry out minor repairs totalling several hundred pounds, such as £500 for a deep clean and touch-up painting.
* **Predictable Cash Flow**: Knowing your income is stable allows for better financial planning and enables you to budget for larger maintenance items or future purchases. Unpredictable voids and re-letting costs make forecasting much harder.
* **Stronger Tenant Relationships**: Good tenants appreciate being valued. A positive relationship can mean clear communication, prompt reporting of maintenance issues, and a generally more pleasant landlord experience. This fosters a sense of mutual respect that benefits both parties.
* **Lower Administrative Burden**: Each new tenancy requires administrative work, from drawing up new contracts to updating inventories and handling deposits. Long-term tenants reduce this workload significantly, freeing up your time to focus on growth or other aspects of your portfolio.
* **Stability Amidst Shifting Legislation**: With the Renters' Rights Bill expected in 2025 and the proposed abolition of Section 21 notices, having stable tenants reduces the risk associated with changes in tenancy law. Evicting a tenant for slight rent increases, especially with upcoming 'no-fault' evictions becoming harder, is increasingly risky and complex.
* **Easier Mortgage Renewals**: Lenders often look at the stability of your rental income and occupancy rates when you come to renew a buy-to-let mortgage or seek new finance. A track record of continuous occupancy from long-term tenants can make you a more attractive borrower, potentially securing better rates than the current typical 5.0-6.5% for a 2-year fixed or 5.5-6.0% for a 5-year fixed buy-to-let mortgage.
## The Hidden Costs and Pitfalls of High Tenant Turnover
While the idea of consistently raising rents might seem like an easy way to boost your bottom line, chasing this often leads to a cycle of costs and headaches that erode profitability. Many landlords underestimate the true financial and emotional toll of frequent tenant changes.
Here's what to watch out for when considering a high-turnover strategy:
* **Exaggerated Void Costs**: Don't just factor in the rent; consider council tax, utility standing charges, and maintenance that still needs paying even when the property is empty. For a typical two-bedroom property, these combined costs could easily be £200-£300 per month during a void period, on top of the lost rent.
* **Significant Re-letting Expenses**: As mentioned, agent fees are substantial. Additionally, marketing materials like professional photos and floor plans, safety certifications (gas, electrical), and energy performance certificates (EPCs, with a current minimum of E and a proposed C by 2030 affecting new tenancies) all accrue expenses or need updating more frequently.
* **Increased Property Wear and Tear**: Every move, however careful, contributes to wear and tear. This means more frequent repainting, carpet cleaning, or even replacement of fixtures. These costs can quickly negate any marginal rent increase.
* **Risk of Problematic Tenants**: The more frequently you screen tenants, the higher the chance you'll eventually let to someone who causes issues, leading to arrears, property damage, or even lengthy eviction processes. The legal costs and stress associated with a difficult tenant can be immense, far outweighing a small rent increase.
* **Administrative Overload**: Constantly processing new applications, deposits, inventories, and end-of-tenancy checks is incredibly time-consuming. Your time as a landlord is valuable, and this reduces your capacity for more strategic activities.
* **Negative Reputation**: Tenants talk. If your property is known for frequent turnover or rapidly increasing rents, it can become harder to attract good quality tenants in the future, even in a competitive market.
* **Difficulty with Lending**: Banks prefer stable income streams. A property with a high void rate or erratic rental history might face closer scrutiny during mortgage applications, potentially impacting your ability to secure the best rates or obtain financing for future expansions. The standard buy-to-let stress test, requiring 125% rental coverage at a 5.5% notional rate, relies on consistent income.
* **Section 21 Abolition Impact**: With Section 21's abolition on the horizon, attempting to force tenants out for rent hikes becomes much more challenging. You'd need a valid Section 8 ground, which typically relates to arrears or breaches of tenancy, not just a desire for higher rent. This change reinforces the value of long-term, stable tenancies.
* **Capital Gains Tax (CGT) Considerations**: While not directly related to turnover, a landlord frequently selling and buying properties to optimise for rent increases might also face more frequent Capital Gains Tax events. Basic rate taxpayers pay 18% CGT on residential property, while higher/additional rate taxpayers face 24%, with an annual exempt amount of just £3,000. These costs can quickly reduce any profits from rapid turnover.
## Investor Rule of Thumb
A good tenant is worth more than a small rent increase; prioritise stability and consistent income over chasing transient, marginal gains.
## What This Means For You
Many landlords get caught in the trap of seeing immediate potential for slightly higher rent, without fully factoring in the hidden costs and headaches of tenant turnover. Understanding the true value of a reliable, long-term tenant is foundational to sustainable property investment. If you want to build a portfolio that truly works for you, focusing on tenant retention is key. This is the kind of practical, numbers-driven thinking we embed in everything we teach at Property Legacy Education, helping you make informed decisions that grow your wealth, not your stress.
Steven's Take
Look, I've seen countless landlords chase that extra fifty quid a month by turfing out good tenants. It's shortsighted, plain and simple. What they don't factor in are the two weeks' lost rent while the place is empty, the £300 letting agent fee, the £150 for a professional clean, and the general faff. By the time you've done all that, you're down hundreds. You want high-quality, long-term tenants who pay on time and look after your asset. That's how you build a profitable portfolio and keep your stress levels down. Treat them well, and they'll treat your property well.
What You Can Do Next
Prioritise tenant screening for responsible, stable individuals.
Offer fair tenancy terms and be responsive to maintenance requests.
Conduct regular (e.g., annual) rent reviews, applying small, justified increases in line with market rates.
Communicate openly and transparently with tenants about future plans or changes.
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