Determining how to calculate what rent to charge for your investment property is crucial for achieving success in the buy-to-let market. Striking the right balance between affordability for tenants and profitability for landlords ensures you attract reliable renters while maximising your returns. This process involves understanding market trends, researching comparable properties and assessing the appeal of your rental property.
Location is a major factor when calculating what rent to charge. The rental income potential of your property will depend on local demand and amenities. For example, Birmingham investment properties near well-connected train stations are popular with commuters and often attract higher rents. Similarly, areas like Harborne, with its affluent reputation and Digbeth, which is gaining popularity among younger renters, have strong rental potential. For students, areas like Aston are more affordable but offer consistent demand due to their proximity to universities. Knowing the profile of potential tenants in your chosen area helps establish the right price and ensures your property remains competitive.
When deciding how to calculate what rent to charge, researching similar properties in your area is essential. Use platforms such as Zoopla or Rightmove to explore the rental prices of properties with comparable features such as number of bathrooms, as well as overall size, condition, and location. Estate agents can also provide you with insights into the local market.
It is also highly recommended to get a formal rental valuation from a local letting agent. They have direct experience of what tenants are willing to pay in the current market which can be more accurate than online listings alone.
Knowing how to calculate what rent to charge isn’t just about setting a number, it’s also about making your property stand out. You need to balance your expectations with the reality of the market. This doesn’t necessarily mean lowering the cost of rent. Consider the areas of your property you can improve.
Maintaining your property is equally important. A well-maintained rental reduces void periods and encourages tenants to stay longer, ensuring a consistent income stream.
Meeting legal requirements is essential when setting rental prices, as it not only ensures compliance and protects you as a landlord, but also enhances the attractiveness of your property to tenants. Ensure your property meets the minimum Energy Performance Certificate (EPC) rating requirements and is fully equipped with smoke alarms, gas safety certificates and electrical safety standards. Properties with higher EPC ratings, such as A or B, may attract eco-conscious tenants and justify slightly higher rents due to lower utility costs.
Beyond safety compliance, you must also consider tenant affordability and the UK rules regarding rent increases. While you can set the initial rent based on market rates, you cannot just charge what you want when increasing rent for an existing tenant. Any increase must be ‘fair and realistic’ and align with the local market. This also means checking that your potential tenants can comfortably afford the rent, which protects your income stream. Many landlords and agents use affordability calculators, such as the 30x rule, to assess this.
Online calculators claiming to show how to calculate what rent to charge might seem convenient, but they often lack accuracy. These tools use generalised data and algorithms, which means they may overlook important factors like specific property features or local demand. While they’re useful for ballpark figures, detailed research is always a better approach.
Setting the right rental price is a challenge for many landlords, especially those new to the market. At Prosperity Group, we specialise in supporting property investors by helping them understand how to calculate what rent to charge in areas like Birmingham, Nottingham and other key property investment locations across the UK.
We can advise on the best UK property investment locations, the benefits of buy-to-let in the UK, manage the entire leasing process and ensure your investment delivers maximum returns. Our team handles everything from finding tenants to maintenance, so you enjoy a steady income without the stress.
Contact us today to find out how we can support your property journey. You can call us on +44 (0) 121 237 4610, speak to us via our live chat or send us a message via the form on our contact page.
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Here are answers to some common questions landlords ask us about setting rental prices.
The best way to work out what rent to charge is to start by researching similar properties in your area, considering factors such as location, size and condition. Also take a look at any unique features that properties have such as furnishings, parking or a garden and it’s important to make sure that your price aligns with local market demand and tenant affordability. Another option is to get a valuation from a letting agent which is the most reliable method.
While there is no single ‘correct’ formula for determining the rent that you should charge, a common guideline for monthly rent is to charge between 0.8% and 1.1% of the property’s market value. For example, if your property is valued at £250,000, the rent might range from £2,000 to £2,750. However, this can vary significantly based on local yield and demand. Using comparable properties is often more accurate.
The 30x rent rule is an affordability check used by landlords and letting agents. It means the tenant’s gross annual income (before tax) should be at least 30 times the monthly rent. For example, to rent a property for £1,000 a month, the tenant would need a minimum income of £30,000 per year.
This question to ask yourself when it comes to calculate what rent you can charge is to think about tenant affordability. As a landlord, you calculate this to ensure your tenant can pay reliably. You can use the 30x rule, ask for bank statements or use a professional referencing service. Setting a rent that is affordable for your target tenant demographic reduces the risk of void periods and arrears.
For a new tenancy, you can set the rent at whatever price you and the tenant agree on, based on market demand. However, for an existing tenancy, you cannot. Rent increases must be ‘fair and realistic’ and in line with the local market. You can only increase rent once per year (on a periodic tenancy) and must give the correct notice, or you can follow a ‘rent review clause’ if one is included in the tenancy agreement.
A 5% increase can be considered fair rent increase, but it depends entirely on the context. If local market rents for similar properties have risen by 5% or more, then it is justifiable. However, if the market is flat, a 5% increase may be seen as unfair and could be challenged by the tenant. Always base your increase on comparable local properties, not just on inflation or your own rising costs.
A reasonable rent to charge reflects the property’s condition, location and the local rental market. It should be competitive enough to attract tenants while still delivering a return on your investment.
When we look at ‘what is a good ROI for a rental property’, a good return in the UK typically ranges between 5% and 10%, depending on the location and type of property. ROI is calculated by dividing the annual net rental income (after expenses) by the property’s total purchase cost, including fees and renovations. Aim for an ROI that aligns with your financial goals while factoring in market conditions and property maintenance.
A good rental yield generally falls between 5% and 8% for most UK properties, with higher yields often found in areas with lower property prices and high tenant demand, such as student housing. Balancing yield with property quality and tenant appeal ensures sustainable rental income.
You should reassess your rental price at least once a year or whenever there’s a tenancy turnover. This allows you to keep up with market trends, changes in property demand and rising costs like maintenance or utilities.
Last updated: November 2025
