photo -Kamila Jarczak Photography
If you think you need lots of money to start making money from property, think again. You don't need to buy property and make a good income from property. You need to add value to someone else's property. And here's how you do it.
Rent-to-rent works like this:
1.You sign an agreement to rent a property, usually for a term of three-to-five years;
2.You pay the owner or letting agent a guaranteed rent and usually you take on paying the bills, just like a normal tenant;
3.You improve the quality of the rental property before renting it out to tenants for a higher rent than you're paying the owner;
4.The difference between the rent you receive from tenants and the rent you pay the owner or letting agent after the property running costs is the profit that you make for your business.
While the basis of rent-to-rent is pretty straightforward, it's finding properties that you can add value to that will earn you a good income from managed properties.
Is rent-to-rent legal?
Many people think that subletting is code for something dodgy. While there have been a lot of terrible tales of people profiteering from overcrowding properties, these rogue landlords often don't have properly licenced HMOs (house in multiple occupation), meaning the property may be unsafe for more than two people, yet they are cramming three or four people per room. Rent-to-rent is a very different proposition.
Rather than taking advantage of people, rent-to-rent aims to add value to properties, turning them from scruffy, poorly-maintained properties into warm, comfortable homes ─ something the property owner may not have the time, money or energy to achieve.
The model has actually been around for a long time when it comes to commercial property. Commercial leases are long-term ‘full repairing and insuring' leases, where the tenant takes on all the costs of repairing and insuring the property. Now the model has been adapted for residential landlords.
So, rent-to-rent is perfectly legal when it's done with the full knowledge and consent of the owner and when the correct contracts are in place.
Why would a landlord give a property to you?
HMO landlords and letting agents have problems, and you can solve those problems. Landlords and letting agents want the rent paid on time and the property looked after. And these are things you can offer in a more specialised and focused way than a high street letting agent. For example, where a high street letting agent may have hundreds of properties, you will start off with one so can provide a more individual service.
When you learn how to describe your solution effectively, you become an irresistible option to your perfect customers. They know you can be relied on to keep the property in good condition, provide a good service to your tenants, and that they will receive their rental income on time every month.
What is the time and effort commitment?
In the beginning, it's going to take you a few hours a week as you'll be moving furniture around and completing improvements within the properties you manage. Once you get set up, it will probably take you a few hours a month to keep the property looking nice and the tenants happy.
If you have, say, five rent-to-rent properties in your portfolio, you'll spend around 15-20 hours a month on maintenance. Even with an average profit of £500 per month, per property, after bills and running costs, you've got a profit of £2,500 per month. That's £30,000 a year for working a lot less than 40 hours a week while building your profile in the property world.
Is rent-to-rent right for you?
There are two ways you can make rent-to-rent work for you. One is creating a brand new career path. The other is providing a safety net.
The events of 2020 mean many of us have started to question our old ways of thinking. It was always seen as ‘normal' and ‘safe' to rely entirely on one source of income. Yet so many of us have found that the ‘safety' of our role is not what we thought.
Having your own rent-to-rent business is great in the short-term for an additional income stream, and in the longer-term it's a good first step to buying your own investment property. Of course, rent-to-rent comes with risks. You need to ensure that you understand it fully and your business is legal and compliant.
It can seem like a huge leap of faith to set out to make money from something you don't own, but it has been done many times before: Uber, the world's largest taxi firm, owns no cars; Facebook, the world's most popular media company, creates no content; Airbnb, the world's largest accommodation provider, owns no property.
For further information visit Rent 2 Rent Success
