Why you don’t need deep pockets to start a property business

Making money from something you don’t own is not a new concept. 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. And owning no property changed my life.

 

By employing the rent-to-rent strategy, my sister and I have attracted contracts worth over £2m, escaped our jobs and built a team.

 

How does rent-to-rent work?

  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.

 

But is it legal?

The short answer is yes, 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.

There have some terrible stories of people profiteering from overcrowding properties, with rogue landlords not having properly licenced HMOs (house in multiple occupation) and cramming three or four people into a single 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.

 

Why would an owner give a property to you to manage?

HMO landlords and letting agents have problems that you can solve. Landlords and letting agents want the rent to be paid on time and for the property to be 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.

 

How much time and effort does it take to be a rent-to-rent landlord?

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?

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.

Ultimately, if you’d like to get started in property without buying one and create the cashflow you need to have more freedom in your life, rent-to-rent is worth looking into and may be the perfect choice for you.

 

 

ABOUT THE AUTHOR

Stephanie Taylor is co-founder of HMO Heaven and Rent 2 Rent Success.

https://rent2rentsuccess.com

 

Find out more

  1. Learn about Rent-to-rent from the government’s property ombudsman The Property Redress Scheme
  2. Find out how to do rent-to-rent ethically with the Free Rent 2 Rent Success Guide and Masterclass
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