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Loading...By Stephanie Taylor, co-founder of Rent 2 Rent Success
Airbnb is the world’s largest accommodation provider. Airbnb owns no property. Facebook is the world’s most popular media company. Facebook creates no content. Uber is the world’s largest taxi firm. Uber owns no cars. Big corporations create wildly profitable businesses by controlling assets rather than owning them. And this is a strategy you can use too.
Most people think that to get started in property, and generate a decent income each month they need to buy a lot of properties.
And to do that they need money. Lots of money.
But this isn’t true. Rent-to-rent means you don’t need a huge financial investment to get started.
Image: Pixabay
How does Rent-to-rent work?
- You sign an agreement to rent a property, usually for a term of three to five years;
- You pay the owner or letting agent a guaranteed rent and usually, you take on paying the bills, just like a normal tenant;
- You improve the quality of the rental property before renting it out to tenants for a higher rent than you’re paying the owner;
- 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, the ‘trick’ is finding properties that you can add value to so that you can earn a good income from managed properties.
Is it legal?
You may have heard awful stories of rogue landlords without properly licensed HMOs (house in multiple occupation) cramming in people three or four people per room. In your mind, subletting may be code for something dodgy.
But 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.
What is in it for property owners?
The ‘secret’ is that 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 specialized 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?
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. But rent-to-rent is a way to get started in property and decide if it’s a model you want to build on or use as a stepping stone to a more traditional property strategy.
Stephanie Taylor is co-founder of HMO Heaven and Rent 2 Rent Success. Stephanie launched Rent 2 Rent Success to help professionals who want to get involved in property, but feel stuck as they’re worried they don’t have enough time, money or knowledge to get started.
Through her inspirational Rent 2 Rent Success YouTube channel, podcast, and website, Stephanie debunks the myth that you need large sums of money to get started in property.
Her book, Rent to Rent Success – Our ethical 6-step system to get started in property without buying it is available now.
The views and opinions expressed in this blog post or content are those of the authors or the interviewees and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.
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