By Stephanie Taylor, co-founder of Rent 2 Rent Success
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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 a property business is great in the short-term for an additional income stream, and in the longer-term it could mean a whole new career.
But to get started in property and to generate a decent income each month, you will need money—lots of money—to buy property. Right?
Wrong. You can make a good income, without ever buying a single property yourself by employing a different strategy: rent-to-rent.
We are all familiar with the idea of big corporations controlling assets rather than owning them and creating wildly profitable businesses:
- 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 control rather than ownership is how rent-to-rent works:
- 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 are 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.
Is rent-to-rent legal?
Short answer, yes. Rent-to-rent is perfectly legal when it is done with the full knowledge and consent of the owner and when the correct contracts are in place.
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 a landlord give a property to you?
Rent-to-rent aims to add value to properties, turning them from scruffy, poorly maintained properties into warm, comfortable homes. This is something the property owner may not have the time, money or energy to achieve.
HMO (house in multiple occupation) 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.
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 is going to take you a few hours a week as you will 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 will 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 have got a profit of £2,500 per month. That is £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?
For many people, subletting is code for doing something dodgy. But rent-to-rent is a wholly different proposition form horror stories of rogue landlords without properly licenced HMOs cramming three or four people into a single room.
Rent-to-rent is about finding properties that you can add value to, and that added value is what becomes a good income. 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 the basis of rent-to-rent is pretty straightforward, and you can get a property business up and running without buying any property.
ABOUT THE AUTHOR
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 2 Rent Success, our ethical 6-step system to get you started in property without buying it’ is now available.
Find out more