What Is A Rent To Rent Business?

Nikka Sulton

What Is A Rent To Rent Business?

Explore a unique avenue into property investment with rent to rent, debunking the myth that substantial capital is the sole entry requirement. Contrary to the negative connotations of subletting, rent to rent seeks to bring value to properties, revitalizing neglected spaces into comfortable homes. This model, originally prominent in commercial leasing, has evolved for residential landlords, offering a legal and ethical approach.

Concerned about its legitimacy? Rest assured, as rent to rent, when conducted with the owner’s full knowledge and consent, supported by proper contracts, is acknowledged by reputable entities such as the UK government’s Property Ombudsman and the Property Redress Scheme (PRS). This recognition solidifies rent to rent as a credible and lawful pathway into property investment.

How does rent to rent work?

The rent to rent process involves four key steps. Initially, you enter into an agreement to rent a property for a period, typically ranging from three to five years. Subsequently, you commit to paying the property owner or letting agent a guaranteed rent, assuming responsibility for bills, mirroring the obligations of a standard tenant.

Following this, you enhance the property’s quality before renting it out to tenants at a higher rate than your agreed payment to the owner. The profit for your business is derived from the difference between the rent received from tenants and the rent paid to the property owner or letting agent, factoring in property running costs. The success of this approach hinges on identifying properties with potential for value addition, a crucial element in generating substantial income.

Why would a landlord give a property to me?

Understanding the rent to rent concept is one thing, but convincing landlords and letting agents to entrust their property to you can pose a challenge for many. However, the key lies in showcasing the unique benefits you bring to the table. HMO landlords and letting agents often face issues that you, as a rent to rent operator, can adeptly address.

Your proposition revolves around solving their problems: ensuring timely rent payments and meticulous property maintenance. Unlike high street letting agents managing numerous properties, you can provide a more personalized and focused service with a smaller portfolio. By articulating your solution effectively, you become an irresistible option for landlords and letting agents, assuring them of your commitment to maintaining the property, delivering excellent service to tenants, and ensuring punctual receipt of rental income every month.

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

Initially, expect to invest a few hours weekly in tasks like furniture rearrangement and property improvements. As you establish your setup, the time commitment will likely decrease to a few hours per month, primarily dedicated to maintaining the property’s appearance and ensuring tenant satisfaction.

With a portfolio of five rent to rent properties, you might allocate approximately 15-20 hours monthly for maintenance. Despite this relatively modest time investment, the potential financial return is substantial. Assuming an average profit of £500 per property after accounting for bills and running costs, your monthly profit could reach £2,500. This translates to an annual profit of £30,000, offering a lucrative income while requiring less than a 40-hour workweek and simultaneously allowing you to establish a noteworthy presence in the property sector.

Is rent to rent legal?

Rent to rent is a legal business model that has roots in commercial property leasing, and its adaptation to residential property allows landlords to enjoy similar guarantees as commercial counterparts. Commercial leases, dating back for centuries, grant tenants the right to sub-let properties, forming the basis for the rent to rent model. Notably, Northwood, the UK’s largest guaranteed rent letting agent, operates successfully using this approach with over 85 offices.

The misconception about rent to rent legality often stems from negative associations with subletting, which can sometimes be done illegally without the property owner’s knowledge. However, rent to rent is legal and ethical when conducted with the owner’s full consent and proper contractual arrangements. This distinction is crucial, and reputable agencies, including Northwood, adhere to these principles in their operations, emphasizing transparency and legality in the rent to rent process.