Over recent years rent-to-rent has exploded onto the scene when it comes to property investment strategies.
The name tells the story. You rent a property off a landlord to in turn rent it out yourself to tenants.
You might wonder why you would want to do such a thing, but there are a lot of ways to make money from these arrangements as ‘the middleman.’
Most of these strategies centre around the fact that you’re taking on the hassle of managing the property whilst the landlord who owns the property gets a guaranteed income with no work involved.
Often this rent that you will pay the landlord will be less than the market value they could make by letting the property themselves, which is their trade off for you taking on the management.
If you’ve not got the capital to buy property to let, rent-to-rent is a quick way to get into property investment with no large capital outlay required.
With no deposit, no mortgage, no conveyancing and no stamp duty to pay, it’s certainly simpler than buying. Of course, you won’t benefit from any rise in house prices if you don’t own the property, but equally you won’t suffer any dips in the market either.
Sound interesting? Here’s the four main ways to make money from rent-to-rent.
The simplest method.
You rent a single let property from the landlord to rent it out as a single let yourself. Of course, you need to make a margin here to create profitability. This involves negotiating with the landlord to take less than market rate in return for a guaranteed rent over the term of your agreement with them.
For example, if a property could rent for £800pcm, the landlord may accept £550pcm off you. Be aware though that you will still have to pay the landlord if the property sits empty and you will need to fund basic maintenance.
It goes without saying that you will make more money from a multi-let than a single let. If the landlord doesn’t have a mortgage and you have their agreement to changing the use of the property, this is a popular choice.
More work will be involved with this option as you will have more rooms, bills and tenants to manage but the extra income makes it worthwhile if you have the time. Agree upfront who will fund any refurbishment that’s needed to convert the property into an HMO.
Like with an HMO, letting the property as serviced accommodation is a great way to generate more income than a single let. Think about the average property that’s let on a short term basis on sites like Airbnb. Providing you can be on hand to manage changeovers, cleaning etc. between each let, this is a great way to maximise the rental income.
Of course, you will need to research this as a business. Is there enough demand in the area to fill the property most nights? Or at least enough of the time to generate a decent profit?
The other thing to be wary of in this situation is the property’s lease in the case of flats. Make sure that sub-letting in this way doesn’t break the terms.
It’s worth mentioning that you don’t always have to change the type of let to make money. You can make money from rent-to-rent by just doing any of the above better than a current sub-letter.
For example, perhaps a rent-to-rent deal is already in place on an HMO but it’s in poor shape. You could pick up the sub-let for a knock down fee, undertake a refurbishment, market the property better and attract better tenants willing to pay an increased rent.
Have you sourced a great rent-to-rent deal but are in two minds as to whether to take it on yourself? Another investor will pay you to source it to them.
If you want to sell the deal to another investor to generate a lump sum of cash, you’re in the right place here at Property Deal Store.
We connect property sourcers to property investors. It’s free to publish your deal on our site and we will promote it to our investors.
Find out more here – Listing Your Deal: The Sourcer’s Guide
Maybe you’re an investor looking for a great rent-to-rent deal yourself? View all our rent-to-rent listings here – rent-to-rent deals.
To find out more about our platform or Property Deal Store in general, you can call us any time on 01282 570752 or email firstname.lastname@example.org.
Yours in property,
– Janice Minihan, co-founder and director of Property Deal Store