RENT TO RENT GUIDE

Updated: May 8


Hey guys hope you are good now today we are going to look at the rent to rent strategy

and here is a guide to rent to rent that will be broken down into a 3 parts

as you might already know its one of the most profitable strategies in property and certainly the most talked-about

so we are going to address some questions and misconceptions surrounding the topic

such as is rent to rent even legal and is rent to rent even for me

well let's find out


so let's get started


WHAT IS RENT-TO-RENT?


Well the clue can certainly be found in the name

you rent a property from a landlord and then you rent it out to tenants

as if you owned the property yourself


you negotiate a guaranteed monthly rent to give to the landlord that needs to be lower than the rent you can charge to your tenants

and you keep the profit in-between

you get all the benefits of controlling the asset without the hassle of actually purchasing the property

The landlord is happy because they have the guaranteed rent, without any management fees or the hassle of dealing with tenants directly giving them a hands-off investment that is a very enticing proposition to a time-poor landlord

your also happy because you're making a nice monthly profit from a property you don't even own

creating a win-win situation for you and the landlord that can lead to many more opportunities in the future such as taking on more property's from the landlord or even when the landlord tells his friends and family about the great benefits you are offering and then, in turn, being offered more property's from the people who the landlord knows



SO WHAT ARE THE BENEFITS OF RENT-TO-RENT


Rent to rent is a great strategy but its not suitable for everyone

you need time to locate and stack deals you also need the correct training and contracts to undertake the strategy

but here are the benefits

you don't need a mortgage or the perfect credit score

because you’re not buying the property you’re just renting it. That means you don’t need to worry about getting mortgages and finding massive deposits

Now, mortgages can be brilliant: leverage is one of the best things about investing in property.

But if you cannot get a mortgage because of a low income or you don't own your own home or simply your credit score is bad because of a few missed payments of an old mobile phone contract you had when you were 17 etc there are many things that can halt a mortgage application going through

rent to rent simply bypasses the need to use mortgages all together

THERE IS ALSO NO NEED FOR A 25-50K DEPOSIT

To purchase a property in the UK for 100k you will need at least a 25k deposit then you have legal fees, and stamp duty fees so realistic you want 30k in your bank to make your first small investment property purchase

that will most likely be a single let as mortgage companies don't like to lend money to first-time landlords to do HMOs of serviced accommodation

so for your 30k investment, you're most likely to make between 3-400 pounds per month

but with just a 5k investment into rent to rent will most likely see you make a monthly profit of 5-700 pounds per month

so you will need a bit of money however as the average rent to rent deal we have done costs around 5k but we generally have made this back within 6-9 months of taking the deal on

and the speed you can get a deal over the line is very fast as we are not waiting for mortgage companies, land registry searches, conveyancing etc that can sometimes take 6 months for a property purchase to go through

we can collect keys in as little as a week

so if its speed you're looking for because you are desperate to quit that 9-5 then rent to rent is certainly worth considering

so all in all rent to rent can be a quick and effective way at entering the property market as an investor without all the hassle of mortgages, stamp duty, large deposits, and lengthy conveyancing


SO WHAT ABOUT THE LANDLORD?


We’ve touched on this a little bit already, but it's worth being crystal clear on this as this is how you're going to secure the deal from them in the first place as they are simply going to ask you well how does this benefit me

1 the main advantage is the guaranteed rent from one single source you

2 hassle-free for up to 5 years with no management fees or having to deal with tenants phoning them at 3 in the morning because the Wi-Fi stopped working


They won’t have to worry about:

  • Void periods Maintenance issues

  • chasing tenants for rent

  • management fees

  • TV and broadband bills

even if the landlord handed the property to a management company they won't cover void periods or deal with bills or any maintenance

giving the property to you enables a hands-off investment to the landlord yes you will pay them less than if they were to do all the work you're going to be doing but 9 times out of 10 they don't have your vision, time, or training to spot the full potential of the property

this is the end of part one of our guides to rent to rent we will be doing part 2 hopefully tomorrow

I hope you all enjoyed watching have a great day and enjoy the weather



WHAT ARE THE DRAWBACKS OF RENT-TO-RENT



So if you have limited funds and time but you still want to get into property investing rent to rent is great but its important to understand that there can also be drawbacks to you yourself the rent to renter


and a big one is


YOU DON'T BENEFIT NO CAPITAL GROWTH


This is can be massive but it's certainly not a guaranteed property prices on a whole generally increase in value year after year it been proven throughout history yes we have dips and recessions but a general rule of thumb is that property increases in value fact

so it will be the landlord that will get this benefit and not you as you are only renting the property

you could make say £500 per month over 5 years that's 30k

now let's say the property you rent is worth 250k and the value increases by 10% in the 5 years the landlord will make a quick 25k without doing anything and 10% is being modest it could be even 20% over 5 years

so if you have the funds in order to purchase the property yourself its always far better to do so but if you don't have a 62k deposit to purchase the 250k house then rent to rent is the best way

saving all your rent to rent income can be a great way to get the deposit together for the future

It certainly worked for us and it can for you


YOU’RE ALSO EXPOSED TO ALL THE RISKS OF PROPERTY OWNERSHIP


Such as having to pay the landlord for any void periods

small maintenance issues and all the bills relating to the property

regardless of if you have any rental income coming in or not so you are exposed to some degree of risk

but without risk comes no reward!



YOU DON’T HAVE FULL CONTROL OF THE PROPERTY


So paying the landlord effectively becomes like paying a large mortgage payment

that would probably be halved or less if you had an actual mortgage

and ultimately you don't have full control so if the landlord wanted to stop the agreement they could and then if they defaulted on the mortgage on the property you could get the property repossessed without you having any say in the matter

things like this don't normally go wrong but there is always the small chance

and we think you should be made aware of


NOW HOW DO WE MAKE A PROFIT FROM RENT TO RENT


As we touched upon before first of all we rent a property we then rent it on to tenants for a higher amount than what we pay the landlord but there are 3 main ways we can do this

and some are more profitable than others we generally stick to rent to HMO or rent to SA


FIRST IS SINGLE SINGLE LET,


So I would say this is the least profitable of the 3

so we simply rent a standard house from an existing landlord we negotiate a great fixed rent on the house for say 3-5 years lets say the market rent is 1000per month and we negotiate rent with him for £750 we then rent it out at current market rent of £1000 and claim a monthly profit of £250

but we have to be careful because with any void periods or missed payments you can soon find that small profit you made is eaten away very quickly

this is by far the quickest and simplest of the strategies


2: RENT TO HMO


Here there are 2 options we can find a standard 3-bed property and then convert it into an HMO by using one of the downstairs reception rooms into a bedroom

where a normal 3 bed would only rent for say £700

you could negotiate a fixed rent with the landlord of say £600

you could then start collecting rent from 4 tenants @ 400pm

giving you a total income of £1600 leaving you with a monthly profit after expenses of around £700-£800

but this strategy you will need t let the landlord know what you intend to do with the property and also do it within an area that has no article 4 in place which is a planning restriction imposed by the council that removes the right for you to use the property as an HMO

  • bear in mind that you are going to have to pay all the bills that are associated with running an HMO And you will have to have the property fully occupied to make a good profit

  • There are also setup charges involved in converting a property into an HMO such as internal layout changes, fire doors, wired smoke alarms ect this will normally cost you around 5k to get this done

  • If the landlord has a mortgage, he will need to check with the lender to see if it OK to use the property as an HMO

after looking at all the negatives this still stands as a very popular and profitable way to undertake the strategy


The second variation is the most popular and the most profitable of 2

this is where we target run-down student properties close to city centers university and hospitals

these properties will of taken a battering over the years and will always need some form of updating

this it where the landlord gets to the point where he needs to do work in order to secure a further booking and more often than not they simply don't have the time to do so

so often they sit empty for a few months with no students at all wanting to move into the property and when the landlord misses the academic year he is stuck with an empty property and ongoing bills so his once asset quickly becomes a liability

this is where we come in we spot these properties and offer the landlord a guaranteed rent with no aggro of finding tenants and even conduct an uplift on the property landlords love it because that once dingy house will now have a new lease of life and become a nice cash-flowing asset once again and it's totally hands-off for them

we love this strategy and its great to find a win-win situation for us and the landlord

this is more profitable than the previous variation of the strategy and there is no worrying about licensing restrictions or article 4 zones or even the montage company's

because its already licensed property with all the HMO specifications already in place

yes we will need to spend a bit on the initial set up but because these larger properties having more rooms the profit margins can be very healthy

these deals typically take between 5-10k to set up depending on the size and amount of bedrooms in the property


3: SERVICED ACCOMMODATION


Serviced accommodation is very similar to the single let strategy but instead of renting it out for years at a time to 1 tenant we rent the property to holidaymakers and workers ect on a nightly basis like a mini-hotel

but that's where the similarities end we need to provide additional services such as housekeeping cleaning fresh linen and towels just like what you find in a hotel

it also has to be fully furnished to a great standard

so the setup costs need to be controlled and can easily eat up a 6k budget in a 2-bed apartment

we then have the ongoing management of the property some people look at running a SA as a whole job in itself

you have to manage the guest check in check out

advertise the property constantly

and make sure it's not rented out to the local gang of youths that can use the property as a party pad for the night and trash the place

all this aside it can make for a great strategy that can prove to be very profitable a personally know of a few people who strictly focus on this and do very well indeed

there are a couple of things you need to check before entering into a serviced accommodation property

it has to have an appealing location to workers and travel makers alike

you need to establish a cleaning team in the area who are used to dealing with a serviced accommodation units

establish a safe place for the keys to be collected for the new arrivals or you will have to check people in and out of the property yourself (that's no fun if you not in the area or if they arrive at 3 in the morning because of a delayed flight or some other excuse yes trust me it does happen )

so it's all about being able to systematize your systems

checks also need to be made with the mortgage company to make sure its OK to do short lets

then there is also the apartment building itself if the property is leasehold a lot of apartment managers won't allow short lets

so make sure you correctly do your due diligence

we nearly took on one deal ourselves in a new build apartment block in a nice spot in the city center agreed with the owner and the block manager established a cleaning team in the area checked the demand all was good to go then just as we were about to sign the apartment block manager said that I would have to personally or someone from our team would have to personally check everyone in and out

this was a total deal-breaker for us right at the last minute but sometimes you just need to learn to walk away

as it was a 12mile drive for us and we have a crazy schedule as it is without the added responsibility of checking guests in and out some might have been OK with this be we ultimately had to walk away

So that's the end of part 2 of our rent to rent guide I hope this hasn't deterred you from the exciting world of rent to rent but it's always best to tell the full story rather than hide facts and paint the perfect picture

I hope you have enjoyed and found this video useful catch up with us tomorrow for the final part of our guide

have a great evening

part 3

hey Guys welcome back this is the 3rd and final part of our rent to rent a guide and today we are going to look at a few more of the bonuses that rent to rent has to offer also ways to secure rent to rent deals

so as we spoke in part2 about the three different ways you can do rent to rent we also have another option to make cash from rent to rent without actually doing a rent to rent and that's to simply sell the deal on to another investor


say you find a deal that makes 4-600 pounds profit per month, do you think someone else would pay you to pass that deal to them? Yes Of course they would!

This is what we call deal sourcing

but you need to make the decision do you want the monthly cash flow from the property for yourself or do you just want to make a quick buck and sell the deal on and keep looking for others this is effectively what deal sources do

but when a great deal comes along they usually keep it for themselves

how do we find these rent to rent deals



Rent-to-rent can be a great win-win situation and a profitable one for us and the landlord

but not all landlords are going to be interested and it doesn't suit them all a lot are happy as they are or using a letting agent because that's all they know and this new rent to rent deal you have proposed sometimes seems too good to be true for them and a lot of letting agents just don't understand

you will hear a lot more oh no thanks it's not for me or the letting agent says oh no we don't deal with the company lets

but that is just their loss and they will soon realize that we provide a great service

but don't let this deter you this is where we need to be persistent go direct to the vendor and use smaller letting agents who understand what you do

yes its hard work and you have to put in the leg work and time but once you secure one deal it soon opens the door to many many more deals


there are many ways to find rent to rent deals and here are a few for you


THE DREADED LETTING AGENTS


This is by far the easiest way to find landlords they are full of them they deal with landlords day in and day out

and the properties they have are easily found online

just one problem the agent has no interest in working with you or has a company policy that doesn't let them

it's all excuses because they don't understand

they are set in their ways and like to do things the traditional way

they always seem to think you are trying to cut them out of the deal

this is not the case it actually is a whole lot easier for the agent to just hand all their properties to us but they just can't see it yet

being successful in this method requires building rapport with the agents and relationships because once hearing you out and think about it there is always the possibility they will put your offer forward to the landlord

just make sure they understand that they will still get their fee and also the ongoing fee from the landlord for managing the property when the agents finally realize they are actually still getting paid just to do less work they should be happy and their ears will soon prick up

you just need to get them to understand your model



FREE LISTINGS


Then there are free listings you can simply cut out the need for the agent by advertising directly to the landlords the ways that work best are Facebook groups, Gumtree, and the local paper you just have to get your point across guaranteed rent, no void periods, no hassle. you’ll have lots of competition so get creative in order to get someone to call you.



DIRECT TO VENDOR MAIL


Going directly to the vendor will always be the most effective way to secure deals as long as you know how to explain the benefits to them

but how do we know who to send the letters to


  • Getting a list from the local council who owns all the HMOs in the area and send them a letter

  • Find properties listed for rent on Right move and Zoopla, and send letters to the properties that suit your criteria

  • Go to roads that are popular for HMOs and target them

  • We also use the land registry to search for the owners of the HMOs and send them letters to within all our coaching packs, we send you a letter template to use to undertake this for yourself




HOW DO WE ANALYSE A RENT-TO-RENT DEAL



So all your hard work has paid off and you have a potential deal how do we now know if the deal is any good

how much we can offer the landlord

we have a tried and tested system for this that is thoroughly gone through in our mentorship packages but these are the main things you're looking for

IS THERE DEMAND IN THAT AREA


One of the reasons the landlord wants you to take on the property is because he can not find anyone to go in the property and it could have been empty for some while


so there are a number of sites we use to get an accurate measure of if there is enough demand for the area


one of the best sites to use is spareroom.co.uk

you also want to call agents that manage HMOs in the area to see how they are finding renting out rooms

if it's a SA unit you want to pop into local hotels and ask them what their occupancy rates are like say your doing a survey and just want to find out you would be surprised just how much they tell you just from asking

HOW MUCH RENT CAN I CHARGE


If it’s a single let that's easy to check Zoopla or Rightmove for close by rental properties with the same amount of bedrooms and like for like houses

For HMOs you need to do this on a room by room basis check the compatible property's in the are using spare room again also look in the newly listed ads from people looking to go into house shares bear in mind that en-suit rooms get a bit extra and single rooms are cheaper than doubles you also want to be comparing like for like property's such as the condition of the house and standard of accommodation

HOW TO WORK OUT YOUR INCOME



We have designed our very own property deal calculator you simply input the relevant data and out pops everything your going to need to assess the deal this again is included with all of our training programs

here is an example of how to work our a rent to rent HMO would look like

rent to landlord £800

rent per room £450 per month

total monthly income of £450×5= £2250

£2250-£800= £1450

now we need to deduct the bills

cleaner twice a month £65

council tax £110

Gas electric and water £300

voids £200

maintenance £150

with all being deducted we are left with

£625 per month


now you can quickly work out how long it will take to get your initial investment back say if you have estimated the cost of making this house into a lovely new HMO at £6000

just simply divide 6000×625 so your initial investment by your monthly profit that's in this quick example 9.6 months

so by the time you're in your 10th month, you will have all your initial investment back and be making a pure profit from then on out not bad from a property you don't even own

this is why we secure deals for a minimum of 3 years this enables us to make a good amount of profits



SECURING THE DEAL


There's one thing left now you finally have a deal nearing completion you have the perfect deal and the landlord is happy to proceed and has accepted your offer this is where your hands start sweating and you question all the calculations you have done your just about to sign the deal and you don't want the deal to fall through at the last minute

this is where you need to stay calm and not become a pushover and agree to last-minute amendments from the landlord stay strong and stay calm and stick to the plan remember to be fair in your agreements with the landlord and they will be fair with you and this will harbor a long-lasting deal and relationship between you both and hopefully lead to many more opportunity opening up in the future as the landlord will recommend you to all his friends and family


WELL, WHO PAYS FOR WHAT?


In your initial conversations with the landlord, you will have to agree on who pays for what

we normally contribute between £150 - £200 per month to cover small maintenance projects

and we will also conduct an uplift on the property but ultimately

its the landlord's property and we have to draw the line somewhere

for example, we are happy to replace taps and a few tiles here and there but we won't do a complete refit on their kitchen and bathroom the install the latest combination boilers just to take on a deal

so we negotiate with them where the line is drawn

we have a set amount we put aside for maintenance but if it exceeds the landlord will have to contribute

and if the house needs a new kitchen and bathroom we can say that we will contribute a percentage to the cost and we will also arrange for the work to be carried out on their behalf so the landlord doesn't need to worry about project managing or anything

the pitch becomes ever so more appealing to the landlord that ultimately having all this done is going to increase the value of their property and they get to benefit from the capital uplift

you need to be firm but fair with the landlord in your negotiations and get everything in writing so there is no confusion around who pays for what during the uplift or throughout the contract

(this is probably the lifeline the landlord has been waiting for )


HOW LONG IS THE AGREEMENT?


How long shall I set up the agreement for is always best to do a minimum agreement for 3 years as this gives you enough time to make some great cash flow but we recommend getting the deal for as long as possible because you then have even more time to make monthly cash flow within

and don't forget it can take 6-9 months to recover all investment costs along with the time it took you to set up the agreement

we do however have things written into our contracts to allow us to hand back the property with 3 months' notice if you feel the deal is not working out as an insurance policy or get out of jail card

the landlord may wish to sell the property after say 2 years so we also have a reimbursement policy that states the landlord must contribute to the funds we put in to set up the property and they also need to provide us with 6-month notice in order to allow our tenants to find alternative accommodation

so conclusion try to negotiate as long as possible to maximize your returns and the property can always be handed back with 3 months' notice if things go wrong (touch wood not had any major issues to date)


WHAT TYPE OF AGREEMENT?


So what type of agreement do we use for rent to rent well the agreement we use comes from the commercial sector and has been used for decades its nothing new and originated in America and is called a company let agreement or a commercial lease

but it's now simply being used in the residential sector and has been used in the UK for at least the last 20 years

most agents haven't heard of it because they only deal with one type of agreement that's called AST a shorthold tenancy agreement

that is an agreement between the landlord and the tenant

where a company let agreement is a contract between a landlord and a company to manage on there behalf

that then enables the company in charge of managing the property to issue AST agreements to the tenants they take on

all contracts you need to undertake rent to rent are included with any of our mentorship packages these are contracts used by us and many of our students all contracts need to be amended to suit your current projects and type of situation and then checked over by your solicitor before you sign as it is important you get it right

.


THE FINAL CONCLUSION


So after many hours of typing and thought we are now at the end of the guide so what's the decision we have looked at the good points the bad points and the strategy as a whole


1: It's a fantastic way to get your foot in the door to the fantastic world of property investing and quickly generates great monthly cash flow

2: there is no need for massive deposits or having to risk too much capital

3: The benefits of rent to rent clearly outweigh the negatives and in life without risk comes no reward

4:yes there are some negatives but there are negatives with everything you do in life we believe its only fair you get to see both sides to the story before you take action so what are you waiting for stop sitting on the fence procrastinating the bad points and go for it then thank us later

rent-to-rent might just be the initial start in the world of property investing you’ve been looking for


SO HOW DO YOU GET STARTED?


To start your new journey in rent to rent simply take action immerse yourself in the subject by reading then find yourself a suitable mentor who can clearly guide you through the whole process from setting up your company right through to settling in your new tenants

you can easily get bogged down with too much free information and not know what to do it and end up doing nothing at all its called analysis paralysis

so if you are serious about getting started in rent to rent or just want to have a friendly chat to find out more please book a free strategy call today and we would be happy to assist you moving forward


have a great day and thanks for reading!


357 views0 comments