Rent-to-Rent is an excellent strategy for making money in property when you don’t really have that much capital to begin with.
You can rent rooms from a landlord at a lower cost than the market rate then rent them out at the standard or higher rate. You then pocket the difference. It’s as simple as that and it’s all perfectly legal too, because it is not considered sub-letting ie you are being upfront with the landlord from the get-go.
A big bonus of Rent-to-Rent is that you can rent out rooms but don’t need to take out a mortgage (which is why you don’t need a lot of money upfront to begin with). There is no legal fees either, since the arrangement is between you and the property owner (landlord).
You are doing the landlord a favour
The reason the property owner has agreed to rent you the property at a lower rate in the first place is because you will take care of the maintenance and other admin duties necessary when renting out property. Not only that, but you can also guarantee them rental income every month. In other words, the landlord can wash their hands of the responsibility of renting out rooms, but still benefit from a regular rental income every month.
This Rent-to-Rent strategy is particularly suitable for HMOs and Serviced Apartments. Both are in high demand – the first by students, in particular, and the second by business professionals and holiday makers.
Rent-to-Rent and HMOs
There are no doubt a number of under-performing HMOs near where you live (especially if you are in a city with university and college educational opportunities). It’s a case of finding out which landlords have lost interest or don’t have the time and offering to do the managing for them.
At the same time, you can redecorate or refurbish the rooms to a higher standard – perhaps you can even add an additional room – then charge more to rent out the rooms. In this scenario, you will need a certain amount of money upfront, but over a series of months you will recoup that initial expense.
An alternative HMO strategy is to take a three-bed house, turn the sitting room into another bedroom and operate it as a four-bedroom HMO.
Rent-to-Rent and Serviced Accommodation
Serviced Accommodation is a fully furnished flat or apartment where there are amenities such as cooking facilities, TV and en-suite bathroom etc. Often there is a concierge, cleaning and laundry facilities.
This tends to be for short-stays and lets but the cost per night to rent is higher than that of a traditional buy to let. These are usually located in city centres where there is plenty of entertainment around such as restaurants, bars and cinemas.
The drawback of both strategies is that they take time. But then, the profits will be higher, because you are putting in more work and effort too.
One way you can avoid the time and effort is to sell the opportunity as a packaged deal to other investors keen to get in on property investing.
3 tips to maximise profits
1. If you have existing tenants then set up a referral scheme, where they benefit for getting a friend to rent a room in your HMO. In this way, you’ll less likely to have empty rooms.
2. For Serviced Apartments, make yourself known to all the major companies in the locale. That way, they’ll know where to potentially house visiting colleagues.
3. If you have a student HMO then get in touch with all the local colleges and universities to advertise on their website. Don’t just leave it up to online portals such as Gumtree or local newsagents windows.
Learn Rent-to-Rent Strategies with Sourced
At Sourced, we provide a Rent-to-Rent training course, which is complemented by ongoing support. We teach our franchisees everything they need to know to get started and then offer them help and guidance to make sure they succeed. Get in touch with the Soured team to find out more today.