Some of you may be thinking “What exactly is rent-to-rent?”!? Well, the clue is in the name! Let’s begin by being clear on what rent-to-rent involves
Rent-to-Rent (also known as Guaranteed Rent) is where a company takes control of a property for a period of time from a landlord and guarantees to pay a fixed rent to the landlord. The landlord gives consent to the company to then rent their property to other tenants.
Essentially, Rent to rent is:
A company, renting out a property from a landlord to then rent out to a tenant.
Why do landlords choose to use a Rent-to-Rent company rather than a traditional letting agent?
The main benefit to the landlord is that their rental income is guaranteed and this is regardless of whether the tenant(s) pay the rent or not. The company will also take care of any maintenance and damage. It is their responsibility to return the property to the landlord in the same condition as when they took it. All these benefits give the landlord peace of mind and security.
The landlord would not incur any letting, management or renewal fees. The landlord could also request an extended contract providing more long term security for the landlord and company as well.
Rent to rent is fantastic for landlords who do not want to have the headaches associated with tenants.
How to reduce your risk?
With Rent-to-Rent, there are risks; you need to cover maintenance costs, legally you need to ensure your contract allows you to rent out to other tenants, the landlord’s mortgage and insurance policy might have restrictions and finally, you have to be able to pay the guaranteed rent!
As with any change in your property investing strategy, the essential thing to bear in mind is your due diligence. While no one would deny the attraction of what appears to be a low money down deal, it is vital to fully perform checks on all areas of the deal to ensure that yourself and the landlord are protected.
If you think that rent-to-rent may be for you, then there are many resources online that you can research from. These can include both positives and negatives of the strategy, and you should pay careful attention to both. Here are some top things to remember when researching a rent to rent property deal:
- Does the contract allow you to rent the property out?
- Are there any restrictions on the mortgage?
- Will an HMO work in this area?
- If SA, are there any restrictions on the head lease?
We hope you found this blog useful and will be bringing more information to your inboxes about other property strategies in the coming weeks.
Have a wonderful and productive week!