Rent 2 Rent Deal Analysis - Don't Get Ripped Off!
What to check for if you’re offered a Rent to Rent Deal by a Deal Sourcer
Everything you need to know BEFORE you buy that deal!
Hello, hello, hello!
It’s so good to talk to you about this.
I’m so fed up of seeing people gettting ripped off on rent to rent deals that just will not work!
Rent to rent IS an amazing strategy.
The results are life-changing.
And I want to make sure you have everything you need to be successful.
So we’ve made the exact Rent to Rent Deal Analyser that we use available to you free so that you can get it right first time.
We've had to so much controversy this week because a Rent 2 Rent deal was posted in a group and I jumped on it and said, "these figures are rubbish." They're actually misleading.
I think the sourcer was saying the deal would generate £900 profit.
What I've done in this video is put the figures into our Rent to Rent Deal Analyser actual spreadsheet to show you the simple process that you can use to assess any deal and make sure that works for you.
It's THE way not to get ripped off.
If you’re unsure how to analyse a rent to rent deal.
Whatever you do, don’t guess!
That’s a recipe for disaster.
Use our Rent to Rent Deal Analyser to ensure you get it right.
Watch the video to see the Deal Analyser in action.
What to check for when analysing a rent to rent deal from a deal sourcer
Rental Income
Often the rent in from tenants will be exaggerated.
Check Spareroom for properties in a similar location and quality.
Note the lowest and highest rents.
Remember that the highest rents might not be achieved.
What you want for a forecast is a rent you can easily achieve for the quality and location of room.
If you can achieve more, it’s a bonus.
Council Tax & Utility Bills for HMOs
Make sure the bills are all included and the amounts included are realistic.
The bills you need to include, if you are paying for them, are:
council tax, gas, electricity, water and wifi
How much should I allow for bills in an HMO?
A broad brush, quick and dirty approach is to allow £100 per room per month for Council Tax and utility bills.
Before actually offering though, it’s wise to do a more detailed analysis of the deal.
You can ask the owner what these bills are and also do your own research. Sites such as Zoopla will show you previous sale prices of UK properties and also running costs for gas, electricity and broadband.
We allow a flat rate for gas and electricity based on experience of energy useage, which I detail below.
Council Tax
You can find the Council Tax for a UK property online from your local authority. This enables you to include the exact figure for a specific property.
Gas
Where there is gas central heating and double glazing in a 4 to 6 bedroom HMO we know the utility cost will come in at under £75 per month in our area.
However, for bigger properties or properties which do not have central heating or double glazing we know the figure will be higher.
Electricity
We allow £75 per month as we know that currently the bills in a typical 4 to 6 bedroom HMO we come in under that.
Water
You can find the exact water rates for a UK property online from your local water company. This enables you to include the exact figure for a specific property.
If it’s a metered property. Beware! Metered water costs for HMOs can be very high. This could kill your profit. Ensure you make allowance for this on basis of evidence.
Wifi
We use Virgin Broadband and it costs £XX
TV licence
We supply one TV in the lounge and buy the licence for that at £13 per month. If you supply TVs in bedrooms you’ll need to ensure these are licenced too.
Also consider whether a business TV licence would be more cost effective.
Check for the costs that deal sourcers often don’t include
Their fee!
This is a cost of the deal and when calculating how long it’ll take to get a return on your investment you need to factor this in.
I’ve heard of loss-making deals being sold for £5,000!
It really is appalling.
Deposit
We negotiate to not paying deposits but sometimes it will be a requirement, especially if you are new in business.
If you are investing in the property too, do negotiate for zero deposit as you’re putting money in. You can try offering 2 months’ rent in advance. So you start paying rent again in month 3. It means your money is locked up for 2 months instead of many years.
Refurbishment
Always ensure you take the refurb into account with realistic figures.
And don’t forget to ask the owner to pay. Many people don’t ask and many owners are willing to pay!
Cleaning
Cleaning is very important in HMOs and is especially important in rent to rent HMOs. When you’re guaranteeing the rent you want it to be as simple as possible to rent your rooms consistently.
And a clean well-managed property is one of the best ways to do this.
We have 1.5-2hours per fortnight at £12 per hour which equates to £52 per month.
Gardening
Gardening depends on what arrangement you have with the agent or landlord. Typically, we have responsibility for gardening and allow £10-20 per month, dependent on the size and type of garden.
Insurance
Here I’m referring to contents insurance for your contents (if you have any). For example, if you’ve bought furniture for the property. For us this is around £8 per month.
Management fees
Many sourcers will sell you a deal to be managed by an agent. This is not something we suggest works well as a beginner and/or if the agent is not known to you.
Often the VAT will be missed. So if the agent fee is 10% the actual amount you pay will be 15-20%+ of gross rent. This is because of VAT and fees such as tenant find, inventory and sometimes hidden fees such as maintenance surcharge.
Minor maintenance
If you’re paying for maintenance ensure you allow some money aside for it.
We allow 1-3% of gross, depending on the property.
Voids
Voids are times when a room is empty and you’re receiving no rent for it.
I have other videos on how to minimise voids and the systems we’ve used to do that effectively. Through our system and the fantastic work of our Property Assistant Luke, we’ve kept our voids between 0 and 1%.
For deal analysis we allow 1-3%
If you’re new to rent to rent, I’d suggest allowing 3% so you have some buffer and the deal still works for you.
Feeling confused?
Breathe and remember, the numbers don’t lie
If you’re feeling that this is all too much and need a lie down!
Don’t worry, it’s totally normal to feel that way.
Once you get used to it, this is simple because the numbers don’t lie.
Use the Deal Analyser to make it easy and take the guesswork away.
BEFORE you buy a deal
Ask Someone who knows!
It makes me sad when someone contacts me AFTER paying £5,000 for a deal which is costing them money every month.
I know they say that ignorance is expensive and it can be very painful too when you’ve put your hard-earned cash into a deal that’s losing you money.
If you’re new to rent to rent and not quite sure about a deal you’ve been offered.
Complete the Deal Analyser
Talk it over with someone experienced whose opinion you respect. Make sure it’s someone succeeding in rent to rent! So many times we accept advise from ‘experts’ who aren’t walking the walk!
And if you want us to be your Guides and look over all your deals before you take them on, you can find out more about how to apply for our Rent 2 Rent Kickstarter Coaching Programme here.
I’m so pleased to have written this out now to really help you to get it right with deals.
I’d love to know what you think.
Has this been useful?
See you soon
Stephanie & Nicky
xx
#YesYouCan #rent2rentsuccess
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