Rent to Rent – Your Get Started Guide
Rent to Rent – Your Get Started Guide (Updated for 2022)
If you want the freedom to escape your 9-5 with little money, time and experience to get started, you’re in the right place.
This is your uncensored rent to rent the little known property strategy.
We’ll show you the ethical way to make money from property without buying it.
If you’ve recently learned about renttorent (sometimes called R2R or RtoR), it can seem farfetched to imagine that there’s an ethical way to make money from property without buying it. If you’d love to get started in property but feel you don’t have enough money to start buying properties yet, rent to rent is a great first step to building up the money and experience to start buying your own properties more quickly.
After coronavirus many people are realising that the ‘secure’ job they thought they had isn’t quite as secure as they thought. Reflecting on their lives, many no longer want to work 40+ hours each week for 40 years in jobs they don’t enjoy. More of us now want to take control and fast-forward plans to start investing in property and achieve an additional income stream.
At Rent 2 Rent Success we’re here to help you. We are sisters and property investors Stephanie Taylor and Nicky Taylor and we’re here to guide you on your journey to finding success and profit with the rent to rent method. We’ll clear up the confusion of rent to rent so you can get started in renttorent the right way.
Your best next step is to take watch your free Rent 2 Rent Success Masterlass to find out more about rent to rent and see if it’s for you.
How does rent to rent (guaranteed rent) work in the UK?
Rent-to-rent is sometimes called lease to let, let to let or the guaranteed rent model. The rent to rent model is a simple concept. Here’s how it works in a nutshell.
You rent a property, usually for 3-5 years.
You pay the owner or letting agent a guaranteed rent. Typically, you take on any bills.
You rent the property to tenants for a higher rent than you’re paying the owner.
The difference between the rent you receive from your tenants and the rent you pay the owner or letting agent after property costs is the profit for you and your business.
There are three main ways to do rent to rent on residential property which I’ll come to in a moment.
Rent to Rent is an incredibly efficient business model
Little money is required to start
You can become profitable within a few months (most businesses are not profitable in the first year)
You have consistent recurring cashflow (most startups do not have recurring revenue )
You have the names and addresses of your perfect customers (most businesses have to find their customers)
And I love the fact that at it’s very simplest you are renting a property. Something thousands of people do every day.
The best news is that you don’t have to buy property to make money from it.
You don’t need huge deposits and you don’t need a mortgage to get started! We’re all familiar with the idea of big corporations controlling assets rather than owning them and creating wildly profitable businesses.
Uber, the world’s largest taxi firm, owns no cars.
Facebook, the world’s most popular media company, creates no content.
Airbnb, the world’s largest accommodation provider, owns no property.
And that is the how this strategy works too - control rather than ownership.
This means you don’t need a huge financial investment to get started. What you do need is a guide to help you through the process of ensuring that you take the shortest and simplest route to success while remaining legal and compliant.
There are three main ways you can do rent to rent, and each one has its pros and cons. I’ll cover them here so you can decide which is best way for you to do R2R property.
1 Rent to Rent HMO - Houses of Multiple Occupation also known as house shares
A House of Multiple Occupation or HMO is one of the most effective ways to do rent to rent. This is where you let out each bedroom in a property individually. It’s what many people know as a student house share where each person has their own bedroom and then shares a kitchen and bathroom. Though HMOs may have en suites or individual kitchenettes.
The rent to rent method works whether you are transforming a single-family let into an HMO, or renting a pre-existing HMO. Let’s take a look at how the HMO cost structure breaks down when you’re turning a single let into an HMO.
Let’s take a 4-bedroom, 2 reception family home renting for £1,000. The same property converted to a 5-bedroom HMO at £600 per room earns a total of £3,000. Most HMO landlords pay the utility bills, but even after these bills, most properties would earn about £1,500 after bills, rather than the original £900.
Existing HMOs work well for rent to rent too. In fact, we work almost exclusively with existing HMOs. This way we don’t need to make all the changes required to change a family home into an HMO which can be both time-consuming and costly. And it really works from a business perspective too.
We can take on under-performing properties and by completing a light refurbishment of the property, dressing the rooms attractively, and provide a good service we can achieve more income from the same property without overcharging tenants or shortchanging landlords. This creates a win-win-win for landlords, for housemates and for us.
The great thing about HMOs is that when you match the right ‘product’ to the right customers, there is always demand. Even in a market downturn people always need somewhere to live. And especially in a market downturn people love that house shares provide an easy ‘all bills included’ option. Even in our post-coronavirus world the desire to house share has actually increased. We’re experiencing higher demand than before the coronavirus pandemic.
HMOs produce consistent recurring revenue. Each housemate commits to staying with you for at least 6 months and many stay for much longer. And the cashflow is much higher than a single family let too. So you need fewer properties.
With the much higher cashflow HMOs are hugely attractive from a business perspective but what puts people off is that they’re more time-consuming to run than a single family let. And that is true. What’s also true though is that with a few simple systems in place you can run an HMO business in a few hours a month. As you’ll see later, even as few as 3 - 5 HMOs can easily produce enough profit to replace an average UK salary.
2 Rent to Rent Serviced Accommodation
The second way you can do rent to rent is serviced accommodation. This method focuses on nightly rentals of the whole unit, rather than dividing the property into individual rooms. For example, a 2-bedroom flat may rent for £800 per month, or it can rent for £50 per night, equivalent to £1,520 for the month.
The potential income from serviced accommodation can be very exciting. However, the costs are also high though you’d have the same you’d have running an HMO (gas, electricity and water) plus other costs like of laundry and cleaning, and online booking portals which are around 15%. Then there’s the VAT of 20% which decreases profit (there is no VAT on rent, so rent to rent HMO and single lets are not affected by VAT).
At first glance serviced accommodation looks hugely attractive with its higher revenue. But as I mentioned above the costs are much higher too. Serviced accommodation is a hospitality business with guests. It’s more time intensive, more costly to run, has more marketing requirements as you’re constantly looking for new guests. And it can be high stress as having 5 star ratings is very important in attracting guests.
Not only that, occupancy can be unpredictable. To make higher cashflow you need to have guests for most of the month. And this is difficult to forecast with any certainty especially when you’re new to it, and some areas have planning restrictions, like the “90 Day Rule”. For example since 2015 you are only allowed to provide short term lets in London for up to 90 days in a calendar year.
So many people find that they actually lose money with serviced accommodation, in spite of the fantastic income.
3 Rent to Rent Single Let
Mostly you’ll be using one of the strategies above for renttorent – either HMO or serviced accommodation.
Once you get started in rent to rent though, you may sometimes be asked to manage single let properties. When I say single let I mean a property rented to a single household such as a couple or a family. Typically single lets require less management. Also the potential for cashflow will be lower. I’ve included this so you know that it’s an option, it’s not something that we choose to seek out but it’s an extra we can offer to our HMO landlords who have single lets they’d like us to manage.
Single lets are straightforward but usually the cashflow is much lower so it’ll take much longer to reach your business goals.
Is rent to rent legal in the UK?
Most people don’t know about rent to rent. And those who do know about it often regard it with suspicion. The question people immediately jump to is, ‘is rent to rent illegal?’. Most people just can’t believe that rent to rent is a legitimate business model.
“How could it be legal to make money from properties you don’t own? How could it be possible to get all the cashflow advantages of owning an investment property when you don’t have £50k to invest in buying one?”
Perhaps your forehead is still furrowed so I’m going to explain a little more. Rent to rent has been used in commercial property for a long time. Commercial leases are long-term leases which give a commercial property tenant (usually a business) the right to sub-let a property. Typically, these are ‘full repairing and insuring’ leases, where the tenant takes on all the costs of repairing and insuring the property. This is what the renttorent business model is based on.
This model came over into residential property and has been adapted to give residential landlords similar guarantees as commercial landlords enjoy. Northwood is the biggest guaranteed rent letting agent in the UK with over 85 offices, it started as a single office in 1995.
Is rent to rent subletting?
And this may surprise you.
Yes rent to rent is subletting.
Many people talking about rent to rent say it isn’t subletting. It is.
Is subletting illegal in the UK?
The reason why some people think rent to rent might be illegal is that subletting has a bad name. Subletting usually comes to public attention when it’s in the news because someone has done it illegally without the knowledge of the property owner. That is absolutely not what we advocate.
Subletting simply means… “to lease to a tenant”.
Rent to rent is legal when it’s done with the full knowledge and consent of the owner and when the correct contracts are in place.
If you still have an eyebrow raised and are thinking ‘well she would say that wouldn’t she?’ you might be swayed by the fact that rent to rent is recognised by the UK government’s Property Ombudsman, the Property Redress Scheme (PRS).
The Property Redress Scheme’s definition of Rent to Rent
“Rent to Rent is where an individual or company, known as the agent, rents a property from a landlord for a specified period of time during which the landlord receives a fixed guaranteed rent from the agent. This can be attractive to landlords who want a hands-off investment with guaranteed income. The agent then lets the property, generally on a room by room basis and manages the property.”
Why do landlords choose guaranteed rent or rent to rent?
People are sometimes confused as to why landlords was choose rent to rent. Some critics come right out and say that rent to rent rips off landlords. I want to set the record straight.
The reason we make money doing rent to rent is because we add value.
We don’t take it away. We take a property that’s underperforming and make it more valuable and in doing that the landlords earns and so do we.
Often we are able to pay landlords more than they were receiving before in net rent. By net rent I mean the rent a landlord receives after the cost of council tax, gas, electricity, water, wifi, minor maintenance, cleaning, gardening and voids (times when rooms are empty have a cost too).
Most landlords know what the gross rent received from the tenant is but are unsure what their net income is.
When we take on a property we pay these costs.
Working with us, can actually provide landlords more income than they were receiving when their property was managed by a high street letting agent simply because we’re able to manage HMOs more diligently and are HMO specialists while a typical letting agents will manage hundreds of properties and be specialists in single lets not HMOs.
Ironically, many landlords we work with have been badly let down by traditional letting agents. For example, Robbie whose two HMOs were managed by letting agents for over 12 years and descended into a state of terrible disrepair before he found us. Before we started managing the property, Robbie was losing money with a traditional high street letting agent. Since we took over management, he’s received guaranteed rent every single month, right through lockdown.
And it’s not just in extreme cases we can help. We work with professional property investors too. They want clarity on what rent they’ll receive every month, especially if they’re remote investors. For them, rent to rent is a perfect solution.
We adopt an ethical approach to rent to rent
The Rent 2 Rent Success System creates a win-win-win
It’s a business you can be proud of.
A win for the property owner
Guaranteed rent, freedom from tenant management and total peace of mind
A win for your housemates
Beautiful, affordable homes they love to live in
And a win for you!
The consistent cashflow you need to live life on your terms.
How much does it cost to do rent to rent?
Most businesses cost a substantial amount to set up and often are not profitable in the first year. As we talked about above, rent to rent is a very efficient business model as it requires much less to start than a typical business. But how much money do you need to get started in rent to rent? People are usually surprised when I explain that it costs under £600 to get your business set up. I walk you step by step through everything you need to set up your rent to rent business legally, ethically, inexpensively and quickly.
Then in addition to that you’ll need
· One month’s rent
· Deposit (if required, which is usually equal to one month’s rent)
· Refurbishment
Refurbishments can vary. And you can choose what level you are willing to pay. Most of Kickstarters are spending up to £3,000 and you’ll know many of the Rockstars we’ve interviewed on the podcast spend much much less than that.
To summarise, it costs under £600 to set up your legally compliant rent to rent business and then you need rent, deposit and money for a refurb.
How to find rent to rent deals
We’ve been in rent to rent since 2016 and we’ve broken down the process into a repeatable system. It’s The Rent to Rent Success System – the 6 Steps to get your first rent to rent deal. When it comes to rent to rent, we wrote the book on it!
It’s the System that’s helped us to
🎯Build HMO Heaven, our thriving HMO management business with contracts worth over £2m
🎯Systemise our business and employ a full-time Assistant Property Manager meaning I no longer work IN our property business and can focus on helping others while our property business continues to grow
🎯Start Rent 2 Rent Success to help you achieve success
🎯And buy property worth over £1m
When I hear of people saying ‘rent to rent doesn’t work’, ‘I tried it and it doesn’t work’. It’s because they don’t have the foundations in place. They don’t have the right systems in place.
The Rent 2 Rent Success System
Like everything else, rent to rent has short cuts, insider secrets and ways to do things right and ways to get them wrong. Our 6 Step System is the fast-track to success. The first 3 steps are your foundations. The second 3 are the things you repeat to grow your business.
Step 1 is Model Magic
This gets deep into the real magic in the rent to rent model, how it works, how it has worked for others and how it can work for you. It helps you understand the ethical approach to rent to rent which makes it a win for you and everyone you worth with.
Step 2 is Mindset Mastery
This is the powerful tools to make success inevitable.
Whether you’re in Rent 2 Rent Kickstarter or doing rent to rent on your own. You have to master your mind. If you don’t have the results you want yet, in any area of your life, you can improve your results by improving your thinking.
When I was starting out, I thought the information about the property strategy was more important. When the truth is that without growing your mind, you can have all the property information in the world and still not take action. We all know people who’ve been on property courses, who could get a PhD in Rent to Rent, but they haven’t taken action. Work on your mind so it’s easier to get the success you deserve.
Step 3 is Mind Your Business
Get your business set up quickly, easily and legally with little money even if you have no business or property experience.
We walk you through the Foundations before you set up and then the 4 Steps to success.
1– Company Setup Basics
2 – Contact Details
3 - Clear Message
4 – Compliance
Afterwards, you through how to set up your business.
So those are the 3 foundation steps
Step 1 Model Magic – understanding the success approach
Step 2 Mindset Mastery – making success inevitable
Step 3 Mind Your Business – setting up right
Once they’re in place you have a solid foundation.
Now let’s move on to the four repeatable steps.
Step 4 Magnetic Marketing
This is the Magnetic Marketing methods to attract owners and agents to you even if you hate selling or are shy. This part is what drives your business. The reason many people hate selling is they see it as getting people to do things they don’t want to do and aren’t in their best interests. Magnetic Marketing is different because it’s not about persuading people to do something they don’t want to do. So what is Magnetic Marketing?
“Magnetic Marketing attracts your perfect customers to you by clearly stating your customers’ problems and your solution using your customers’ language”
To be successful you need to tap into what your customers are REALLY looking for. What emotions are driving them? And remember sometimes they won’t be consciously aware of these. When your solution clearly meets what your ideal customers are really looking for, they become magnetically attracted to you. It’s your secret sauce.
Step 5 is Make the Deals
Discover how to analyse deals in minutes, negotiate like a ninja and do the deals! This are is so important. The Number 1 mistake people make in rent to rent that they don’t know their numbers.
When you get this right, your business works well. And success is easy. When you get it wrong it costs you money and peace of mind. And the solution is so simple. The Rent to Rent Success Deal Analyser gives you total clarity. Our rent to rent deal calculator saves you time, money and stress. Even if you’re not a spreadsheet person, it’s simple to use
Step 6 is Manage & Multiply
Understand how to systemise your business and get the money and time freedom you want as your business grows.
This step includes refurbishing, tenanting and managing. In Kickstarter we go into detail and give the step by step breakdown of how to take each step and we’re there to support you along the way.
That’s the complete Rent to Rent Success System
1. Model Magic
2. Mindset Mastery
3. Mind Your Business
4. Magnetic Marketing
5. Make the Deals
6. Manage & Multiply
If you’re trying and you haven’t had success yet, remember that it could be simple tweaks needed. Things that work don’t work when not done quite right. Anyone can send a letter, but not everyone sends the letters that really work. Anyone can get a deal, but not everyone can get a deal that cashflows and gives you freedom
To find out more about rent to rent and see if it’s right for you
Get the Free Rent 2 Rent Success Masterclass & Guide to find out the simple 6 step system to rent to rent success and life on your terms