What is Rent to Rent?
The market for rental properties is an enticing prospect for the financial ambitious right now. Who wouldn’t like the thought of reducing their workload from a 9-5 job to working as-and-when needed? But is it feasible? Can you actually do it? Are you taking a silly risk?
The answer: you don’t know until you try. But how do you go about getting involved? And what if you don’t have enough money to buy properties? Don’t worry, we’ll explain everything you need to know about rent to rent right here.
The Rental Property Market Is Booming
First of all, let’s look into why the rental property market is booming. In case you haven’t already noticed, there’s a big housing shortage right now in the UK. With banks slow to lend and the population on the increase, the Government are struggling to keep up with the demand for housing. To put that into figures, the number of households in the private rented sector in the UK has increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%) households
This is where the new gap in the market comes – an opportunity for people to capitalise on the demand for rented property. As a result of the recession, many people have become ‘accidental landlords’. They have been forced into renting their property when they never intended to because of the market crash. People are capitalising on this, just as you can capitalise on opportunities that arise when a landlord reaches retirement age, is living far away from his or her properties to let, or is fed up with the work involved in being a landlord.
How To Sell Guaranteed Rent to a Landlord
As mentioned, many landlords renting out a property, whether a 2 room resale flat or a 10-bed mansion, are fed up with the legwork. If only their life could be much easier! Well, that’s where the lure of rent-to-rent comes in and where a profit-making property let system begins. Those interested in this scheme can take away that strain by offering themselves up as a middle-person. In this get-rich-quick scheme you pay the landlord a guaranteed rent every month, meaning that they don’t have to worry about finding new occupiers – you deal with that. By offering them an assured income every month without the hassle of managing their property, many landlord will be tempted by this opportunity.
How much money can I make?
Surely, you need a big cash flow to start all this up? No, not really. While buying to rent a property requires a lot of start-up costs, these costs are relatively low for the potential profit. You will need some cash upfront to sort out insurance, contracts and to refurbish each room to make them standalone hubs for each tenant. This could cost you in the region of a few hundred pounds to a few thousand pounds per property. Once you get it set up, probably within the month, you can start getting tenants in right away.
With universities up and down the UK attracting new students all the time, there is a severe need for these rental properties. So you will have plenty of willing tenants. Charge them all individually, get their rent in, take away any maintenance cost, pay the landlord the agreed guaranteed amount and, hey presto, you’ve got yourself a profit! For many, this is somewhere between £500 and £1000 per calendar month per property.
Once you’ve got all of that sorted, you just sit and watch as the cash flows into your bank account – allowing you a freer lifestyle and even the ability to eventually give up the day job! An illegal trick? No, it’s not. While morally questionable, it is perfectly legal, and it’s called ‘rent to rent’. With this system, particularly focusing on multi-lets and young professional/student types, people are making some serious money. And, remember, that’s £500-£1000 per calendar month, per property. Once you’ve got one set-up, there’s nothing stopping you from doubling that amount with another property, and then another property, and why not another? With four properties on the books, investors could be making £2-4k a month in profit.
There’s no doubt that extensive research is a must! Whether you’re a renter or looking into letting this is something to be aware of. And if you’re more interested in saving up for a first home of your own, I’d say focus more on increasing your savings and talking to some reliable estate agents and mortgage brokers.