How to start your own property business… without buying a single property
Stephanie Taylor, Co-Founder of Rent 2 Rent Success, spills her secrets
By Stephanie Taylor
Many people like the idea of going into property, but worry that they’ll need a large amount of money to invest.
But this isn’t necessarily the case. There are other ways to get into property and make a good income, without ever buying a single property yourself. A strategy for doing this is known as ‘rent to rent’.
With rent to rent, you control rather than own properties. This means you don’t need a huge financial investment to get started.
It’s the strategy that changed my life back in 2016 and, with my sister, we’ve attracted contracts worth over £2 million, escaped our jobs and built a team.
Let me outline how rent to rent works:
You sign an agreement to rent a property, usually for a term of three-to-five years;
You pay the owner or letting agent a guaranteed rent and usually, you take on paying the bills, just like a normal tenant;
You improve the quality of the rental property before renting it out to tenants for a higher rent than you’re paying the owner;
The difference between the rent you receive from tenants and the rent you pay the owner or letting agent after the property running costs is the profit that you make for your business.
You can find further information on rent to rent here
Pretty straightforward, right? However, the ‘trick’ is finding properties where you can add value and earn a good income.
IS RENT TO RENT LEGAL?
This is a question I’m asked most often.
For many people, subletting is code for ‘doing something dodgy’. There have also been a lot of terrible stories of people profiteering from overcrowding properties. These rogue landlords often don’t have properly licenced HMOs (house in multiple occupation), meaning the property may be unsafe for more than two people, yet they’re cramming three or four people into one room.
Rent to rent is a very different proposition. Rather than taking advantage of people, rent to rent aims to add value to properties, turning them from scruffy, poorly-maintained properties into warm, comfortable homes ─ something the property owner may not have the time, money or energy to achieve.
The model has actually been around for a long time when it comes to commercial property. Commercial leases are long-term ‘full repairing and insuring’ leases, where the tenant takes on all the costs of repairing and insuring the property. Now the model has been adapted for residential landlords.
So, rent to rent is perfectly legal – when it’s done with the full knowledge and consent of the owner and when the correct contracts are in place. If you’re still concerned, 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).
WHY WOULD A LANDLORD GIVE A PROPERTY TO ME?!
This is the next most common question I get asked!
The ‘secret’ is that HMO landlords and letting agents have problems that you can solve. Landlords and letting agents want the rent paid on time and the property looked after. And these are things you can offer in a more specialised and focused way than a high street letting agent. For example, where a high street letting agent may have hundreds of properties, you will start off with one, so can provide a more individual service.
When you learn how to describe your solution effectively, you become an irresistible option to your perfect customers. They know you can be relied on to keep the property in good condition, provide a good service to your tenants, and that they will receive their rental income on time every month.
HOW MUCH TIME AND EFFORT DOES IT TAKE TO BE A RENT TO RENT LANDLORD?
At the start, it’s going to take you a few hours a week, as you’ll be moving furniture around and completing improvements within the properties you manage. Once you’re set up, it will probably take you a few hours a month to keep the property looking nice and the tenants happy.
If you have, say, five rent to rent properties in your portfolio, you’ll spend around 15-20 hours a month on maintenance. Even with an average profit of £500 per month, per property, after bills and running costs, you’ve got a profit of £2,500 per month. That’s £30,000 a year for working a lot less than 40 hours a week, while building your profile in the property world.
IS RENT TO RENT RIGHT FOR YOU?
The events of 2020 mean many of us have started questioning our old ways of thinking. It was always seen as ‘normal’ and ‘safe’ to rely entirely on one source of income. Yet many of us have found that the ‘safety’ of our role is not what we thought.
Having your own rent to rent business is great in the short-term for an additional income stream, and in the longer-term it’s a good first step to buying your own investment property. Of course, rent to rent comes with risks. You need to ensure that you understand it fully and your business is legal and compliant.
If you like the idea of getting started in property without making a big investment, rent to rent is well worth considering. It has the potential to give you the cashflow you want for peace of mind and greater freedom.
Stephanie Taylor is co-founder of HMO Heaven and Rent 2 Rent Success. Stephanie launched Rent 2 Rent Success to help professionals who want to get involved in property, but feel stuck as they’re worried they don’t have enough time, money or knowledge to get started.
Through her inspirational Rent 2 Rent Success YouTube channel and podcast, Stephanie debunks the myth that you need large sums of money to get started in property.
Or tune into Stephanie and Nicky’s Free Rent 2 Rent Success Guide and Masterclass