Renting out property is a highly attractive way to gain reliable monthly income. However, it’s a method that not everyone can afford. Between the deposit, mortgage repayments, legal fees and maintenance costs, renting out a property you own can be an expensive prospect. However, there is a different path to property rental. This option has steadily been gaining attention and popularity across the UK: rent to rent.
Rent to rent FAQs
What is rent to rent?
In a nutshell, rent to rent is the practice of renting a property from the person who owns it and then renting out that property to other tenants rather than living there yourself. The idea is that you will earn a greater amount of monthly income from your sublet tenants than the amount you have agreed to pay the property’s owner.
What is subletting/subleasing?
Subletting (or subleasing) is the technical term for when a tenant rents out a room or portion of the property to another person. With a rent to rent property, the original tenant (you) sublets rooms to enough people to make more monthly income than the property owner is charging you.
What are the benefits of rent to rent?
The main benefit of rent to rent is tha it lets people who want to earn money from a property do so without having to buy one outright. This means there is no need for a deposit and no mortgage to worry about. Effectively, all you are doing is taking on the role of the landlord, without the full financial burden of actually being one.
There are benefits for the property’s owner as well. They are guaranteed a stable monthly income but without the effort of managing the property (you can find out how much income by using an online rental calculator). Finally, the subletters usually benefit by paying less than the average market rental rate.
What are the risks associated with rent to rent?
As you might have already guessed, a lot of unscrupulous people abuse the rent to rent concept. They cram in as many tenants into sublet rooms as possible to maximise their profits. This can compromise the safety and comfort of the people living there.
Accordingly, rent to rent has gained a lot of bad press and legal scrutiny in recent years. For this reason it’s essential for both you and the property owner to do your research and act in good faith.
What are the risks of rent to rent for the property owner?
While the owner no longer needs to worry about finding tenants or managing the property, giving up that responsibility also means giving up a measure of control. They are entrusting the letting of their property to an individual, rather than a well-regulated estate agency.
If things go wrong, the owner can end up paying out in a big way. This might involve lost rental income or invalidated insurance policies, and possibly even legal action being taken against them.
Is rent to rent legal?
Rent to rent can be undertaken in an entirely legal manner. Depending on the type of letting structure you want to set up, there are formal agreements designed to give both the landlord and tenants the proper legal protection.
These include simple, single-let agreements and rent to rent HMO (House in Multiple Occupation) licenses. These are designed for ‘house share’ setups of three or more people not from the same household, such as a family unit.
What are the responsibilities of a rent to rent landlord?
Even with all the legal necessities in order and without breaking any safety or insurance rules, there are still a number of responsibilities to consider. The main one is finding and securing tenants so you can pay the property owner their agreed monthly fee. If there are any gaps in the tenancy that becomes your problem, not the owner’s. You will also be responsible for covering routine maintenance costs.
Who pays for the various maintenance costs in a rent to rent setup?
This entirely depends on the contract that you negotiate with the property owner. You might be expected to cover routine maintenance costs – utility bills, council tax, minor repairs and replacing smaller furnishings and white goods.
More major costs are generally seen as the owner’s area of responsibility. These might include replacing the boiler, repairing any structural damage, or wholly refurbishing the property, for example. The key thing is to make it entirely clear from the outset who will pay for what.
Are there rent to rent training courses?
Rent to rent has become extremely popular in the UK and abroad. This has led to a wide range of training courses springing up online.
Like most financial training programmes, these range in quality and price from respectable courses run by professionals to entirely fraudulent scams. Legitimate courses can be excellent sources of information on the pricing strategies, pitfalls and legal considerations of rent to rent. Just make sure you vet your chosen course carefully!
Is rent to rent worth it?
If you’re willing to put in the time and effort, rent to rent can be a valid way to make money from property without owning it yourself. However, it is far from being a risk-free, effortless path to wealth.
No matter what so-called financial gurus might tell you, rent to rent has its challenges. However, if you maintain fair, legal and transparent agreements between yourself and both the owner and subletters, you can quickly build trust and secure a financial outcome that works for everyone.
Find more answers to your most frequently-asked property-related questions. Discover 10 things to consider when buying a new build property, or understand what Coliving is and whether it might work for you.
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