Rent to rent
What is Rent to Rent?
In its simplest form, Rent to Rent, or as it’s more popularly known ‘R2R’, is where an investor rents a property from a landlord and then sublets, either as a House in Multiple Occupation (HMO) or Serviced Accommodation (SA).
After paying the agreed rent to the landlord and all other expenses, what is left is profit for the investor.
What are the benefits of Rent to Rent?
- Contract in place for usually 3, 5 or 7 years
- Controlling other people’s property to produce cashflow
- Low entry cost compared to buying
- High potential cashflow
- Great potential ROI
- No need for a huge deposit compared to buying
- No need for a mortgage
- No Stamp duty
- Low legal costs compared to buying
- Generate cash quickly – in some cases, in a
matter of days
- Potential to purchase property at today’s price in the future
How does Rent to Rent work?
There are two ways an R2R strategy can be applied;
- R2RHMO ((Rent2Rent House of Multiple Occupation)
- R2RSA (Rent2Rent Serviced Accommodation)
Using this strategy, an investor rents out as many rooms as legally possible to maximise revenue.
Each tenant will be usually on a minimum six month Assured Shorthold Tenancy Agreement.
There is a vast amount of legislation around HMO’s so no-one should adopt this strategy lightly.
This is where property sourcers like us conduct thorough due diligence on the area, type of property, anticipated room rates and, more crucially, supply and demand.
To adopt this strategy, an investor sublets either the whole of the property, or individual rooms for short stay rentals, much like the hotel and hospitality industry.
The rental duration for guests can be as little as one night, with no maximum stay.
The property is usually advertised usingfacilities like Airbnb, booking.com, Expedia, and many others.
The location and standard of the property are vital to
attract the right type of guests and remain at high occupancy levels throughout the year.