Rent To Rent Property Guide

Rent to rent can be a good way to get into property investment with little upfront capital, but how do you get started? This guide tells you all you need to know about rent to rent, from how to find suitable properties, the pros and cons of rent to rent, and more.

Table of Contents

What is Rent to Rent?
How Does Rent to Rent Work?
Is Rent to Rent Legal?
Pros and Cons of Rent to Rent
Who is Responsible For Property Maintenance in a Rent to Rent Arrangement?
How To Find Suitable Rent to Rent Properties

What is Rent to Rent?

Rent to rent, also known as guaranteed rent, is a strategy where someone rents a building from a landlord, and then rents it to a third party. The original landlord still gets their rent paid, and the rent to rent landlord charges a premium to tenants and keeps the profits. This strategy is common when renting out HMOs or serviced accommodation.

How Does Rent to Rent Work?

First, a would-be rent to rent landlord finds a suitable property and approaches the owner or landlord. If they agree on a rent to rent arrangement, the original landlord passes control of the property to the new rent to rent landlord. This party then finds tenants to sublet the property to, making a profit for themselves.

A good example of this would be an HMO property. Say, for example, party A owns a 4-bedroom house. They are renting it out for £1200 per month. Party B approaches this landlord and offers them guaranteed rent for a year without the hassle of finding tenants and maintaining the property. This is a tempting prospect, so party A agrees. Party B then converts the property into an HMO, ensuring all legal requirements are fulfilled. They offer out the individual rooms in the property for £500 per month. Once all 4 rooms are filled by tenants, party B is making £2000 per month, easily covering the original £1200 rental and making a profit for themselves.

Is Rent to Rent Legal?

For a rent to rent arrangement to be legal, the original landlord or property owner and the new rent to rent landlord must both be in agreement. Someone who rents a property from someone and sublets rooms there to tenants without the knowledge of the original landlord is illegally subletting the property.

Pros and Cons of Rent to Rent

There are several benefits and drawbacks of the rent-to-rent strategy – see below for our list of pros and cons.

Pros of Rent to Rent

No mortgage. This enables budding property investors to make a profit from renting without having to come up with the upfront cost of buying a property themselves.

No deposit. Again, the rent to rent landlord doesn’t need to buy the property to start renting, so no deposit is required.

Minimal costs. This strategy has very few upfront costs, meaning that you can start earning quite quickly with little upfront investment.

Cons of Rent to Rent

No capital growth. Rent to rent landlords won’t benefit from capital appreciation over time, as they do not own the property, their only profit comes from renting it out.

Potential void periods. Even if you don’t fill the rent to rent property with tenants, you still have to pay rent to the original landlord every month, which could leave you out of pocket.
The property owner is still in control. If they decide to sell the property part way through your agreement, there is very little you can do about it and you will have to evict your tenants. Having a legally binding agreement in place can help to mitigate such circumstances.

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Who is Responsible For Property Maintenance in a Rent to Rent Arrangement?

It is usually the case that a rent to rent landlord takes over the responsibility of property maintenance. They may also undertake renovations or improvements to the property to maximise their potential earnings, with the permission of the original landlord or property owner. This is a big part of the appeal of rent to rent arrangements for property owners. They still get their rent paid every month, but don’t have to engage with tenants or spend time and money on maintaining the property.

How To Find Suitable Rent to Rent Properties

Not all properties will be suitable for the rent to rent strategy, and many landlords aren’t interested in entering into such an arrangement. To find suitable properties, you can look on the rental pages of popular sites like Rightmove and Zoopla but remember to check other sources too. Local authority landlord lists can provide some good options, as can other listing sites like Gumtree, Facebook marketplace and other social media platforms, HMO portals like SpareRoom, and more. A good option for would-be rent to rent landlords is offering to take over the management of a current HMO property. Commercial rent to rent is a viable option too, as many landlords offer a larger space that can be split into several smaller retail or office units.

If you want to get started as a rent to rent landlord, be sure to find a property that fits into your investment strategy and budget. Think about the property – does it need a lot of renovation, and if so, can you afford this? Will you have the time and expertise to do it yourself or will you hire people to do it for you? Is it in an area in high demand, such as near a university or in a large city? Consider your exit strategy too and your long-term financial goals. Be sure to discuss all required works to the building with the current landlord and consult with a legal professional who can draw up a suitable agreement between the two parties. As always, speak to a financial advisor or accountant before beginning a new investment venture.

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