BUY TO LET MORTGAGE VS CASH BUYERS
David Barr
December 22nd, 2020
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Are you a landlord or potential landlord interested by the idea of Rent-to-Rent? You might have heard a lot of people in the industry talk about it, or even sell courses on how to do it, but what exactly is it and what does it entail?
As a landlord, a rent-to-rent is when you rent the property out to a tenant, which is done on a single let basis. The difference to a standard rental is that the tenant will very rarely actually live at the property, and will just sub-let each of the rooms to whomever they want.
The idea is that the tenants rent the property out to as many separate tenants as they can, still paying the landlord the same amount of rent as if they were to rent out the property themselves & keeping the difference as profit.
As a landlord, you might be curious as to why you would do this. It’s passive, and you don’t need to be hands-on, the tenant you have in place who is sub-letting out the property will handle almost everything for you. As a landlord, you’ll be guaranteed rent because you’ll agree a specific timeframe and the rent is often paid in lump sums.
Sometimes these arrangements can involve small amounts of refurb work to convert the property into what the tenant requires, but this will be laid out in the initial agreement.
Now you know exactly what rent-to-rent is, and we went into some of the reasons that you might favour this type of tenant but first before you jump in, we’ve listed and described some of the main pros and cons for you below:
- Your payments are guaranteed – The third party will be paying the rent & often in lump sum payments, so you guarantee your returns whether they have someone living in the property or they don’t.
- Emergencies & maintenance checks aren’t your problem – For all intensive purposes, you’re not the landlord to the tenants. Any emergencies in the property will fall under the third party, and they also have to conduct all the maintenance and ensure that all the regulations are followed. It makes your investment extremely hands-off.
- There are no extra costs involved – You don’t have to pay anything additional, including utilities, finding tenants or third party cover.
- Trusting the third party – You need to ensure that who you put in place for managing the property are reputable, don’t exploit tenants and won’t mismanage the property to ensure it doesn’t devalue by damage that isn’t repaired. You don’t get to vet the tenants, so you’re putting a lot of faith in them.
- Liabilities – As we’ve mentioned, you aren’t responsible for maintenance of the property, however, you still own it and are liable for claims against you if someone is injured in the property.
- Agreements are longer-term – This is both good and bad really, it just depends on how you look at it. Agreement for Rent to Rent are typically for 3 to 10 years, and you have little say on what happens with the property during that time.
Rent-to-rent obviously makes money, otherwise, property owners would never do it. It’s perfect for landlords that want to be completely hands-off, whilst still getting a guaranteed income, and without having to find tenants every few months/years.
It can be worth it if you want to be completely hands-off, but there are a few things that we recommend that you should consider before making the decision, which includes:
- Research, research & more research – It’s extremely important to do as much research as you possibly can, especially on the person that you are dealing with and trusting the property with. See if the person you are dealing with has the right licences, and are experienced in property management.
- Your contract needs to be strong – Make sure your contract is watertight and covers you for everything, you might want to visit a solicitor to ensure that you’ve left no stone unturned.
- Set out a payment plan – Often with rent to rent you can ask for large lump sums and less frequent payments, but you want to set all this out in a payment plan and come to an agreement – don’t just leave it up to one parties word.
The properties that appeal for rent to rent are just usually your standard vanilla buy to lets or HMO’s. You’re often not going to find the best deals on these kinds of properties on the open market, so you need to figure out a way of getting a deal to maximise your rental yield. That’s where we come in, we can connect you with some great deals on properties that are suitable for rent to rent.
Start your property portfolio today!
Are you a landlord or potential landlord interested by the idea of Rent-to-Rent? You might have heard a lot of people in the industry talk about it, or even sell courses on how to do it, but what exactly is it and what does it entail?
As a landlord, a rent-to-rent is when you rent the property out to a tenant, which is done on a single let basis. The difference to a standard rental is that the tenant will very rarely actually live at the property, and will just sub-let each of the rooms to whomever they want.
The idea is that the tenants rent the property out to as many separate tenants as they can, still paying the landlord the same amount of rent as if they were to rent out the property themselves & keeping the difference as profit.
As a landlord, you might be curious as to why you would do this. It’s passive, and you don’t need to be hands-on, the tenant you have in place who is sub-letting out the property will handle almost everything for you. As a landlord, you’ll be guaranteed rent because you’ll agree a specific timeframe and the rent is often paid in lump sums.
Sometimes these arrangements can involve small amounts of refurb work to convert the property into what the tenant requires, but this will be laid out in the initial agreement.
Now you know exactly what rent-to-rent is, and we went into some of the reasons that you might favour this type of tenant but first before you jump in, we’ve listed and described some of the main pros and cons for you below:
- Your payments are guaranteed – The third party will be paying the rent & often in lump sum payments, so you guarantee your returns whether they have someone living in the property or they don’t.
- Emergencies & maintenance checks aren’t your problem – For all intensive purposes, you’re not the landlord to the tenants. Any emergencies in the property will fall under the third party, and they also have to conduct all the maintenance and ensure that all the regulations are followed. It makes your investment extremely hands-off.
- There are no extra costs involved – You don’t have to pay anything additional, including utilities, finding tenants or third party cover.
- Trusting the third party – You need to ensure that who you put in place for managing the property are reputable, don’t exploit tenants and won’t mismanage the property to ensure it doesn’t devalue by damage that isn’t repaired. You don’t get to vet the tenants, so you’re putting a lot of faith in them.
- Liabilities – As we’ve mentioned, you aren’t responsible for maintenance of the property, however, you still own it and are liable for claims against you if someone is injured in the property.
- Agreements are longer-term – This is both good and bad really, it just depends on how you look at it. Agreement for Rent to Rent are typically for 3 to 10 years, and you have little say on what happens with the property during that time.
Rent-to-rent obviously makes money, otherwise, property owners would never do it. It’s perfect for landlords that want to be completely hands-off, whilst still getting a guaranteed income, and without having to find tenants every few months/years.
It can be worth it if you want to be completely hands-off, but there are a few things that we recommend that you should consider before making the decision, which includes:
- Research, research & more research – It’s extremely important to do as much research as you possibly can, especially on the person that you are dealing with and trusting the property with. See if the person you are dealing with has the right licences, and are experienced in property management.
- Your contract needs to be strong – Make sure your contract is watertight and covers you for everything, you might want to visit a solicitor to ensure that you’ve left no stone unturned.
- Set out a payment plan – Often with rent to rent you can ask for large lump sums and less frequent payments, but you want to set all this out in a payment plan and come to an agreement – don’t just leave it up to one parties word.
The properties that appeal for rent to rent are just usually your standard vanilla buy to lets or HMO’s. You’re often not going to find the best deals on these kinds of properties on the open market, so you need to figure out a way of getting a deal to maximise your rental yield. That’s where we come in, we can connect you with some great deals on properties that are suitable for rent to rent.
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