The “rent-to-rent” strategy is often seen as a quick and straightforward way to earn a significant passive income for those in property investment. You essentially sign an agreement, get payment in advance, and the tenant manages the property for you.
This approach sounds wonderful! The simplicity and ease of making money with little work are driving its popularity within the dynamic realm of property investment.
However, despite its allure, rent-to-rent has faced some criticism. Accusations of unethical behavior and poorly maintained properties have circulated in online forums and the media, causing some owners to second-guess this investment strategy.
The Progressive Property Facebook Community has discussed rent-to-rent frequently, highlighting the misunderstandings and challenges associated with it. We aim to analyze both the advantages and disadvantages to help you determine if rent-to-rent fits your investment goals.
What is rent-to-rent?
Rent-to-rent involves leasing a property to a tenant who does not reside there but sublets the rooms individually. These agreements may require some minor renovations to maximize rental space, and the tenant (sub-letter) may request financial support from the owner for these changes.
The sub-letter rents out the property to several individuals, covers the original rent and utility bills, and profits from the difference.
Why would you agree?
Many property investors wonder why they should let someone else potentially earn more from their properties. The answer lies in the allure of passive income. The role of a landlord comes with its own stresses, so many welcome the chance to receive guaranteed rent for several years upfront, eliminating concerns about vacancies and late payments.
The sub-letter handles the everyday responsibilities of managing tenants and minor maintenance, allowing the property owner to avoid these tasks and still receive the property’s full rental price.
Common misunderstandings about rent-to-rent
• A rent-to-rent deal is not considered an assured shorthold tenancy since the tenant does not live in the property. These are typically commercial or business tenancies.
• Tenants have a right to remain in the property, and eviction requires a court order, as removing a tenant without one is illegal.
• Both the sub-letter and the individuals renting from them will have contracts that likely afford them the same legal protections as regular tenants, despite the arrangement being a sub-letting one.
Is this strategy right for you?
When changing your property investment approach, due diligence is crucial. While the prospect of passive income is tempting, it’s essential to look at the criticisms and legal implications. Consider the following: Are you comfortable letting others profit from your investment? How much control do you want over the conditions of your tenants? Are you knowledgeable about the legal aspects and confident in the sub-letter’s credibility?
The Progressive Property Facebook Community is a resource filled with experienced investors. Engage with this collective knowledge, research thoroughly, and keep an open mind. Passive income might be more attainable and manageable than you expect.
