Rent to Rent Strategy

Rent to Rent Strategy

If you want a future in property, chances are you have little money. Those of us with 5, 10 or 20 years' experience have often accumulated some so it appears from the outside a good way forward.

If you have little money there is a good chance that you have come across the training companies, all of whom offer "no money/little money down" strategy courses if, naturally, you will part with £5000 to find out how.

 

One of the strategies offered by the many training companies that have recently sprung up is the rent-to-rent model. All you have to do is persuade a landlord that you will lease his property, rent it on at higher profit and keep the difference. This is neatly known as R2R or rental arbitrage.

There is nothing fundamentally wrong with this, you, as a landlord may be tired of managing and wish to be more hands-off.

Rent to rent offers the chance for new entrants to property to learn the ropes and make a living. So far so good.

One of the tools offered on the courses (Progressive Property/Rick Gannon/Kevin Poneskis) is to gain clients by sending mail shots to your local HMO list, as I am sure you are aware.

I spoke to the ICO about this as I find it rather offensive that these chipper fresh-off-the-training-boat people can get details of my interests so easily. This is their advice:

If you are trading as a Ltd Company there is little you can do.

As an individual/sole trader there is a possible breach of GDPR, this hinges on whether they have just cause for sending the mail-shot. After investigating the courses it appears that this is justified as legitimate interest, i.e. they have something that is genuinely interesting to you.

To deal with it, send a letter to the person/s that wrote to you requesting their justification. If they do not reply in 30 days you can lodge a complaint with GDPR who will then investigate the circumstances of the claim and determine if there has been a breach.

But what should you do if the offer sounds inviting?

  1. Check out the operator as you would any tenant, also check Companies House for the people in question, being "new" is OK but is there any adverse info?
  2. Check that your mortgage allows the arrangement. Most Buy to Lets will not allow HMO or SA, HMO products will not allow SA, they only allow AST.
  3. If it is a Serviced Accommodation offer (we have Corporate Clients/offer short stays/are relocation specialists) it may be pitched as a Company Let. It is not a Company Let and should be on a Common Law Tenancy, Commercial Lease or Management Agreement. If the operator doesn't agree then don’t sign up.
  4. Bear in mind that most leaseholds prohibit the use of the property as Serviced Accommodation (look for terms in the lease such as ‘no business use’ or ‘only on a single residential tenancy).
  5. If it is for HMO question how the operator is going to increase the yield to make their margin? Make sure that they have nothing in it that will breach your current arrangements.
  6. Remember that a C4 or Sui Generis HMO cannot be used for Serviced Accommodation (C3 can). An HMO is by definition someone’s home, a Serviced Accommodation is not.
  7. Insurance – A change of use will necessitate different buildings insurance.

I hope that helps, if you are happy to tackle these obstacles best of luck. After all, a 5 year term at full rent with little maintenance sounds almost too good to be true!

Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.

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