Why buy when you can rent someone else’s property?

by Readers Question

10:57 AM, 25th October 2017
About A year ago

Why buy when you can rent someone else’s property?

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Why buy when you can rent someone else’s property?

Why purchase a property yourself when you can rent out someone else’s residence?

The benefits seem to be obvious:

  • Less money-down.
  • Less risk,
  • Higher Return on Income
  • Shorter-term commitment.

However, what are the downsides to subletting, or Rent-to-Rent as it’s been coined?

Does anyone have any experience of this model and how well it works?

Any advice would be helpful.

Many thanks.

Richard



Comments

Neil Patterson

10:59 AM, 25th October 2017
About A year ago

Click here and type rent to rent for an index of our Rent to Rent articles >> https://www.property118.com/?s=&cat=-1

JohnCaversham

9:59 AM, 26th October 2017
About A year ago

Hi Richard, have a look around the net and you'll find lots of training courses dedicated to rent to rent, the headline figures look sound and you've already pointed out some major benefits though those same headlines don't advise on the downside as there are a huge amount of grey area's to consider and when it goes wrong boy does it go wrong...Consider your owner dying going bankrupt or changing his mind mid term, breach of mortgage conditions that bans subletting, breach of insurance conditions that bans subletting, what if you yourself develop health issues but are tied into a long term contract, what if you die, what if what if..!? I'm not saying its doesn't work as clearly it does but you really need to be at the top of your game and in my opinion its not for the faint hearted and i suspect that many of those practicing rent to rent particularly their first attempt are winging it to some extent!
Rgds John

Mandy Thomson

10:05 AM, 26th October 2017
About A year ago

Hi Richard

I suggest you see Mark Alexander's previous post for an idea of the basic requirements (such as mortgage provider's permission, insurance etc): https://www.property118.com/rent-to-rent-company-smashes-crowdfuning-target/

Assuming the above concerns are addressed, to act as a landlord for a property owner you need first rate knowledge and experience of managing that type of property, plus a sound knowledge of the legislation and your responsibilities as landlord. As the landlord, most of the legal responsibility will lie with you, unless you can clearly demonstrate the owner was being unreasonable in refusing authority or payment for repairs or other necessities.

This brings us to maintenance, a really important consideration. Even with the most considerate tenants who take care of the property, there will always be maintenance issues, which can be stressful and expensive.

You need a clear written agreement with the owner about who pays for what, and it would normally be assumed you as landlord and property manager would take care of day to day matters without troubling the owner, otherwise, what are they paying you for?

You would also need to have some money for maintenance, tenant finding etc, I would say £5000 minimum.

There really isn't any such thing as a no money down property investment, which is why many people are unable to buy.

I believe Northwood are one of the few large letting agents who do rent to rent (e.g. for HMOs) but I have heard that even they have come unstuck with disputes with owners over where responsibilities begin and end.

Richard U

11:47 AM, 26th October 2017
About A year ago

Reply to the comment left by Mandy Thomson at 26/10/2017 - 10:05
Thanks for your comments Mandy and John. I am an experienced HMO landlord - so pretty thick-skinned. I couldn't agree more about no money down being unrealistic and contingency funds being important. I think the points about insurance and contracts are what concern me most. I am pretty flexible about the terms under which this would be attractive to me - I always think there is a sensible deal to be done with the right person. But, I like to know the T's are dotted and the eyes crossed 🙂 should thinks go wrong -so how do i mitigate these risks and ensure I get the right insurance and contracts in-place?

Gary Dully

1:17 AM, 27th October 2017
About A year ago

I have 3 rent to rents.
The original landlords are “worn out” and the rent helps my cash flow each month
Maintenance is an issue, so our contract says anything over £5000 is the original landlords responsibility.

I have not had any problems so far.

The insurance is a bit trickier and a management agreement is in place that provides proof for. Council tax etc.

They bear some risk, but the original landlords do NOT want anything to do with them anymore.

They are happy to get rid of them, the deals were designed as a win-win transaction and they had to get past the solicitors involved.

So long as they get their rent, they couldn’t care less.

Richard U

7:16 AM, 27th October 2017
About A year ago

That’s great Gary, very interesting. If it’s not stealing your trade secrets, how did you identify these landlords in the first place?


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