More Property Stuff, This Week Rent To Rent Serviced Accommodation
Hi Everyone,
I hope your week is going well. We are three quarters of the way through February already and time is flying.
This week i have started a concentrated mastermind course about rent to rent serviced accommodation, a very profitable business model.
I confess that i have heard about this business model for quite a long time, but i never had the urge to use it. Why is that you may ask?
Well, there are 4 profit levers in property:
1: To buy at a discount - but because you are not buying with rent to rent, then this does not apply.
2. Cash flow- this is the main feature of rent to rent, the difference between your income from short term rentals and your payments to the landlord for a long term let, plus other costs such as cleaning, maintenance, linen and crockery replacements, council tax, and of course the utility bills including gas, water, electricity, broadband and tv netflix etc.
3. Capital appreciation - tis does not apply because we do not own the property when renting from the owner, he takes advantage of the capital appreciation.
4. The Ability to refinance, after capital appreciation, and provided that the cashflow is sufficient to justify the higher payments. This does not apply in the case of Rent To Rent.
I had thought that you really needed to be able to take advantage of all the 4 profit levers in order to make money from property, but this is not the case.
The rent to rent model is able to justify investment of your time and money for a number of reasons. What are these reasons?
Well, here are a few reasons to consider Rent to Rent if you are starting out in property:
1. You don´t need large sums of money for deposits to buy the property (typically 25% of the purchase price, plus incidental costs, which overall is likely to be 30 to 33% of the purchase price).
2. You dont need an unblemished financial score or track record, because you are not asking anyone to loan you money.
3. When you operate this business model for serviced accommodation, the guests or tenants do not have any rights associated with their tenancy. Payment is made up front for their stay of however many days or weeks, and there are no refunds if the property is not used after having paid for it. If a guest of tenant refuses to leave the property after their booked and paid for stay is completed, then you just call the police, as a hotel would if a guest did not vacate their room at the end of a stay.
4. You set up a long term contract of say 3 to 5 years, with the landlord, and keep any rental increase to the landlord to a minimum, whereas your charge-out rates would attract increased rates, thus giving you more profit margin, gradually over the period of the tenancy.
5. The other aspect is that you can rent properties that are in good to excellent condition, and therefore do not need money spent on them for refurbishment of finishes.
6. Maintenance for items up to 100GBP are made by the tenant (the rent to renter), and major items are to the account of the landlord, so the Rent to Renter has little exposure to risk at all.
This new mastermind course that I am doing with Liam Ryan is giving me plenty of food for thought about possibly investing in this Rent to Rent strategy. I have 2 more days before I complete this course, so I will re-assess the business model and all its implications during the next few days.
If you have experience of Rent To Rent as a business model, then give us a comment below.
Have a great weekend ahead!
Cheers everyone
Alan
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