Hi

I have chosen to go down this route having a lot of success although I do recognise that people considering rent to rent will want every box ticking sometimes you just have to make a judgement . My confidence does come from that I have 9 properties via Martin and Co who sign me up on an ast I then sublet on a room by room basis using a licence . I have recently been advised that this can be done using an ast..it's a grey area but not something that holds me back . Martin and Co are looking at using leases when I take properties from them we shall see . If anyone on PT comes up with a definitive answer I will naturally listen and adjust accordingly my documents are fine but if things change I will change with it and that's the advise I would give anyone else . I aim to continue aggressively growing my HMO Rent to Rent business .

I buy any new boilers that need replacing..

I pay for any epc required...

I gas check all the properties I pay for this ...

I don't take deposits although you could..

I pay for all repairs .

I also buy and invest in HMOs we have 16 rent to renters and 11 HMO,s / multilet houses .

Kim. http://Www.kimstones.co.uk HMO Rent to Rent Course Doncaster Saturday 20 th October call 0800 6335 333/07795411759 to book places .

Kim,

As Martin and Co are taking a cut I would try and rent directly from the owner. martin and co must love this strategy

@V I suspect like many strategies they are often location specific and I would imagine harder to do in Guildford where landlords are not struggling to let out property.

Richard

Hi Richard

I prefer to have Martin and Co provide me with properties they ring me , I have several direct with Landlords I dont mind M and C taking their bit the amount I agree is the amount I pay .

I have spoken to Ian English who is doing Rent to Rent in Tonbridge Wells I have had a look at some areas in London as long as the figures work on offering 70% of market rent and specific to the property needed its dooable in most areas . The way we do it means also that we use the communal room which means an additional rent(subject to the local HMO people agreeing) it is all about figures I am sure there are many areas its not dooable in however it is also down to the ability of the negotiator to negotiate a great deal .

Landlords are strugling in all areas many dont want to be landlords are accidental LL Doncaster houses rent fast also however there is a deal to be made . Finding the demand for rooms in an area is essential . I have taken HMOs on 5 year guarantee contracts in great areas you would think the LL would not be interested BUT never presume when negotiating it always surprises me what motivates a LL to agree a deal.

Kim

http://www.kimstones.co.uk

Kim
http://www.kimstones.co.uk

I would also guess that the landlord is happier to deal with Martin and Co (as it is a large brand, no disrespect) than go direct esp if they are an accidental landlord.

Richard

(19-09-2012 03:57 PM)KimStones Wrote:  Hi Richard

I prefer to have Martin and Co provide me with properties they ring me , I have several direct with Landlords I dont mind M and C taking their bit the amount I agree is the amount I pay .

I have spoken to Ian English who is doing Rent to Rent in Tonbridge Wells I have had a look at some areas in London as long as the figures work on offering 70% of market rent and specific to the property needed its dooable in most areas . The way we do it means also that we use the communal room which means an additional rent(subject to the local HMO people agreeing) it is all about figures I am sure there are many areas its not dooable in however it is also down to the ability of the negotiator to negotiate a great deal .

Landlords are strugling in all areas many dont want to be landlords are accidental LL Doncaster houses rent fast also however there is a deal to be made . Finding the demand for rooms in an area is essential . I have taken HMOs on 5 year guarantee contracts in great areas you would think the LL would not be interested BUT never presume when negotiating it always surprises me what motivates a LL to agree a deal.

Kim

http://www.kimstones.co.uk

Kim
http://www.kimstones.co.uk

Hi Richard

I do think it helps although I have 7 direct which I found myself it's a mix really just like finding any deal hav as many irons in the fire as you need to create the desired result . HMO Rent to Rent is just part of what we do and what our goals are over the next 10 years I am 52 soon it's funny how hitting 50 focuses your mind the credit crunch buggered up a plan or two of us property investors we had to adapt and seek ways of moving forward HMO Rent to Rent as worked well for me .

Kim

http://Www.kimstones.co.uk

Hi Richard,

Interesting that you think that R 2 R may only work in areas of lower rental demand. Does that mean that room rates may be lower, or rooms harder to fill?

You have sparked another thought.

The likes of Northwood offer a "Guaranteed rent" which is taking the property below market value, renting it out, and creaming off the difference.

As you say, most landlords would prefer to go to a recognised brand for this service, than another landlord.

Why do Martin and Co. pass on leads to Kim? Is it because they don't offer a guaranteed rent themselves, so just happy to make a few quid in letting the property BMV? Are they not meant to achieve the highest possible rent for a landlord client? Does the landlord client know that the lettings agent is doing this?

What if the sub-let landlord stops paying the rent, but carries on collecting the individual room rents?

What recourse does the head landlord have to remove the sub-let landlord who is not living in the property ... and of course the tenants are going to end up losing their home through no fault of their own. What are their rights of sub-let tenure, and would they be able to be served notice to leave if they could prove that their rental payments had been made?

I am not criticising this strategy, I am just trying to understand possible pitfalls, as that is the only way of avoiding them. If you don't understand the pitfalls then there is a high possibility that they may bit you in the butt!!

Interesting and relevant blog from Tessa Shepperson her on the validity of a sub-let tenancy agreement >>> here

(19-09-2012 05:52 PM)vanessa warwick Wrote:  Hi Richard,

Interesting that you think that R 2 R may only work in areas of lower rental demand. Does that mean that room rates may be lower, or rooms harder to fill?

You have sparked another thought.

The likes of Northwood offer a "Guaranteed rent" which is taking the property below market value, renting it out, and creaming off the difference.

As you say, most landlords would prefer to go to a recognised brand for this service, than another landlord.

Why do Martin and Co. pass on leads to Kim? Is it because they don't offer a guaranteed rent themselves, so just happy to make a few quid in letting the property BMV? Are they not meant to achieve the highest possible rent for a landlord client? Does the landlord client know that the lettings agent is doing this?

What if the sub-let landlord stops paying the rent, but carries on collecting the individual room rents?

What recourse does the head landlord have to remove the sub-let landlord who is not living in the property ... and of course the tenants are going to end up losing their home through no fault of their own. What are their rights of sub-let tenure, and would they be able to be served notice to leave if they could prove that their rental payments had been made?

I am not criticising this strategy, I am just trying to understand possible pitfalls, as that is the only way of avoiding them. If you don't understand the pitfalls then there is a high possibility that they may bit you in the butt!!

Re the comment about Martin & Co above. The point here it seems is that neither Martin & Co nor the property owner want the perceived hassle of dealing with letting and management of a multi let property, and would only be prepared to single let the property. The agent is not necessarily letting the property at below rental value as the assumption here is a single unit rental basis. However the head tenant adds his work and expertise ( and maybe some low level expenditure) to create the extra rental income. As long as the property owner knows what is happening, I can't see a problem from the rental value angle. If he was prepared to put in the same work and expenditure he could have the higher rental. But he opts for the single unit rate on a longer term basis without the voids.

What I find difficult is understanding how this can be done where a BTL lender is involved without breaching the mortgage terms re ASTs. Is its legitimate usage therefore only restricted to properties where the owner owns the property on an unencumbered (mortgage free) basis?

Dave

Just saw this posted on the BMV Facebook group;

To use an AST there are certain criteria stipulated by the Housing Act 1988. Namely: 1.The tenant must be an individual and 2.The property must be occupied as the tenant's only or principal home.
If you are leasing in the name of a company, as we are, then it cannot be an Assured Shorthold Tenancy.
A Management Agreement Lease by far matches what we are effectively providing to the Landlord – which is a lettings management service. We are obliged to pay rent in void periods and this must drafted into the lease.
The Management Agreement also deals with things like the Landlord providing you with a warranty that they have received consent to let from their mortgagees. It also provides you with authority to act on behalf of the Landlord and deal with all tenants. As for insurance the end tenant’s names must be included on the primary landlord’s policy. This is simple enough to arrange.
We considered using a license. It doesn’t matter what a document calls itself - a court will look at the reality of the situation to distinguish whether a tenancy is on a lease or a licence. If you are granting the occupiers exclusive possession of the dwelling at a market rent then this will inevitably equate to a lease and be covered by the HA1988, making it an assured shorthold tenancy agreement.
If you use a Management Agreement Lease then the best approach is to have an AST in place between the primary Landlord and the Tenant. You would set up the AST and sign as agent for and on behalf of the primary Landlord, ensuring that you retain the management function
So MY conclusion is that the most advantageous approach for all is to have a Management Agreement between you and the primary Landlord. You would pay the primary Landlord a fee for the consideration of collecting and retaining whatever rent is paid under the contract. There would be a direct Assured Shorthold Tenancy Agreement between the primary landlord and the end tenant. You would have agency powers, to be covered in the Management Agreement, to sign the agreements on the landlord’s behalf.

(06-09-2012 09:49 AM)vanessa warwick Wrote:  What sort of tenancy agreement or room licence do you produce as you are not the Landlord?

As the devil is always in the detail, what other things should I be considering that may catch me out?

Hi

The big point for me is about the AST between LL and middle man (Agent), as under HA 2004 an AST requires the 'tenant' to be at the property, which in this case they are not. The other big point is that none of this has been tested in a court of law, so there is no case law - Being a trail blazer can be profitable in the early cycle, but I guess the more people try it and the more people who get it wrong, then we may find this tested in court - being a trail blazer is therefore gutsy but profitable.

I agree with Francis Dolley about the structure, in terms of what I would prefer, the below is my personal opinion.

I would prefer to call this strategy a Fixed Rent Agency Agreement or Guaranteed Rent Agreement, since that's what it is (under Francis' model). LL contracts Agent who agrees to guarantee a fixed rent, agent signs up tenants on ASTs on behalf of the LL as per normal agency agreements. LL has agreed to £x amount of fixed rent guaranteed by Agent who agrees to make the margin as their management commission. As such, I have three points with this:

Given that many houses suitable for such a strategy may require capital investment, is some kind of loan agreement in place to secure against the Agent doing work to the property to make ready for HMO use and then the agency agreement ceasing abruptly?

Also, does the agency indemnify the Landlord from costs associated with non compliance of Management of HMOs Regulations 2006 and other areas including licensing and planning?

Would such an agency agreement possibly be at risk of attack if it was not clear in the agency agreement about the regulations and statute that the agent was about to bring the LL into that he/she didn't used to have to worry about? Not that I'm risk averse or anything, but answers to these questions need to be presented to the landlord.

The use of licences is a favoured route by some, but should in the purest sense be used for accommodation needs where a tenant is using the accommodation as a second home, so that it does not form their main residence. Do people who 'rent to rent' secure tenants who only fit this bill? If not, then the licence can be challenged as an effective AST, if it's an AST then this has to be with the ultimate owner or a tenant of the owner who is contracted to superior AST who has permission to sublet. If the Head AST is invalid due to the middle man not being present in the property, then the Licence-come-AST that the middle man has used is unenforceable. So, bring on the non-paying tenant and what do you use to enforce them moving on?! Some background on licences vs AST - http://hmodaddy.com/why-hmo-landlords-sh...over-asts/

I believe that most current 'rent to rent' is being carried out without all the ducks in a row, but if the people doing it have enough cash flow to cover the odd one that goes wrong, then why would they be worried? In the same way that the French magazine cares not about any fine from pictures of Kate, due to the vast amount earned from publishing it in the first place. I guess some people weigh up risk and reward and then make a decision.

Ps. Martin and Co is a franchise where franchisees have access to support (should they so engage said support), so although a single branch is engaging in this activity, I do not believe that this alone is good reason to rely on one strategy over another, since the participation of said agent may well be one person's opinion - Much in the same way that I offer mine. Also, with such very technical areas such as this, I wouldn't be entirely sure that they have fully unpicked it all - which is quite clear with the various discussions around on the internet at the moment.

Some will take a calculated risk, some will not take a risk at all. Depends on whether an individual thinks that the gain is worth the risk.

Ps. Kim, I would still be interested to hear what you have to say on the course and am contemplating attending.

Just my 2p.

Phil Ashford
http://www.comfortlettings.co.uk
Student HMO Specialist | Quality Residential Lettings in Nottingham

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PPS. Also agree that mortgage and insurance needs to be considered. The ultimate owner very much needs to know therefore if their house is being HMO'd.