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  • Rent-to-Rent

    R2R couple claim they will be making millions



    An article in the Mirror about a couple undertaking Rent to Rent has left me somewhat perplexed!

    There are so many flaws in the article, that its hard to believe it is newsworthy.

    The article explains how the couple offer to pay the landlords a guaranteed monthly rent, and in return get to let the properties out at a higher rate, pocketing the difference.

    They claim they are are set to pocket £4.5K per month IF all their rooms are rented, but it does not state if that is gross or net.

    I always struggle to comprehend how landlords would hand over their greatest asset to people with no competence or experience and in light of the following:

    To get started, the couple borrowed on their credit cards to give each property a lick of paint and new furniture.

    They negotiated a two-week, rent-free period with the first house they took on so that they had money coming in before they had to pay the landlord.​


    Full/source article 

    However, at least that shows that money IS needed and that R2R is not completely "no money down" as some trainers would have us believe.

    This article is irresponsible imho.  It makes no mention of compliance issues or the risks to landlords of R2R.  If R2Rers experience rent arrears, they will have to serve notice on each person renting a room, and that could mean significant legal costs.

    The whole thing, if not undertaken with robust financial backing, experience of tenant management, and legal compliance, is likely to end in tears for the landlord. Meanwhile the Rent to Renter just walks away ....

    Rent to Rent puts all the massive risk of the R2Rer or sub-tenants not paying rent on the landlord.  The R2Rer has very little skin in the game and, if things start to go wrong, they very often pocket the rent and do not pass it on to the landlord, before disappearing and leaving the landlord with a big mess to clear up.

    The Rent to Renter may also create an HMO that requires licensing.  If this is not undertaken by the R2Rer, it is the landlord who becomes liable for any fines, which can be significant.

    There seems to be more of these "get rich quick" stories appearing in the media.  Thankfully, this time it did not mention Samuel Leeds as the inspiration!

    Here is a reprise of my interview with Paul Shamplina on this topic:

     
    SEE ALSO  -          Rent to Rent SA deals - warning!

    UP NEXT -              No money down deals - de-bunking the hype

    DON'T MISS -         Professional landlords' reputations damaged by R2R

    NOW WATCH:

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    Oh dear.   This will end in tears - for the landlords and the tenants.  Ben Rogers would be proud of them.  

    No doubt there is an enterprising person in the local HMRC office taking careful note of this.

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    I don't think it will be long until the Govenment will look at this. Stupid Landlords if you ask me. There has to be some sort of regulation brought it against this sort of thing surely. The amount of 'get rich quick' bandits I see on this is an absolute joke.

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    'He aims to clinch another 48 deals by the end of 2019'

    Scaling to this level isn't going to be an easy task and the risk level both for them and the landlords they work with will be sky high even if done compliantly which I would be suprised if they are.

    When I saw the article yesterday I was suprised a 'Guru' wasn't mentioned in the article, I'm sure they will have been through someones process.

    The government need to take action on this sooner rather than later as with so many 'wanabees' undertaking this strategy it's a ticking time bomb!

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    As stated in the interview with V., I have had Rent to Rent on my radar for some time because at Landlord Action, we see the fall out from it.

    Coincidentally, I have recently written an article on this topic on Landlord Zone.  Excerpt:

    The practice has been heavily promoted by the “investment guru brigade” as a way for individuals to get into property without the need for a large investment. But unfortunately some of these would-be property gurus are amateurs with little experience at best, if not rogues at the worst, so things can go horribly wrong.

    That’s not the whole story of course; there are some genuine, professional and highly experienced agents offering this type of service, and some local authorities do so as well, but even so, owners need to be careful. There are some gaping chasms of risk that owners can fall into with this practice, so buyer beware.

    Read the full article - Rent to Rent can make a serious dent

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    Founder of Landlord Action and Brand Ambassador for Hamilton Fraser


    hi Vanessa 

    Sorry to break the news this was an Samuel Leeds inspiration .

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    Interesting that they are now saying they paid thousands of pounds for courses before meeting Samuel Leeds and also paid for personal mentoring with Samuel Leeds.  Perhaps that is why they had to put the refurbishment costs on credit cards?!

    They say each rent to rent is bringing them between £750.00 to £800.00 per month profit, although all the rooms are not fully let.  Only two out of five are fully let.  So their claimed income of £4,500 per month is only projected income, not actual money in the bank.  There is no mention of whether it is gross or net income, which is vital when discussing "profit" and "passive income".

    As always in property, the devil is in the detail and numbers never lie.

    I can't see Coventry being an area to be able to make those kind of profits, judging by this screenshot which suggests an average room rate for a good quality room is £300 pcm.  The gross profit would appear to be circa £525.00 pcm and then you would have to deduct council tax, utilities, insurance, broadband etc. 

    I estimate such properties might make £150.00 per month net.  So with five of them their net profit might be in the region of £750.00 month.  Two empty rooms or non-payers of rent across 5 properties, and that profit is wiped out.




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    I am from Coventry so i understand the market a bit better.  You could get the money they are talking about but it would have to be ensuite and high end.

    There are some many HMO'S rooms in Coventry as they have built and still  building arounds 25, 000 student flats so lots of LL are selling up or can't rent which is why i think they might do the R2R so at least are getting some cash flow in.

    I know they did a 0% DEPOSIT to get the room rented out quicker as there is about 650 rooms on SpareRoom with only about 2-300 rooms "wanted" so they stand out from the 100's of rooms on SpareRoom.

    David

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    Always good to have local knowledge David.

    Could you crunch the numbers based on that, and let me know the max NET profit that could be achieved by the R2R model being operated in Coventry?

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