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What Is A Rent-To-Rent Deal?
Rent-to-Rent is a property investment strategy where an individual or company rents a property from a landlord and then sublets it to tenants at a higher rent. The rent to rent model is very popular strategy investors are now using, it is a simple concept but very successful and profitable if done correctly, please see below a breakdown of what rent to rent is
1.Company rents property from landlord for a term usually of 3-5 years
2.You pay the owner or letting agent a fixed guaranteed rent and you take on all bills
3.You rent the property to tenants for a higher rent you are paying the owner
4.The difference between the rent you receive from tenants and the rent you pay the owner is the profit
Their are 2 main strategies that investors are now using in Rent to Rent and both have their benefits
1. HMO (House multiple occupation)
The HMO Method is one of the most effective ways to do rent to rent , This is where you will rent out each bedroom in a property individually , This is commonly known as a Student house share where each person has their own bedroom but share bathroom and kitchen , in some cases some bedrooms will have ensuites.
You will rent each bedroom for a fixed monthly rate , total income from all tenants should be higher than the rent you need to pay owner , difference from the rent you receive from tenants and rent you need to pay landlord and bills covered will be your profit
Example:
5 bedroom house
Rent to landlord £1500
Rent each bedroom at £500 pcm to student x5 £2500
Bills £100 a room
Total income £2500 minus rent £1500 + bills =£500 profit for investor
2.Serviced Accommodation
Serviced accommodation focuses purely on the nightly rentals of the whole property rather than splitting the property into individual rooms , investors will use portals such as Airbnb , booking.com AND contractor/professional booking sites such as Saco, Homelike to achieve a nightly rate totalling higher than the rent thus making their profit
Please bear in mind although the total income can be higher there is more outgoing also , booking fees, cleaners , etc
If you are looking to optimise your profits its beneficial to really get your brand out there to encourage direct bookings. When advertising on OTA platforms its beneficial to have your brand on cushions etc which is displayed in the professional pictures so rather than the contactors and other professionals booking on OTA platforms where you have to pay commission fee they can book directly with you. You can offer a discount - This reduced the fees for the guest and increases the profits for you, the operator.
If you are an investor would like to know more about getting started in rent to rent please do not hesitate in contacting us
What Is A Buy-to-Let Property Deal?
A buy-to-let property deal involves purchasing a property primarily to rent it out to tenants, generating rental income. This investment strategy allows property owners to earn money while benefiting from potential property value appreciation.
Key Features
Property Purchase:
Investors buy residential or commercial properties specifically for rental purposes.
Rental Income:
The main goal is to generate consistent rental income to cover mortgage payments and other property-related expenses.
Long-Term Investment:
Buy-to-let is generally viewed as a long-term strategy, with investors aiming to benefit from both rental income and property value increases over time.
What Is A BRR deal?
A Buy, Renovate, and Refinance (often abbreviated as BRR) deal in property is a real estate investment strategy that allows investors to acquire properties, increase their value through renovations, and then refinance to access the equity they've built. Here’s a detailed breakdown of each step involved in this process:
1. Buy
Identify and Purchase: Investors look for undervalued or distressed properties that can be acquired at a lower price. This often involves:
Researching the local market to find properties below market value.
Conducting thorough inspections to assess the condition of the property and potential repair costs.
Negotiating the purchase price and terms with the seller.
2. Renovate
Property Improvements: After acquiring the property, investors undertake renovations to enhance its value. This may include:
Cosmetic Upgrades: Painting, flooring, landscaping, and other aesthetic improvements.
Functional Repairs: Updating kitchens and bathrooms, fixing plumbing and electrical systems, and addressing structural issues.
Value-Add Features: Adding amenities, such as energy-efficient appliances or outdoor spaces, to attract higher-paying tenants.
Budgeting and Planning: Careful planning is crucial to ensure that renovations stay within budget and are completed on time. Investors often create a detailed project plan to track progress and expenses.
3. Refinance
Reassess Property Value: After the renovations are complete, investors can have the property appraised to determine its new market value, which should ideally be higher due to the improvements made.
Cash-Out Refinance: Investors can refinance the property based on its increased value. This typically involves:
Obtaining a new mortgage that reflects the higher appraised value.
Accessing the equity that has been built through renovations, allowing investors to withdraw cash.
Use of Funds: The cash obtained from refinancing can be used to cover the next property investment