As well as investing in a portfolio of HMOs with my family, I also control lots of HMOs using the Rent to Rent strategy.
If you are new to Rent to Rent there are a number of significant benefits of starting out using this strategy:
Let me give you an example of my favourite type of property to target:
A 3 bed house, with 2 reception rooms downstairs, 1 family bathroom and 1 downstairs toilet. You can look at lots of these types of properties online by studying the floorplan.
You then simply rent the property from the landlord. Let’s say the market rent is £1000 per month. You then offer to guarantee the rent for a period of 3-5 years via a corporate lease agreement.
We would cover any minor repairs for the landlord, up to the value of £50 each month, put a cleaner in place weekly or fortnightly, have the garden maintained and the windows cleaned. This then becomes a hands off affair for the landlord, knowing their property is going to be maintained each and every month.
A handyman would then do the conversion works converting it from a family home, into an HMO.
Typically we spend around £6-£7000 setting up an HMO, and this takes around 2 - 4 weeks depending on how much needs done to make it a nice house but also compliant. The reason I spend this amount on set up is that I always look to be in profit, or at least have my initial investment back within 6 months.
We always ask for the 1st month to be rent free so we don’t have rent to worry about whilst doing the conversion works and set up.
Advertise your rooms on various portals including Facebook and Spareroom.
So our 3 bed house now becomes a 5 bed HMO.
5 rooms rent out for £500, so 5 x £500 =£2500
£2500 minus your rent to landlord of £1000 leaves you £1500, then minus bills of £500 leaves you £1000 cashflow per month.
£1000 cashflow! How many of these deals would enable you to replace your income?
Sounds simple doesn’t it?
It is once you understand it.
Where is the best place to source the houses for rent to rent?
I find agents are the best at bringing you deals. Once they get to know like and trust you, and understand your model then it's a win-win for you and the agent as you’ll forge a great relationship where you will both benefit.
Let’s say you want to test an area, then rent to rent is great for this. Got a contract starting in your local areas and need to house people quickly? Then rent to rent is great for this. Want to get build some capital to buy more houses? Then rent to rent is great for this too.
We as a company have a mix of owned properties and rent to rent as well. Once you know what you’re doing you can quickly get out of your job doing this in 6-12 months easily.
Any questions please shout!
Happy investing. d a
Ian McBain is a prolific creative property investor. As well as a large portfolio of HMOs and Rent to Rents he spends his time supporting and helping others to invest.
When he’s not serving his clients, he loves spending time with his wife and young daughter and taking his paddle board out on the waters of sunny Southend-on-Sea.