While rent-to-rent is an enticing prospect for landlords, the workload can be overwhelming. However, rent-to-rent management doesn't have to be stress-inducing. Ultimately, the answers lie in adapting and managing your processes.
Rent-to-rent is where an individual or company rents a property from landlords, and the landlord receives fixed guaranteed rental payments.
Several legal ways can be used to sublet a property, including commercial or corporate tenancies, management agreements, leases, or guaranteed rent schemes. These can be attractive to landlords who want a hands-off investment. Landlords agree to a guaranteed rent while the rent-to-renter looks after the property, does small maintenance jobs, and finds and manages tenants.
Someone can rent a property and pay the owner or letting agent the guaranteed rent while renting the property to tenants for a higher rent than they are paying the owner.
A company or individual can rent a property from a landlord for a period of time. They are then given consent by the landlord to rent the property to other tenants.
Rent-to-rent investors often issue tenants with a licence rather than a conventional assured shorthold tenancy (AST). Under a licence agreement, which is more usual when a homeowner lets a room to a lodger, the landlord or agent can access the property whenever they want – something an AST doesn't allow.
A House in Multiple Occupation (HMO) is where each bedroom in a property is let individually and the tenants usually share the kitchen, living area and bathrooms. This method is an effective rent-to-rent solution because the cost of renting out an HMO is lower than renting a one-bedroom flat, for example. In this scenario, a rent-to-rent company could take over a single property and, in some cases, will rent it out as a professional HMO.
Arthur's three-tier structure holds the HMO license documentation at the property level instead of adding that same document to each room.
Compliance can also be automated, such as sending an email or push notification to the rent-to-rent company a certain number of days before the certificate expires.
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Automation is an increasingly large part of a property manager's job. Automating reminders for problems like late rent should be easy with good property management software.
Arthur allows clients to send rent reminders to their tenants a certain number of days after the rent has not been paid, eliminating the need for the property manager to contact the tenants themselves. Early rent reminders can also be sent to those tagged as a "late payer" on Arthur, so only they will receive a reminder, rather than those who usually pay on time.
Rent-to-rent can be confusing, but it doesn't have to be. When a rent-to-rent company signs a contract with the landlord, it will typically take over the maintenance of the property. However, this can vary depending on the nature of the issue.
For example, a landlord typically expects a rent-to-rent company to sort out and pay for minor repairs, but the landlord may take care of major upgrades like central heating, which would count as capital improvement.
Divvying tasks between the property manager and the rent-to-rent company can be simplified by having all maintenance issues in one system. From there, both parties may decide which issues fall under whose responsibility. Arthur's maintenance module does precisely this.
Read more on managing maintenance requests without getting snowed under on our blog.
Maintaining a good relationship with the people you are dealing with daily, weekly or monthly is crucial; rent-to-rent companies will undoubtedly want the same on their side.
This allows for clear communication to establish who needs to take care of what within the property. Plus, contracts can be made watertight with clear clauses outlining subletting responsibilities, maintenance, rent collection, and more.
A rent-to-rent agreement has three tiers: the property, the unit, and the tenancy. Most software does not allow for accurate tracking, but Arthur will split these up to make them easier to follow.
The property refers to the level the landlord owns, the unit is owned by the rent-to-rent company, and the tenancy relates to who the rent-to-rent company has put in as the tenant. The amount of money paid to the landlord and the amount received from the tenant can be tracked from this. Arthur also allows landlords to create a profit and loss report through its system.
Learn more about this on our rental property management information page.
The hands-off approach and guaranteed income of rent-to-rent are reason enough for landlords to want to be involved. However, working productively to make the process as simple as possible is key.