Now that you’ve decided on your rent to rent refurbishment strategy, how do you make it work? Well, here’s some advice and tips for starters:
Requirements a R2R property must meet
▪ When embarking on a rent to rent strategy, the property in question must meet certain requirements. It must, of course, be habitable i.e. have heating, running water, electricity etc. so that people will want to live there.
▪ If you’re planning to rent out rooms to more than three individuals who aren’t related in any way, then it will be classed a House of Multiple Occupation (HMO) and you will need to register it as such with the local authority. You’d be advised to check beforehand that you’ll be able to secure a HMO permit since many local authorities are limiting the number of HMOs in particular areas (where there are already plenty). Failure to get a permit for a HMO can lead to a court appearance and hefty fine (around £20,000).
▪ You will need to be conscious about overcrowding i.e. don’t have too many tenants in a small property.
▪ If it’s your own property, then you will need to stay within the mortgage terms and conditions for the property – otherwise, the lender could take it from you. And on that note, make sure the buildings insurance covers you for renting it out.
▪ Tenants occupying the property must all have the right to remain and rent in the UK. In other words, you would be responsible for carrying out Right to Rent checks. If you don’t and a tenant is renting illegally, you could again face court proceedings and a big fine.
▪ You’ll still need a lease and to give notice to tenants when you want them to move out.
How to minimise spend to maximise returns
You’re not paying out any money on a deposit with rent to rent strategy, nor will you have lawyer’s fees or stamp duty to pay. As a result, you should be able to save cash to make alterations e.g. if you want to make a sitting room into another room you’ll need to buy a bed, wardrobe etc. Get good quality second-hand furniture or wait for the sales. If you’re doing up more than one room at a time, negotiate a discount for bulk buying.
Turning a single let four-bedroom property (where one family has lived before) into a HMO and converting that sitting room means you’ll get rent from five individuals (rather than four or one individual families, meaning your profit is always going to be higher). Incidentally, it’s always a good idea to let the landlord know what you plan to do before going ahead. They still own the property, after all – even if you’re managing it and finding the tenants yourself etc.
Use free listing sites to advertise for tenants, rather than pay a letting agent. This includes Gumtree, Facebook Marketplace, Twitter etc. Or, take a look at ‘room wanted’ adverts in newsagents windows or supermarket billboards. Alternatively, get in touch with us here at Sourced and we can help you find tenants.
Author
Chris Kirkwood
