OpenRent Community

Are Rent to Rent Deals a Good Idea for Landlords?

Originally published at: https://blog.openrent.co.uk/are-rent-to-rent-deals-a-good-idea-for-landlords/

Sometimes landlords will get a mysterious message from a prospective tenant. They claim they can rent the property for a much higher price – and even guarantee that the rent is paid on time every month. Even better, they can sign a contract tomorrow. It sounds too good to be true. But is it? The…

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Just by way of a practical example of what can happen when such arrangements go wrong: Against my advice, my brother-in-law rented his property to a rent-to-rent company that already had around 10-15 similar properties on its books. The guy was very professional in his approach and claimed to have HMO licenses in his name from several of these properties and a good relationship with the HMO team at the Council. He guaranteed a particular rent and put 4 tenants in there.

Things started to go wrong when the Council introduced an Additional licensing scheme that would capture 4-bed HMOs. The rent to rent company wasn’t aware of this and the property was now in default. A neighbour complained that it was over-crowded and the Council wrote to my brother-in-law threatening prosecution. His insurance was then due for renewal and he was unable to get insurance for the house as it didn’t have a licence. On inspection it was found that there were actually 10 people living there as it wasn’t being effectively managed as the rent to rent company had over-extended itself. Then some of the tenants stopped paying rent and the so-called guaranteed payments to my brother-in-law also stopped. Then came Covid19 and the tenants effectively can’t be removed. The rent to rent company offered to end the contract with my brother-in-law but all that would happen then is that the occupants would become his direct tenants and he would inherit all the problems and liabilities. This issue is still not fully resolved.

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Don’t touch it with a barge pole

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