One entrepreneurial property strategy that has emerged over the last few years is that of renting a property with the intention of then renting (or more accurately letting) it out. More recently, government policy now appears to legitimise and even encourage it. So in this report we will look at the subject of rent to rent (a.k.a. lease to let), both at whether it can be a legitimate opportunity for the property entrepreneur, as well as for landlords whose tenant might be doing a 'rent to rent'.
The 'strategy' can cover a few different situations: It might involve someone renting a property on, say, a one year tenancy then creating a kind of 'pseudo HMO' by letting out the rooms individually. It might include someone renting a property, living there themselves and then letting rooms to others. It might even include letting a rented property to others by the day/week in a 'hotel style' operation.
So why exactly has rent to rent become attractive of late? Demand for more economical, shared accommodation might have a part to play. Also, the new breed of online accommodation sites such as Spareroom, EasyRoommate, AirBnB and Booking.com, have made it practical to do. (Browse these sites and it is not too difficult to spot properties which might be rent to rent.)
Most importantly, it is easy to see that a kind of 'arbitrage' profit may be possible based on the difference between the rent
for a property on a long let and a property/rooms let by the week/month. For example, in many locations, a four bed property rented at say £1,400pcm may let as six separate rooms at £350pcm each or £2,100 in total. So for the entrepreneur there is an opportunity to make money with less outlay and risk than actually buying property. In the theoretical case above there would be a gross profit of £700pcm - as much or more than the return from actually buying to let a smaller property in the same area.