.png)
Rent to rent is also known as guaranteed rent and has become a popular investment option across the nation. A company or individual becomes the official ‘renter’ and guarantees the landlord rent for a specific period, say three years. The individual can then rent the property out to a third party; however, even if the property isn’t rented, the landlord still receives the agreed monthly rental amount. So, is this viable, and is rent to rent worth looking into?
The lure of rent to rent
Guaranteed rent has many advantages for both the landlord and the renter. For landlords, they’re essentially guaranteed rental income whether or not the property is sublet to another tenant. Plus, the official renter typically deals with any repair costs or damage done to the property. That does offer greater peace of mind to the landlord and there is no management or letting fees to worry about either.
It’s a win-win for landlords.
Is guaranteed rent worth trying?
Rent to rent is similar to a buy-to-let contract; however, you’re not the legal owner of the building. You should look at this as an investment option; you’re a renter that will sublet the property to another (at a higher rate). This can be a solid investment for you, if it is managed correctly, and good tenants are found.
Rent to rent can be worth looking into, especially if you’re willing to put the extra work into finding a reliable tenant. Of course, the landlord should issue you a rental agreement, and you will have a separate sublet agreement with your tenants.
Are there risks to guaranteed rent?
This type of investment is not without risk, even though there are many advantages to it. For instance, a landlord (the one who actually owns the property), could face legal ramifications for their sublet. If there is a buy-to-let mortgage, rent to rent could breach the original agreement with the lender. There could also be issues with home insurance and the loan being called in. If that happens, the tenants are left out in the cold.
Of course, you should seek legal advice before any agreement is signed. This keeps everyone right (and they’ll also know where they stand). It is, however, important to understand the risks and rewards of rent-to-rent. If you’re the owner of the property, you could even seek some guidance from your mortgage lender. You don’t want to void any mortgage agreement in existence.
The endless options for investment
Property investment is quite flexible which makes it a viable solution for many across the globe. With guaranteed rent, it isn’t overly complex but does have its rewards (as well as its risks). If you’re a landlord, you should ensure your original mortgage allows for sublets or a sub-tenant. Guaranteed rent ensures landlords get a fixed rental fee from a tenant, whether they physically live there or rent to another tenant. That is why rent to rent is incredibly popular today.