What is rent-to-rent?

So, um, today we're going to be just talking about rent to rent for 10 minutes, just to give you an overview of what it is. So we're going to specifically talk about rent to HMO. You're very noisy, Steve. Is that better? Yes, thank you. So we're going to talk about rent to rent HMO specifically because there's a couple of options. Um, so basically, what is it, why should you do it, and does it fit the cash flow strategy? I don't know if you want to mute yourself for a minute because I don't know what's going on. Thank you. And then just chip in. So rent-to-rent HMO. So a HMO is a house share, housing of multiple occupation, where more than 1 to 2 people live in the house together. So you can get a 3-bed minimo with 3 people in that are not related, or you can get an 18-bed. The sweet spot for me is 5 to 6 beds. Anything lower than that is not very profitable unless you own the property. Anything over that is a little bit too much, um, in terms of guaranteed rent. So rent-to-rent is basically where you lease the house off an owner. So it's like leasing a car. You lease the house off the owner, you don't own the bricks and mortar. But you are the landlord, so you then make the little bit in the middle. So you offer the owner guaranteed rent every single month, you get the bit in the middle of the tenants paying you, and you're responsible for the bills. So in order to do this, there's a little bit of contract work, a little bit of negotiation work, and a lot of legislation work, but we'll cover the basics today and then we'll probably do a wider webinar on why you should do this in a little bit more in detail. And some more questions. So when I first worked and I had a job, I needed, I think, approximately 4 to quit my job. So the profit you can get— can earn— I wouldn't touch anything lower than £500 profit a month, purely because if you get an empty bedroom or something goes wrong or the electric's gone up or there's any repair work, it's not very profitable for you. So minimum £500 a month, anything over that is a massive bonus. So when I first worked, I needed approximately 4 to quit my job, and then I still didn't quit my job when I got those 4 because then you get your overheads. So as you grow as a business owner, you get your cash flow to quit your job, but then what people forget is, one, what happens when there's a void, two, when there's repair work, and then when you need to pay your accountant pay your insurance, pay any other, any other relevant things, and then they don't put it into pots of repairs, insurance, overheads, etc. When you've got all of that covered, then you've got the money to leave your job. Go a bit extra just to keep yourself safe. So that's basically it in a nutshell. I don't know if you want to jump in, Steve, at all. I feel bad for you.

No, it's all right. Um, no, I've got no experience of rent to rent. It's not a strategy that I've ever done. I mean, one thing that's always— that I'm always curious about, what is the benefit to the owner of the property for them to do a rent-to-rent rather than just rent it out themselves?

Oh, a lot less headaches, to be honest. So the reason I got quite a lot of rent-to-rents when I first started is because I was solving people's headaches. And I know that's a typical cliché thing on a course, but I genuinely was solving headaches. So I've taken a portfolio of properties from one landlord, I've taken a portfolio from another landlord, and then via word of mouth I get a few more. So basically I've dealt with drug addicts, I've inherited tenants that have smashed the houses up, I've taken them on where— and I do management for other people as well with the same sort of model where I'll just bust some ass basically. I take on the headaches. As a traditional letting agent, you'll be open Monday to Friday, 9 till 5. A tenant will have to ring up and they'll get anybody in the office to speak to. This sounds awful, but they don't put in the work and the effort as somebody who does a rent-to-rent. Because for me, if the house is crap, they don't rent, you don't get the rent paid, you don't get the tenants. So again, it's a massive risk. So you work harder to make sure them houses stay paying line. So as an owner, you don't have to deal with a letting agent who doesn't care if there's rent arrears. Like, I took a property on and this person was in £7,000 of rent arrears, and he— I know— and he was on Universal Credit. It takes one form. It was called a UC47, it's changed now. There was one form they could have completed to get direct rent to the landlord. One form. And he was in £7,000. So I had to basically— I took over that property as management. I didn't want that on a rent-to-rent personally. So you eradicate headaches basically. They don't have to deal with letting agents, you don't care. They get the rent paid because it's guaranteed regardless. So whether there's voids, the roofs fell off, it's exploded, they contractually still get that rent. So they can then increase their portfolio without issues, basically. But yeah, cool. Um, just in regards to— you probably, if you've not done rent to rent, Steve, you probably won't be aware of the typical training course that people do. So they say to get a property, you can get it furnished yourself, um, do some repair work, carpets, decoration, that sort of thing. So I'll just tell you about 3 types properties I've taken on. So my very first rent-to-rent was an absolute hellhole. It truly needed bathroom and kitchen refurbs, but I took it on. It was in a terrible part of Hull and it attracted terrible people because of where it was, and it just wasn't a very nice house in the slightest. I negotiated with the landlord that he, um, put the carpets but then I spent a lot of money decorating it, cleaning it by hand, scrubbing all the rat poo out, bleaching it. I think I was high on bleach for a while because of how bad it was. Then I had to furnish the entire property. So it had a couple of beds in which I kept because they was in good condition, and a couple of wardrobes. But at the time, that was about 5-6 grand I needed to put into that first deal. Then I've taken all the properties on where I've inherited 2 undesirable tenants. Um, they had rent arrears or they were difficult to manage, sort of thing. That property was fully refurbished— no, sorry, that property had furnishings and a couple of tenants, so I didn't need to put a lot into it. And now I'm working with a portfolio landlord who's actually buying properties, doing back-to-brick refurbs, paying for everything, paying for all of the furniture, letting me choose everything. Then he's given me the keys, and I've been out of that. So when you're doing rent to rents, you don't typically need to aim for the crappiest property with the crappiest person. There's a multiple of people out there that you can get these deals from and why, right? Yeah, I might do a little training video one day of how, how to furnish it. And again, if you're, if you're new in property and, and you're a bit skint as well, And again, I've now managed to build a relationship up with a local furniture person where I can buy landlord packs at a discount. So you've got your bed here, good quality bed. You can get washable mattress— mattresses now, whether like hospital ones. And then you can— oh, Steve! You can also get a wardrobe, a chest of drawers, and a bedside table as well within a pack. So you can buy them. Facebook Marketplace, if you're just starting out as well, you can, um, buy things from Marketplace. You can get given really good quality things from there as well. At the time, I had my garage full of beds, really good wardrobes, bedside tables, chest of drawers, etc., etc. So you don't have to go have a HMO, do a back-to-brick refurb, and do it absolutely perfect with the wall panels and pretty little lights and really fancy things. You're going to start rent to rent, you can literally start out doing it very minimal. It's the service that counts. We've had people come back to us from different agents or move out of the city and come back to us specifically because of our service. The houses aren't the best, but our service is pretty good.

That's a good recommendation.

Yeah. So yeah, have you got any more questions, Steve, because you've never come across this really?

I suppose it's how, if somebody wanted to get into rent-to-rent, what kind of properties work best and how would you go about contacting the landlord of that property? To sort of start the negotiations?

Yeah, so this is, um, this is really controversial, and I go against training courses when I say this, but it's, it's worked for me. Um, I don't go through agents. Agents complicate it too much. Um, they either don't sell the deal well enough, or they don't— there's just too much complexity in it because they want to stay in the deal also. So then you've technically got to letting agents on a deal. So I would start by going to a networking event. Come to ours, um, come to a different networking event. There's many, many, many all over the place. Build relationships up with people who have already bought the HMO register, because councils will charge for that. Already bought the register, have a look at it and add those landlords on Facebook. For free. So when I first started, I literally had a virtual assistant who was writing letters, putting it on stamp, sending it out in the post. I got nothing back, like zero. However, I went on Facebook and I was like, I'm Heidi, I'm doing HMOs in Hull. Heidi HMOs Hull. Heidi HMOs Hull. Over and over and over and over and over again. Word got out. I did videos of me taking really terrible properties on. Working with tenants that were challenging, etc., and I was just getting them thrown at me. And then I added them on Facebook, so then those landlords in my area that was rumoured was then contacting me. We've heard what you do, can you take this on, can you take this on? So yeah, I wouldn't spend a fortune on stamps and letters and pissing about like that. I would literally add them on Facebook and demonstrate what you can do. Cool, cool. So we've covered a little bit of rent to HMO. If anyone's got any questions, put it in the chat, message us, you know how to find us now. We're very open to questions and answering them. So that was a little snippet on rent to HMO. We'll probably do a longer video one day on start to finish rent to HMO and serviced accommodation as well, but Hopefully that was useful for a start, and if anyone's got any questions, shout up. Do you want to press the button, Steve? Do you want me to press it?

No, I think that's, that's it. If there's no questions, then I can't— oh, there it is, top left-hand corner, and I couldn't see it. I was looking everywhere else apart from that bit of the screen.

Yeah, cool.

Thank you, Heidi. Hope that's been of value.

See you later, everyone. Bye.