Rent-to-Rent? It’s Garbage! Don’t Do It!

Rent-to-rent Property Investment

Rent-to-Rent is garbage.

Yes sir, I said it.

And I mean it.

If you’ve been pitched the dream of becoming a property millionaire with alluring “no deposit” and “passive income” headlines, then the odds are you’re being robbed blind sold “rent-to-rent”

Boy, is it being pushed hard at the moment.

Perhaps you know someone that’s living proof of it’s merits, or maybe you have had the misfortune of being mesmerised by a “property guru” that’s shifting property seminars or courses on the subject. Whatever the case may be, you’re interested in the concept; you’re hopeful, and now you’re pumped to become a successful property investor without dropping a penny.

Yeah… no! It ain’t happening, because the whole thing is as ridiculous as it sounds. I don’t care what any greaseball “property guru” is whispering in your ear. S/he is almost certainly misleading you down a very bleek road.

In my opinion? Well, I think I’ve been clear, but to clarify, rent-to-rent should be treated and avoided like garbage by almost everyone, especially those with limited funds and experience, which ironically, is the precise demographic targeted to embrace, what I believe to be, the most unstable and unreliable means of achieving long-term property success.

Table of contents:

What is rent-to-rent?

It’s a simple strategy (which is why it blows my mind when people pay thousands to enrol onto rent-to-rent property courses! But more on that shortly):

  • Step 1: You find a rental property which you believe is falling short of its full potential.
  • Step 2: You rent the property off the landlord, often on the basis that you will guarantee rent every month, as that encourages the landlord to lower the asking price because they have a guaranteed income.
  • Step 3: You rent out the property yourself to other tenants for more money than you’re being charged by the landlord. Essentially, you take on all the responsibility of managing the rental property as if you’re the landlord.

So it seems as though the landlord is happy as Larry because they have a guaranteed income, and they have alleviated themselves from the laborious duties of managing a rental property, and you’re equally as smug, because you’re making profit from a property without having spent thousands on buying it.

What a time to be alive.

Yeah, it’s still garbage! Smoke and mirrors.

Why rent-to-rent is high-risk (and not worth it)!

See, this is what they don’t tell you. “They” being the army of property experts pushing it [like their life depends on it].

They don’t always give you the full picture of all the drawbacks, many of which make rent-to-rent a terribly unsafe and unreliable strategy to achieving wealth and property success, particularly for novice and inexperienced landlords.

  1. Firstly, rent-to-rent doesn’t generate “passive” income! Greaseball experts love to throw around the word “passive”, because they want you to believe it’s effortless.
  2. You don’t own the property, so there’s absolutely no capital growth (which is how most landlords become financially secure in the long-term and absorb unforeseen expenses and losses).
  3. Rent-to-rent is only profitable if tenants pay rent on time, otherwise it can be a soul-destroying money-pit, especially if rent has been guaranteed to the landlord (which it usually is). That means, if the tenants don’t pay rent, you still have to. That’s an extremely silly and highly leveraged position to be in.
  4. It’s very easy to be unprofitable:

    • Vacant periods between tenancies, especially if you have a hard time finding replacement tenants
    • Rent arrears
    • Normally, you will also take on the responsibility for repairs and maintenance, because after all, you have agreed to take on the management. However, that’s not an exclusive arrangement with rent-to-rent, but it is the norm. So presuming you are responsible, that’s obviously another easy way to get hammered into the red.
    • One or more of those circumstances can easily wipe out several months of profit, if not more.

  5. Rent-to-rent is usually most profitable (I use the word “profitable” in extremely loosely goosey terms) when operating a HMO, so you’re generally dealing with low income individuals. Unfortunately, out of all tenant types, they’re most likely to face financial hardship and fall into arrears.
  6. Rent-to-rent breaches almost all anti sub-letting terms and conditions found in mortgage policies, insurance policies and leases. Generally speaking, it’s extremely difficult to operate rent-to-rent legitimately.
  7. You effectively become the middleman between the landlord and the tenants, and that can be a logistical nightmare, particularly when it comes to managing repairs.
  8. Last but not least, it’s not the easiest of methods to turn a profit, let alone make serious money.

Bottom line, it’s insanely difficult to be successful with it, and you’re taking on an incredible amount of hassle without benefiting from the most compelling aspect of property investment: capital growth!

The risk/reward ratio is extremely unpleasant in reality.

Why property “gurus” teach rent-to-rent!

So, if rent-to-rent is as terrible as I say it is, then why are buttload of experts selling rent-to-tent courses like it’s the golden ticket to property success?

Well I’m glad you asked, because it’s an issue that really gets on my tits.

Let me be frank, the people getting rich off rent-to-rent are the snake-oil property experts that are flogging extortionate rent-to-rent courses! If they were “living proof” and achieved “financial freedom” with rent-to-rent, they wouldn’t be wasting time flogging property courses!

“Rent-to-rent has made me so filthy rich that I’ve decided to become a teacher”, said absolutely nobody successful.

The reality is, the “property mentor” market has become contaminated with a lot of people with limited experience and success, and all they’re doing is trying to cash in on selling useless courses. Unfortunately, many are successful because they prey on vulnerable people, many of which are facing hardship and looking for a way out.

To answer the question at hand directly, here is why the bottom of the barrel property experts flock towards selling rent-to-rent courses:

  • It’s an easy dream to sell

    “Become a property million without putting down a deposit”

    Ahhhh, the appeal, it’s blinding.

    The most compelling selling point of rent-to-rent is that it requires very little capital to get started, so almost anyone can do it, which makes it easy to cast a huge net.

    However, if it sounds too good to be true…!

    If you think the odds of achieving “financial freedom” (the term often thrown around by these snake-oil gurus) with property with virtually any capital, then you need a wakeup call. I’m sorry! But it’s so woefully unlikely, that it’s a joke it’s even taken seriously.

  • It’s easy to teach
    Bear in mind, the majority of the buffoons selling rent-to-rent courses aren’t exactly the sharpest tools in the shed, so whatever pearls of wisdom they’re sharing has to be basic.

    Fortunately for them, the concept of rent-to-rent is piss-easy.

Take away what you will from this, just make sure it includes the understanding that rent-to-rent is not being taught because it’s the most sensible or robust means of property success. It’s being taught because someone wants to profit from it.

Why you don’t need to pay for rent-to-rent training courses

So, actually, many of the property seminars that teach rent-to-rent are free (so, a fair price, to be honest), and I wouldn’t necessarily discourage anyone attending a free seminar, especially if there’s absolutely nothing else to do. You can actually learn some useful nuggets of information. But it’s important to understand that they’re free by design, and it’s certainly not because a self-proclaimed property millionaire is doing God’s work and “giving back to the community”

If you attend one of the freebie seminars, you’ll probably have the misfortune of hearing the following classic and nauseating line, “I DON’T NEED TO BE DOING THIS, BUT….I WANT EVERYONE TO HAVE THE SAME SUCCESS AS ME”

No, you definitely need to be here doing this, mate. That’s for sure.

The freebie is usually just bate; it’s a ploy to lure people into seats so the organisers can up-sell “premium content” and one-on-one mentoring. Essentially, the free seminar is just one big sales pitch with the opportunity to learn limited useful information, and it’s riddled with all the usual snake-oil sales tactics you’d expect, like comical “90% early bird discount” and “limited availability”. It’s all so stupid, but that’s how they make their money!

Putting aside any possible merits of rent-to-rent, the reality and crux of the matter is that it’s not that difficult to learn, and all the information is freely available online – it just takes time to educate. Simply, you don’t need to attend a free or paid seminar to learn rent-to-rent, and you certainly don’t need pay through the ass to unlock any premium content or mentorship to learn more.

Can you make money from rent-to-rent?

Yes.

Definitely.

I’m sure there are many landlords itching to smugly inform me of how they’re making a killing from rent-to-rent.

Despite my Debbie-downer opinion on the whole issue, I’m not against rent-to-rent per’se, and I’m sure people are having success with it, even though I believe the odds are stacked against you!

I do, however, think it’s a terrible strategy for reasons mentioned, so it’s not a method I would ever endorse or encourage, especially to those with limited funds and experience.

My main issue is with “experts” mis-selling rent-to-rent to the wrong people, and charging a boatload to teach it.

If you really want to learn rent-to-rent… do it the right way!

Despite my resistance to accept rent-to-rent as a reliable strategy to invest in property, I’m not point-blank against it! Rent-to-rent is a strategy, I just think it’s one of the worst out of the bunch.

As long as you’re aware of the risks involved, I’ve done my job, and at that point, I wouldn’t dream of stopping you or anyone else from pursing the journey if that’s the desire.

My only recommendation would be to choose wisely in who you trust. I can confidently say that if a property expert is trying to sell a rent-to-rent course for thousands of pounds, then you’re probably in the wrong place.

“I urge anyone thinking of undertaking one of these courses to put the company or the person’s name into google. Dig back at least 5 pages to see what is available about them on social media.

If in doubt, visit a property forum and ask.”

– Vanessa Warwick, Co-founder Property Tribes.

If I wanted to jump on a learn rent-to-rent training course, I wouldn’t pay more than a couple of hundred pounds. But my first port of call would be to read rent-to-rent books (there are a few on Amazon), join forums and Facebook groups, and independently soak up as much information as possible. That’s often enough to learn everything you could learn from a course, and some.

What I think is far more important than learning the strategy of rent-to-rent is learning how to be compliant, and that’s a course I would pay for. Rent-to-rent can be a legal minefield, and that’s why many are doing it illegitimately, breaching all kinds of terms. Sadly, most of the courses available are held by no more than salesman, so they have virtually no legal qualifications, and therefore don’t teach compliance. That’s a problem, in my opinion.

I have no affiliation with Tessa Shepperson (a Landlord Law solicitor) from landlordlaw.co.uk, but I know she’s highly respected, and she holds rent-to-rent training days. Refreshingly, she’s not a property guru, she’s a highly experienced solicitor. That’s the route I would take.

Better Property Investment alternatives to rent-to-rent

If you’re looking for a quick, easy and cheap alternative to rent-ro-rent that provides better odds, then unfortunately I don’t have good news for you. It’s a unicorn, it doesn’t exist, so I can’t point you in the direction you want to be pointed in.

For my sins, I’ve been a landlord for over a decade, and experience has taught me that there is no secret recipe or worthwhile shortcuts, despite what you might be being sold by a two-bit property guru. The old fashioned route to long-term and sustainable wealth via property is tried and tested, and it still remains king: save a deposit and buy the right property.

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