Rent to Rent, dubbed the new property get rich scheme

Graham_Devon

Daniel Burton is just 25, a dropout from the London School of Economics, but he's raking in £35,000 a month in rent – without ever having to buy a property. He has let out 200 rooms in 40 properties across London, turning a fat profit by renting a three-bed house from a landlord, converting the lounge and dining room into bedrooms, cramming more tenants in and leaving them with just a kitchen to share. Welcome to the rapidly growing world of "rent-to-rent", also known as "rent the rented" and "multi-let".

Burton calls it "arbitrage" – finding properties where a landlord has not realised how much more they could squeeze in rent from the house. In an online webinar he tells other potential investors how to "jack up the rent" and maximise the amount of money that can be obtained from local authorities through the Local Housing Allowance.

But Burton is just one player in a mushrooming industry. A new breed of self-styled property experts are flogging books, seminars and courses on rent-to-rent, boasting that pretty much anyone can "turbo charge" the rent or "make £10,000 a month" without so much as even buying a property.

This comes amid growing concern about spiralling rents in Britain's major cities, overcrowding and a lack of tenancy rights. Average rent in London has increased by 18% over the past three years, with the latest increases running at about 8% a year at a time when real wage growth is close to zero.

But for the promoters of rent-to-rent the lure is the "infinity profit" and "passive income" – terms that are cheerfully bandied around websites encouraging others to participate.

Who'd have thought you could make money renting to rent!?

Anyway....the only question I would have is how are they converting rooms within a house they don't own?

Surely this also breaks mortgage rules for the landlords renting to the rent-to-rent landlord? if they have mortgages that is?

http://www.guardian.co.uk/money/2013/jun/29/rent-to-rent-property

Carl31

I thought many tenancies would have a condition that meant this sort of thing was not possible. I know we cannot sub let to anyone on our house

Seems a bit of a faux pas on the side of the land lord

Graham_Devon

Carl31 wrote: »

I thought many tenancies would have a condition that meant this sort of thing was not possible. I know we cannot sub let to anyone on our house

Seems a bit of a faux pas on the side of the land lord

The article suggests many landlords know about it and are more than happy with it.

It appears to be based loosely on loopholes and switching to commercial tenancies. There are some cases where it's certainly legal. Others where it's possibly not quite so legal.

Either way, it's praying on those who need housing and cramming in as many as possible in a house in order to take a slice of the pie. Just another damaging consequence of greed and high house prices.

somethingcorporate

I'd not trust a tenant to do things properly, you'd have to be half-mad to give your tenant this kind of responsibility over your investment property.

Still, if all those greedy folk can only see $$ who cares about the safety of those living in shoddily converted properties?!

IveSeenTheLight

Graham_Devon wrote: »

The article suggests many landlords know about it and are more than happy with it.

I was once asked to put additional beds in the bedrooms and also in the living room of a 2 bed flat so that the "prospective tenants" could move their family across from abroad.

I was concerned of subletting so I let out to another prospective tenant.

The article states "They say landlords know", but I would wonder if they really do.

chucknorris

IveSeenTheLight wrote: »

I was once asked to put additional beds in the bedrooms and also in the living room of a 2 bed flat so that the "prospective tenants" could move their family across from abroad.

I was concerned of subletting so I let out to another prospective tenant.

The article states "They say landlords know", but I would wonder if they really do.

When we were showing prospective tenants around the last house we bought in 2008, I said to them 'We are looking for tenants that will appreciate the quality of the refurbishment that we have just carried out, and enjoy the space rather than just cramming the house full of people'. To which they replied 'would it be ok to move out the dinning room and lounge furniture and put more beds in'? We did eventually find the sort of tenants that we wanted though.

kabayiri

You will always get chancers/entrepreneurs, who spot anomalies in a marketplace and maximise the resulting opportunity.

But...what I don't get is , why start broadcasting the technique / running seminars and courses ?

That's surely creating a bubble, where early adopters reap the profit then pile out early. Bubbles create casualties, probably the poor renters ultimately.

Perhaps creaming off £10K a month just isn't enough for these entrepreneurs.

IveSeenTheLight

kabayiri wrote: »

You will always get chancers/entrepreneurs, who spot anomalies in a marketplace and maximise the resulting opportunity.

But...what I don't get is , why start broadcasting the technique / running seminars and courses ?

That's surely creating a bubble, where early adopters reap the profit then pile out early. Bubbles create casualties, probably the poor renters ultimately.

Perhaps creaming off £10K a month just isn't enough for these entrepreneurs.

Probably because the revenue stream is drying out / they are being found out so are now "selling" the idea for £15k a day selling the idea through their seminars.

It sounds like a get quick rich scam that benefits those in early and creams of those desperate to replicate but will unlikely be able to.

don;t they realise there is a shortage of properties and there are only a limited number of rent to rent potential properties?

Mallotum_X

somethingcorporate wrote: »

I'd not trust a tenant to do things properly, you'd have to be half-mad to give your tenant this kind of responsibility over your investment property.

Still, if all those greedy folk can only see $$ who cares about the safety of those living in shoddily converted properties?!

Depends what they are doing.

Is a house less safe because the lounge has a bed and not a sofa..

Mr._Pricklepants

Daniel Burton is just 25, a dropout from the London School of Economics, but he's raking in £35,000 a month in rent – without ever having to buy a property.

Another one who got 'lucky'?

zzzLazyDaisy

Mallotum_X wrote: »

Depends what they are doing.

Is a house less safe because the lounge has a bed and not a sofa..

It could turn a 3 bed family let into a HMO. Which would be unlicensed and leave the head landlord at risk of a hefty fine

http://www.lbhf.gov.uk/Directory/Housing/Multiple_occupancy_homes/