Chances are this is a person who has a rent-to-rent agreement over the property, they do not own the property but they have an agreement to manage and sublet the property and they are offering it to you to lease. Rent-to-rent is being sold to many people as a great way to get into property world without having to put any money down, so it is an attractive way to start in property.
Recently I have seen a big increase in the number of people doing rent-to-rent and offering their properties to supported living providers. On the face of it it can seem like a good way to get hold of property fast but there is a lot to think about and I am seeing a lot of these operators do not understand supported living. They are seeing it as a way to make money and do not understand the issues involved. Be very careful you, your organisation and your tenants could be at risk!
There are good rent to rent operators, but there has been a lot of poor practice which means Trading Standards are currently investigating the model. On top of this the proposed changes under the Renters Reform Bill may mean the rent-to-rent model may not be sustainable.
What do supported living providers need to think about before you sign a lease with a rent-to-rent arrangement in place? Here are 12 questions you need to ask:
Does the property have a compliant mortgage in place? Not many mortgage lenders will allow there to be a lease on the property, and most will not allow tenants that they class as “vulnerable” (which by their definition is most supported living tenants). The lender may not be happy with a rent to rent arrangement too.
So, if there is a mortgage in place make sure you get written proof that the mortgage lender is aware of the arrangement and with the tenants you support living in the property. If they say there is no mortgage on the property I would be asking for written evidence of this too.
Is the right property insurance in place? Standard buy to let insurance will normally not cover supported living tenants, so even if there is insurance in place it may not cover the property if you are leasing it.
Does the insurance provider know you are leasing the property? Do they know there is a rent to rent operator involved? Do they know the type of tenants who will be living in the property. You need to see written proof of this to make sure you are protected.
How long is the rent to rent agreement? Does it mirror the lease term you are signing? Do the break clauses mirror the ones in your lease? I would be asking to see a copy of their agreement.
What happens if the property owner wishes to sell the property? Ask this and see if you are protected in any way.
What happens if the property owner defaults on the mortgage payments? Make sure you ask the rent-to-rent operator this.
What happens if the rent-to rent operator goes bust or stops paying the landlord?
Does the property owner know you are sub leasing the property? Make sure you see evidence of this, or better still speak to the property owner.
Does the property owner understand the service you offer?
Who is responsible for any repairs not covered by your lease, the rent to rent operator or the property owner? If its the property owner, how can you make sure they are done in a timely manner/to the right standard for your tenants?
How is the rent-to-rent operator making their money? Chances are they have negotiated a low rent and are charging you a higher rent. Make sure you can afford this rent. I do not see many enhanced housing benefit claims being happy that a portion of the rent is going to pay for a rent-to-rent operators business model unless they are adding value to the arrangement in some way.
Before you sign any lease please make sure you get it checked out by a lawyer who is used to reading commercial leases.
Sadly, I do speak to providers who have got into these arrangements and things have gone wrong, sometimes this has resulted in them losing a property and their tenants being evicted.
If it was me, I would approach this kind of arrangement with extreme caution. The more people in any lease arrangement the more chances there are for things to go wrong. I think it is better to build relationships with property investors yourself and know that you are dealing directly with the property owner.
If you want to find and build relationships with property owners you can download my free guide here or join our unique community where you can connect directly with property owners to find the property you need here: The Supported Living Property Network
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