How to do rent to rent in supported living?

4 things you must have in place before you get started 

On social media you will find people talking about rent to rent in supported living a lot and making it out to be easy and simple. I think in reality it is complex and there are many barriers to overcome to get this set up right. Remember you need to think about protecting yourself, the provider, the property owner and the supported living tenants. 

Rent-to-rent in supported living is a when a person rents a property from a property owner and then sub rents this property to a supported living provider. Usually, the way they would make money would be by charging more rent to the provider each month than they are paying the property owner and this uplift they would keep as profit.   The theory is in supported living you would not be managing the property so you could get away with a small uplift and take that as pure profit each month.  In theory this seems appealing and you can understand why people are keen to explore this as an income stream. 

Rents in supported living are closely scrutinised by the local authority and supported living providers need to complete complicated forms to justify how they got to the housing benefit amount they are claiming.  I do not think most local authorities will look favourably upon paying a higher rent because there is a rent-to-rent operator in the equation.   

There are people claiming they are making large uplifts each month and making good money from this model but I am not sure how sustainable this in the long term,  especially as local authority budgets are under such pressure.  I do think these arrangements may fall foul of the higher levels of scrunity local authorities are being forced to complete on supported living rents.  

Four things you need in consider before renting a property: 

1. If there is any finance on the property is the lender happy with a rent to rent agreement, a supported living lease and supported living tenants in the property? Most buy to let mortgage lenders will not allow supported living tenants to live in the property.  
   

2. Is the property insurance set up to allow for supported living tenants? Is the insurer aware of the rent to rent agreement and the  lease arrangement? Are they aware of the type of tenants in the property?   
   

3. You will need to ensure the lease with the supported living provider mirrors the length of the rent-to-rent agreement with the property owner.    
   

4. You would also need to be very careful that the lease wording did not leave you exposed to repairs, voids or any other liabilities as you may not have sufficient income to cover these.  

Providers should be doing thorough due diligence on the property they are leasing and the person they are leasing the property from. In my experience, and I speak to a LOT of supported living providers, most high quality experienced providers will be cautious about leasing a property from you if you do not own the property. They will be concerned about how their regulator will view the arrangement, about being left exposed or the implications for their tenants for whom a providing a stable long term home is their priority.  

If you were to find a provider who was happy with a rent-to-rent agreement I think there are a few sitatutions where it could work: 

• If you could rent a property i.e a family house and then turn it into something of higher rental value to  meet the needs of the provider, i.e an HMO, you could then justify the uplift in rent from house to  HMO. 

• If you can negotiate a very low rent for the property and then charge the provider the market rent, keeping the uplift as your profit each month. 

I know there are some people making rent-to-rent work in supported living and I suspect I will be seen as being negative by giving this opinion.  I am not interesetd in popularity,  I think it's important I am honest with you about the reality and challenges. I could make thousands of pounds each month if I wrote and sold a "rent to rent in supported living" course as I am asked for it most days, but I will only promote things that I think are ethical and sustainable and I would rather you look at other ways to make supported living work for your property business. 

If you do not have the money to put down a deposit to buy a supported living property then look at other ways to get involved. Here are four starter strategies you could use to invest in supported living: 

1. Could you learn some creative ways to buy property and then buy property to meet the needs of providers? 

2. Maybe you could research how to safely use investor funds to buy property for supported living? 

3. How about building relationships with providers and help them find property they need? 

4. Or could you source property for investors and add a supported living lease to your sourcing package? 

If you want to learn more about supported living so you can get involved in a safe sustainable way, then I have a range of courses you can explore to help you understand this much needed area of property investing, click here for more information, or, if you want to learn more and build relationships with providers then have a look at The Supported Living Property Network and build long term wealth and you can do it properly, while you create much needed homes for those who need them most.