Rent to Rent Property: The Complete Guide (2023)

Rent to rent property businesses have been gaining popularity in the UK in recent years as a way for property investors and entrepreneurs to generate income without having to buy their own properties. 

In this complete guide to rent to rent property, we'll take you through everything you need to know to start your own rent to rent business. From finding the right properties, to securing funding, to navigating the legal and regulatory landscape, we'll cover all the key aspects of this business model. 

We'll also examine the pros and cons of rent to rent, the controversies surrounding it, and how it compares to traditional landlord-tenant relationships. 

Whether you're an experienced property investor or just starting out, this guide will provide you with the information you need to help succeed in the rent to rent property game.

What is "rent to rent" and how does it work in the UK?

Rent to rent (R2R) is a business model that involves leasing a property from the owner, and then subleasing the property to tenants at a higher rate. The R2R business owner acts as a middleman, collecting the rent from the subtenants and using the difference between the rent paid by the subtenants and the rent paid to the property owner to generate a profit.

In the UK, rent to rent is a relatively new and emerging business model in recent years. It is typically used as a way to generate revenue through the acquisition and management of rental properties, or as a way to capitalise on market trends and opportunities through the acquisition and resale of properties.

Don't mistake rent to rent as passive income

To engage in rent to rent in the UK, an individual or business typically begins by identifying a suitable property and negotiating a lease with the property owner. The individual or business then subleases the property to one or more subtenants and collects the rent from the subtenants. The difference between the rent paid by the subtenants and the rent paid to the property owner is used to generate a profit.

Rent to rent can be a complex and time-consuming business depending on how much support you have. It's not necessarily a hands-off income business...

It's important for investors to carefully assess the potential risks and rewards of this business model. Equally, it's just as key to ensure all legal and regulatory requirements are met, as any rent to rent business model may be subject to additional scrutiny and oversight in the UK.

What's the appeal of operating a rent to rent property business?

The big attraction for prospective property enthusiasts wanting to start a rent to rent property business, is that far less capital is needed to get going. 

This is because you don't need to "buy" any property, and therefore no heavy deposits or big mortgages are necessary. 

You can start with a much smaller amount of funds versus buying a property on a buy-to-let agreement. The initial funds would typically cover:

• The rent you'll pay to the landlord for a few months (including coverage for empty tenancy periods on your side).
• Legal and administrative fees for paperwork and compliance.
• Any minor refurbishment costs to add value (i.e. increase the price) of sub-renting the unit.

With these points in mind, it's a lot faster to start generating cash flow. Of course, that's only if everything is executed carefully and according to plan.

The pros and cons of rent to rent: is it a scalable business model?

There's the good and bad when it comes to the R2R business model. 

The pros of R2R

Some of the stand-out advantages of running a rent to rent business include:

• Generate significant profits by capitalising on the high demand for rental housing in certain UK markets through 2023.
• Enter the real estate market without the need to purchase properties outright – low capital input, high potential cashflow.
• Flexibility to choose the properties to invest in, the terms of the lease agreements, and the rent charged to subtenants. This can allow you to tailor your investments to your specific goals and preferences.
• Diversify the investment portfolio and spread risk by investing in multiple properties or markets.
• If a rent to rent strategy is implemented successfully with a strong team in place, it can provide a source of passive income through the management of rental properties – yes, we did mention earlier that it's not necessarily a passive income business, but it really depends on how well you scale and how well you operate!

The cons of R2R

On the other hand, there are also significant risks and potential downsides to the rent to rent business model. Notable disadvantages could include:

• It's still somewhat controversial in that it has received criticism for potentially exploiting tenants and landlords, and contributing to the high cost of rental housing.
• Legal and regulatory standards are subject to more scrutiny and could change. The UK government and its property and landlord policy makers are always keeping a close eye on it.
• There could be a high tenant turnover (as is the risk with any traditional rental properties such as buy-to-lets). This can be time-consuming as well as costly to manage.
• Tenant default risks are possible in a rent to rent property, as they are in any type of leased property. Subtenants may not be able to make their payments, and you might need to take legal action which could again be expensive and consume much of your time.
• Maintaining and repairing the property will almost certainly be your responsibility – it's part and parcel of a common R2R property agreement with the landlord (i.e. property owner). Keeping costs reasonable here is critical.
• Depending on your relationship with the property owner, there's potential for conflicts or misunderstandings. These could be challenging to resolve and may result in legal disputes or terminated leases.

Is it a feasible business model?

Ultimately, whether or not rent to rent is a scalable business model will depend on a range of factors, including the specific market conditions, the demand for rental housing, the availability of properties, and the legal and regulatory framework in which the business operates. 

The rewards are there to be seen, but then so are the risks... It's certainly feasible in the sense that you can earn good money and make a good living from operating a property company in this fashion. 

Although, if you're considering getting involved in rent to rent as an investor or business owner, then you need to carefully assess everything and have a well-documented plan of action that gives the best chance of avoiding all of the cracks and pitfalls.

Rent to rent controversy: exploitation or opportunity?

R2R property businesses have been the subject of controversy in some quarters, with some people arguing that they contribute to the exploitation of tenants and landlords and contribute to the high cost of rental housing. 

Critics of rent to rent argue that it can result in tenants paying significantly higher rents than they would under a traditional landlord-tenant relationship, and that it can undermine the stability of the rental housing market.

Conversely, supporters of rent to rent argue that it can provide an opportunity for investors to enter the real estate market without the need to purchase properties outright, and can provide a source of passive income through the management of rental properties. 

There are some advocates of rent to rent

They also say it's a viable investment strategy that offers significant potential rewards, and may argue that it can help to increase the supply of rental housing in certain high-demand locations throughout the UK.

Ultimately, whether rent to rent is seen as exploitation or opportunity will depend on the perspective of the person in question. As an investor willing put cash into a rent to rent property, you'd likely see it as a way to get a good return on your investment. 

However, the UK government or a strapped-for-cash tenant struggling to find a place to rent, may view it as unethical and contributing to the housing crisis.

A closer look at rent to rent and the UK rental housing market

The state of the UK rental housing market during in 2023 varies depending on a range of factors, including the specific location, the demand for rental housing in those locations, the availability of properties, and the economic conditions.

In general, the UK rental housing market has been characterized by high demand and rising rents in recent years, particularly in urban areas. This will be no different in 2023... 

It's driven by a range of factors, including population growth, rising house prices, and a shortage of affordable housing. As a result, many people in the UK are unable to afford to buy a home and are instead choosing to rent.

High demand brings high rental costs

The high demand for rental housing has led to increased competition for rental properties in cities and nearby towns to those cities. Unsurprisingly the situation has contributed to rising rents. 

It's made it challenging for many people to afford rental housing let alone buying a home – there are ongoing concerns about the affordability and the availability of housing across the UK.

Despite these challenges, the UK rental housing market remains attractive for investors, with the potential for strong returns and profit in certain locations. This is predominantly because of the huge supply and demand gap, in that there isn't enough housing (supply) for tenants (demand) across the board. 

For the most part, occupying your investment properties with tenants, whether they adopt R2R, BTL or HMO strategies, shouldn't be difficult – pending the right things being done well: location, good standard of build and furnishings (if applicable), and competitively priced.

The legal and compliance landscape of UK rent to rent

The regulatory landscape of rent to rent in the UK is complex yet highly regulated. It's similar to typical landlord-tenant regulations but with added scrutiny given there's an additional party involved: you, as the R2R middleman.

Rent to rent is subject to a range of mandatory requirements that vary depending on the specific circumstances of the property and the agreements in place. These requirements may include:

• Licensing: Rent to rent properties may be subject to licensing requirements in certain circumstances, such as if the property is being used as a house of multiple occupation (HMO). HMOs are properties that are occupied by three or more people who are not from the same household, and are this warrants additional licensing and management requirements. Investors in rent to rent properties should be aware of these requirements and ensure that they are properly licensed.
• Insurance: As with any landlord, they should have Landlord insurance. In a rent to rent deal, you could be classed as the landlord from the tenant's perspective, and so this needs exploring further to ensure you're adequately protected. Additionally, other areas of insurance from a business standpoint you should look into purchasing are public liability, professional indemnity, and rental protection.
• Contracts: There are several contracts that may be necessary to have signed as part of a rent to rent property opportunity. They might include a lease agreement, sublease agreement, property management agreement and guarantee agreement.
• Tenant protection laws: A rent to rent property need to follow tenant protection laws in the UK, which set out the rights and responsibilities of landlords and tenants and provide a framework for the resolution of disputes. This includes the requirement for landlords to protect tenants' deposits and to maintain the property in a safe and wearable condition, and the requirement for tenants to pay rent and to use the property in a responsible manner.
• Health and safety regulations: Keeping rent to rent properties in a healthy and safe condition is paramount. Health and safety regulations in the UK set out the minimum standards that must be met to ensure the safety of tenants – make sure to follow them. These regulations include areas such as fire, electrical and gas safety, among others.
• Property maintenance: There are minimum standards that must be met to ensure the functionality of any leased UK property. They could cover structural integrity, plumbing and heating, pest control, and more.
• Professional and legal advice: Investors in rent to rent properties should seek professional and legal advice before entering into a rent to rent agreement to ensure that they are fully informed of their rights and responsibilities and are operating in compliance with the legal and regulatory requirements that apply to their business.

It's really key that investors in rent to rent properties are familiar with the legal and regulatory requirements that apply to their business and to ensure that they are operating in compliance with these requirements. Failing to comply with these requirements can lead to legal action, financial penalties, and reputational dangers!

Rent to rent property business: 10-step checklist

Still keen on venturing into R2R property? Increase your chances of success when starting out by ticking off the following 10 checklist items.

If you can't or don't need to tick off one or more, then at least consider your strategy in or around them to avoid any surprises later on!

1. Market research: Conduct thorough research on the local property market and identify areas with high demand for rental properties.
2. Business plan: Create a detailed business plan outlining your goals, target market, marketing strategies, financial projections, and operational procedures.
3. Legal requirements: Ensure that you comply with all legal and compliance requirements, including obtaining necessary licenses and permits, registering your business, and adhering to landlord and tenant laws.
4. Funding: Determine your startup costs and explore financing options such as loans or investment from partners.
5. Property sourcing: Identify suitable properties for rent to rent on your own and negotiate with property owners or agents. Or find a property sourcing agent or company specialising in R2R sourcing to give an expert hand in the deal finding and deal making process.
6. Property management: Develop a system for property management and maintenance, including regular inspections, repairs, and tenant relations – can you do it on your own or is this worth considering outsourcing to a property management company?
7. Marketing: Adopt a full marketing strategy to promote your business and attract potential tenants, including online advertising (and offline depending on the target market), social media, and networking.
8. Financial management: Implement a robust accounting and financial management system, including budgeting, bookkeeping, and tax compliance.
9. Team building: Build a team of professionals, including property managers, accountants, and lawyers, to support your business operations. This doesn't necessarily mean hiring people directly since that's a horrible large cost when starting out. But at least have vendors in place ready to help when necessary.
10. Risk management: Develop a plan to manage potential risks, such as property damage, tenant defaults, or legal disputes.

Now, this list can seem a little daunting at first glance... 

It's not to scare you but instead perhaps provide a reality check that there's a lot of things to take into account if you're going to do this properly!

Do what ever you can to avoid shortcuts, and best of all, steer away from any "get rich quick" R2R gurus or schemes. It's a simple business model, but not easy execute – it requires hard work to make it genuinely profitable.

How can I find a great rent to rent property deal?

The quality of your market research and business plan depend heavily on the numbers you've calculated for your revenue and costs on your first R2R property deal.

How much can you realistically make? How much can you realistically lose in the event of several worst-case scenarios?

Most importantly, how on earth can you find that first deal to really get things going and avoid some obvious pitfalls?

This is where the benefits of working with a property deal sourcer come into play...

Property sourcing experts in rent to rent opportunities

They exist, and they can help in more ways than one:

• Time-saving: Property sourcing brokers can save you time by identifying suitable properties that meet your rent to rent criteria. They can take care of the legwork, including searching for properties, viewing them, and negotiating with the landlord or property owners.
• Expertise: they have the expertise to identify properties with high potential for profit and growth. They can help you to avoid making costly mistakes, and can provide advice on areas to invest in, rental yields, and potential demand.
• Access to off-market property deals: a property sourcer may have access to off-market rent to rent deals that are not advertised publicly. These deals can often be more attractive and profitable than those available on the open market.
• Negotiating power: the R2R deal sourcer will have the experience and knowledge to negotiate with landlords and agents to secure the best possible terms. They can help you to get a better deal on rent, terms of the tenancy agreement, and other conditions.
• Networking: they often have a network of contacts in the industry, including landlords, agents, and other property professionals. This can give you access to a wider range of rent to rent deals and opportunities.
• Professionalism: This is their "business" activity for a reason. A property sourcing agent can provide a professional service, handling all aspects of the process in a timely and efficient manner. They can help to ensure that the deal is completed smoothly and that all legal requirements are met.

If you're not sure where to start looking and how to negotiate a rent to rent property deal, simply get in touch with a property sourcing company first to understand more. Most, if not all, will chat to you free initially and give potentially invaluable advice before you take the plunge! 

You might want to check out the best questions to ask property sourcing agents – these can easily help you assess a property deal sourcer and enable you to act with more confidence if you want take things further.

Here's a case study from a verified property sourcer

Let's take a look at a rent to rent deal that was formulated for an investor by OS Residential Properties, a property sourcing company specialising in London and Cambridge.

It started with a local landlord who is the owner of 2 HMO properties in Streatham, London. They were having problems with tenants and managing everything (including the problems) themselves. A far from ideal situation for any property owner.

The landlord had suffered long void periods, damage to her propertIes, and horrid costs to evict the tenants. 

As a result, the landlord was unable to do the necessary repairs needed to bring their properties to a reasonable standard for any prospective tenants – they were not attractive to live in, and the chance to drum up any tenant interest was quickly turned away by local estate agents.

And so with that, the landlord sought help via a different strategy: rent to rent.

Guaranteeing rent for landlords with property refurbishments

They saw a guaranteed rent advert online posted by OS Residential Properties, a registered property sourcing agency. The landlord contacted them to find out more – they were simply fed up and tired of all the stress and hassle of managing the properties, while at the same time, this guaranteed rent advert seemed like an ideal outcome to alleviate the current pains.

OS Residential Properties and their Director, Nana Sheila were perfectly positioned to help: they acted as the intermediary between the landlord and their strong network of investors who were on the lookout for new rent to rent property opportunities.

With that being said, there was one investor who was interested in taking over the management of both HMO properties in the South London area. OS Residential Properties connected both the investor and landlord through their property sourcing process. 

Who wins – the investor or the landlord?

The answer is the investor and the landlord. This is a win-win situation for both of them! Here's why...

• The investor agreed to pay the landlord rental income for the 2 HMOs – this is guaranteed rent for the landlord over the course of several years.
• The landlord now enjoys a rental income every month free from tenant management and with complete peace of mind.
• The investor spent thousands on a high-quality face-lift to both properties – even though they don't own the properties.
• The properties were rented out to professional tenants – this time, more carefully selected and vetted.
• The investor now receives a higher (premium) rental income than what they pay the landlord, meaning they're left with a positive cashflow without actually owning those properties. This positive cashflow also takes into account the cost of their refurbs, which at the end of the guaranteed rental agreement will leave them with a healthy profit overall.

Rent to rent as part of a UK property portfolio – summary

Investing in a rent to rent property business in the UK can be a lucrative and rewarding experience, but it's not without its challenges. 

It offers the potential for significant income, without the need for a large initial investment, and can provide a flexible and scalable business model. However, it requires a good understanding of the legal and regulatory landscape, as well as the rental housing market, and the ability to manage and maintain properties effectively.

The biggest challenges of the rent to rent model are arguably the need to secure a reliable and consistent stream of tenants and the potential risks of rental arrears, property damage, and legal disputes. It also requires a significant amount of time and effort to source, negotiate, and manage properties, and may require additional investment in marketing and advertising to attract potential tenants.

Making it work what ever the R2R strategy

Whether you're adopting a rent to buy-to-let, rent to serviced accommodation (R2SA) or even rent to HMO model, those with the necessary skills and resources can make it work. 

As with any investment opportunity, it is important to conduct thorough research, seek professional advice where necessary, and develop a sound business plan to minimise risks and maximise potential returns.

Need help getting started with the right rent to rent property investment opportunity? Check out and connect with one or more verified rent to rent deal sourcers listed with us.