The Five Most Important Tools You Need When Starting A Rent-To-Rent Business

I know first hand how tough it is getting started in rent to rent. It can be really challenging to not only know what to do to get your business off the ground but also what steps to take next.

Read below to listen to the full episode on The HMO Podcast for the five absolute essentials that should be at the top of your checklist when you’re starting a rent-to-rent business!

These tools are non-negotiables that can truly shape your business, but they are super easy to get in place. And if you’re already on the exciting path of rent to rent, don’t worry – it’s never too late to ensure you have these things in place effectively!

1. The Right Contracts

First and foremost, you need the right contracts in place for any rent-to-rent (R2R) business – this includes a lease and management agreement. Ideally, you’ll always use a lease, but you can’t if there’s a mortgage in place. You can use one when a landlord is unencumbered on a property or has commercial finance that is okay with you leasing the property.

But in essence, these contracts do and say the same thing. And when a landlord is interested in working with you, they’ll ask you for a copy of your agreement. It should outline all of the terms and conditions, including what you will provide and be responsible for and the same for the property owner.

You don’t want to be scrabbling around trying to get your hands on one as you could end up paying for something that doesn’t do the job, which could end up being a big problem down the line. So, invest in the right sort of paperwork ahead of time, giving you and the owner all of the protections and clarity that you both need!

In an ideal world, you’ll get your agreements drawn up by a commercial lawyer. That’s what I did, and it was one of the most important and valuable investments we ever made in our R2R business. But if you want a copy of my contracts to use as a framework, sign up for the premium subscription of The HMO Roadmap, and then get it reviewed by your lawyers.

2. A Rent-To-Rent Deal Stacker

Secondly, you need a deal stacker built specifically for R2R, covering the key factors and sensitivities that you should be considering with every deal. Stacking rent-to-rent deals is actually quite different to what you should do and consider when buying HMOs as the metrics and considerations vary greatly.

R2R is very sensitive to factors like utility bills and how much you get per room per week, as an extra £2-£4 per week on a bedroom makes a big difference in this model. A good deal stacker should tell you where you’re going to be if you pay the landlord ‘x’, refurb it for ‘y’, and factor in some bills and the length of the contract.

You also need to be able to see, play and tweak all of these things to help you stress test deals. This can help you understand the limits and extremities of prospective deals. But the deal stacker you use should not be overly complicated, and it’s not easy to build your own – it actually took me years and years to develop mine.

The R2R deal stacker available within The HMO Roadmap premium subscription allows you to easily and quickly work out different scenarios for a deal and build a picture of where you’d ideally like to be and how varying parameters impact the deal. Then, you’ll work out what you could pay the landlord from ‘x’ to ‘y’, and then you should go negotiate the best possible deal.

This allows you to know exactly where you need and want to be. And keep in mind that not utilising a good R2R deal stacker could lead you to negotiating deals that don’t have enough meat on the bone, and of course, that will cause huge problems later on!

3. A Thorough Business Plan

If you’re building a rent-to-rent business, you’ll also need a well thought out business plan. As R2R businesses have a lot of moving parts and considerations to make, it’s especially important to have a detailed plan before you get started.

Not having a business plan is like going on a big road trip and not planning your route at all! You can almost guarantee that you’re either never going to get to where you ultimately want to be. You’ll spend extra time and money, because you get lost and have to change direction along the way.

This is exactly why you should design and map out your route for getting from Point A (where you are now) to Point B (your destination or goal) in your R2R business. And with that, you can start building a plan for how to get between those two points and put tangible goals and KPIs in place.

Before you get overwhelmed with how to do this, I’ve built a template business plan for either a R2R or HMO business. Our premium subscription offers this and includes all the prompts, questions and frameworks you need to help you build your own business plan.

4. HMO-Specific Tenancy Agreements

There are different places you can get tenancy agreements, but many aren’t specific for HMO properties. So, you need to be careful with what tenancy agreements you use. Over the years, I’ve learned that there are many things you need to add, take out and tweak because otherwise, it wastes loads of time and can end up costing you money.

You’ll also actually need two different types of tenancy agreements – one for students and one for young professionals. They’re quite different with varying considerations. And you must be clear about all of the little details regarding who’s responsible for what. If something isn’t covered in your tenancy agreement, it’s going to come at your cost!

If you’d like to see a copy of my tenancy agreements and use it as a template for your R2R deals, head over to TheHMORoadmap.co.uk and sign up for a premium subscription.

5. A Supportive Network and Mentor

Finding support and guidance is key as the R2R strategy is really difficult to do on your own. It’s such a tricky business to build, because there are so many moving parts, it’s quite competitive, and it can be a tough sale! Having a supportive network and mentor was one of the most important parts of starting and scaling up my rent-to-rent business.

Because of how much you need to learn to build a R2R business, you’ll likely need some guidance, support and a network around you. On top of that, during the entire time I owned my management business, I had a mentor.

Over the years, there were a whole range of reasons why I could have thrown the towel in, and there was so much advice that I was given by my mentor that helped me save time and money, avoid huge mistakes and stay on track.

So, if you’d like to be a part of a supportive community of HMO investors and R2R operators, join our free Facebook Group The HMO Community. There are so many members who have huge amounts of experience in our industry and can offer guidance and support if you have any questions or issues.

And if you want to take it a step further and invest in professional and experienced-based advice and support through mentorship, Joe & Liv work with us at The HMO Roadmap, offering a R2R mentorship program. For more information, visit the The R2R FastTrack page and book a call.

Those are the five tools that you must have in place if you’re starting a rent-to-rent business! The good news is that you can find resources and guidance for each of these over in The HMO Roadmap. This is why I created the online learning platform in the first place, because I wanted to build the very best one-stop shop for all of your HMO needs.

And if you have any questions regarding R2R or HMOs in general, join us over in The HMO Community Facebook Group and ask away!

About the Author:

Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind, writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!