Between 2013 and 2015, I embarked in a total of 3 property renovation projects that earned me a comfortable £2120 in monthly profits, using the Rent-To-Rent scheme.
In this article, I’ll go through every step I took to bring these projects to completion.
From deal negotiation and sourcing contractors, to finding tenants and managing properties.
I’ll also discuss the lessons I’ve learned going from one project to the next.
Now, before we start, I thought it would be a good idea to explain what Rent-To-Rent exactly is.
What is Rent To Rent?
Here’s the definition given by Progressive Property:
“Rent-to-rent is when you rent out a property to a tenant on a single let basis. This tenant will rarely live at the property, and will be free to sub-let its rooms as they see fit. Depending on the type of property and the agreements made, sometimes the arrangement involves a small amount of refurb work, converting offices/lounges etc into extra bedrooms.
The sub-letter will then rent out the property to (usually 4+) separate tenants while paying the property’s single let rent and bills, while pocketing the difference.”
Check this video from Samuel Leeds for an in-depth look at what Rent-To-Rent means:
Now that we’ve explained the basics, let’s jump right in.
My First Student Property: £500/Month
My first ever renovation project took place in 2013, three years after starting my property business from scratch.
It was a townhouse, with 2 reception rooms and 2 upstairs double bedrooms.
The owner, for whom I was already managing 2 properties, was a successful business woman with a portfolio of residential properties spread across many cities.
And like many successful person, she was extremely busy and didn’t have the time, nor the patience, to manage her properties.
And, quite frankly, managing her properties was a lot of work. Most of them were in pretty poor condition and were in serious need of renovation.
Maintenance issues were reported almost daily, and collecting the rent every month from frustrated tenants often required a lot of negotiation.
To make matters worse, getting the owner to agree on repairs was always an uphill battle.
However, despite the obvious state of disrepair, the properties always attracted a lot of interests from prospective tenants.
Because their location was perfect.
And this 2-bedroom property was no different.
Located steps away from Coventry University and with easy access to the motorway, it was the perfect spot for students and young professionals alike.
On top of that, the £375 she was charging was well below the average rent for the area, and even lower when compared to student properties.
So, when she asked me to take over the management of the property, I thought:
Why not offer her a guaranteed rent, bring the property to a much higher standard and increase the rent?
With that, the owner wouldn’t have to worry about spending on repairs and I would make a lot more money than the traditional management fees. Not to mention the time saved on dealing with maintenance issues and tenants’ complaints.
So, after running the numbers, I offered her a deal she couldn’t refuse:
I would pay her £400 a month in guaranteed rent for the next 4 years and pay for all maintenance repairs, boiler and structural issues excluded.
No Ifs No Buts.
All I needed was one month free of rent, so I could have the time to source a contractor and complete the refurbishment.
My first property development project was underway.
My first task was to find a qualified tradesman, who wouldn’t cost me an arm and a leg.
Fortunately, I knew just the right person for the job.
A contractor who was recommended to me by my first business partner.
Even though he didn’t have a car, he was cheap, reliable and available immediately
So, without delay, we agreed to meet on site.
After discussing all the details, an agreement was reached. The refurbishment would take about 6 weeks and cost me around £7000 (costs + labour).
Within a few days, work had already started. Things were running smoothly but not without a lot a involvement from myself.
What I thought was an irrelevant detail turned out to be a very consequential one:
Because he didn’t have a car, the contractor relied on me for pretty much everything involving transportation of goods and people from one place to another.
That took a lot of my time and energy.
So much so that I decided to lend him one of my two cars so I could concentrate on other aspects of my business.
But, after nearly 5 weeks, we finally got there.
The once unappealing, 2-bed property was now a beautifully decorated, 3-bed property ready to welcome a group of students.
Despite the unexpected inconvenience, the project was a success. Not only it was completed ahead of schedule (5 weeks instead of 6) but we also managed to keep it within budget.
So, all I had to do now was to find tenants, which I did after only a few days. They would all pay £450 month including all utility bills and internet.
That’s £950 gross income for me. And, after deducting all costs and summer discounts, I would end up with around £500 in net monthly income.
And, with around £7400 spent for the refurbishment, It would take me only 15 months to recoup my investment.
That’s a 75% yield! Not bad for a first project.
However, another thing I didn’t pay attention to, when I should have, was the utility bills payment system.
The property had a top-up meter installed. That is, electricity and gas had to be topped up manually with a card.
And because bills were included in the rent, I was responsible for ensuring the tenants always had gas and electricity at the property.
So, knowing that, I made the mistake to rely on the students to let me know when the energy was running out.
They would often find themselves without gas or electricity, sometime in the middle of the night, because they would never let me know when meters needed topping up.
And I would get a lot of slack for it, from students and their parents. Not to mention the countless trips I would make to the property to make sure it didn’t happen again.
But, overall, the project was a great success, and I would use this first experience to start an even more lucrative project few months later…
My Second Student Property: £700/Month
By the time started my second renovation project, I was a much more experienced property manager and I had learned valuable lessons from my first experience.
We were in February 2014 and the business was doing great. I had plenty of extra cash, and, motivated by the success of my first project, I was desperately looking for a second property to add to my portfolio.
And, I didn’t have to look very far to find what I was looking for.
Galvanised by our first deal, and the peace of mind she now enjoyed with a rent guaranteed scheme, she was much more open the idea of duplicating it to another property.
So, when I came up with the offer for the second property, she agreed immediately.
This time, It was a 4-bed property with three large double bedrooms and a tiny box room. The property was in a slightly better condition than the first one, but was still far from standard I would expect for a student property.
I had already been managing the property for the past 2 years and complaints were also a regular occurrence. In fact, the current tenant had left the property without notice and was more than two months late on his rent.
So, the new deal seemed like the perfect solution for the both of us.
She would get £600 every month for the next 4 years and I would renovate the property and find much more reliable tenants.
The conditions stayed the same- I took full responsibility for repairs, apart from the boiler and the structural issues, and I also wanted a month free of rent.
Once the deal was made official, I turned my attention to finding the right man for the job. My first contractor was nowhere to be seen, having most probably gone back to his native Romania.
So, I decided to go for someone I know, and who had already done couple of jobs for me. He’d been recommended to me few months prior by another agent, who’d been working with him for years.
After meeting at the property and discussing the details, we found an agreement. The project would be completed in 6 weeks and it would cost me around £13 000.
It’s £6000 more than the first project, but the expectations were also much higher. I was now looking to go one step further and turn all but one bedroom into en-suite rooms (that is, a room that has a toilet in the room and come with a shower and/or bath).
Having learned from my last experience, I also made the necessary arrangements to change the pay-as-you-go meter system for a quarterly bill one. So I wouldn’t have to make countless trips to the property, or be called by angry parents asking me to act more professionally.
And, most importantly, I could now take a complete hands-off approach and focus on running my business.
Or, at least, that’s what I thought.
Although the job was being completed to a very good standard, time was now becoming a major issue. We were already 4 weeks in, and by the look of it, the project was nowhere near the end. My worst fear soon turned reality. We were not going to make it on time.
And with the free month now up, every day would cost me an extra £20 in rent.
When I asked for a completion date, I was told that it would take an extra 3 weeks to complete.
And that’s exactly what it took. A total of 8 weeks from start to finish. Not the ideal scenario, but the job was done nonetheless.
It was a nervous ride but I was finally there, once again. A complete refurbishment project that cost me £13 000 and would generate profits for years to come.
The property was decorated to a very high standard, and finding tenants proved relatively easy. Within 2 weeks, I had a group of 4 tenants moving in. And with a rent of £1750 for the whole property, I was now making £1150 in income, and £700 after deducting all expenses.
And with a 64% yield, It would take me roughly a year and a half to recoup my investment.
When I thought this was the best deal I could get, an ever better opportunity came along.
My Third Student Property: £920/Month
We were now in 2015, I already had 2 successful renovation projects to my name and, despite the changing student property landscape, I was confident I could add a third property to my list and still make a killing.
The other 2 properties combined were bringing me a total of £1200 per month in profits, and they were extremely easy to manage. No late phone calls or emails and no late rent payment.
For about a year now, I had been chatting with this property owner, who owned a 4-bed property, located literally steps away from the University. That was his only property and it was occupied by a family for the past year or so.
I even went to see the property one day, as we were discussing the possibility of me taking over the management of the house once their contract comes to an end.
And, to be honest, I’m not even sure how this family made it past a few days living in this mess. With hindsight, I’m even wondering how we was not penalised by the Council for failing to maintain the property to an acceptable standard.
Anyway, knowing that the tenancy agreement was now on a statutory periodic tenancy, and could be brought to an end by either party, at any time, I decided to call him to offer a rent guaranteed deal.
He had never heard of rent-to-rent before and was a bit sceptical at the idea of giving away the management of his property for the next 4 years. So, It took a bit of convincing. And, after taking him round the properties I had already done up, he agreed to a deal, this time slightly different than the previous two:
£500 rent guaranteed for 2 years, increasing to £600 for the remaining 2 years. I would also take responsibility for the repairs, boiler and structural issues excluded.
Finding a tradesman was straight forward. I would use the same one. He did a very good job the last time round so there was no reason to change.
As usual, we met at the property to assess the work to be carried out and after negotiation, we agreed to a price:
This time, the refurb would cost me £8000, and last 5 weeks. A very good deal, considering the amount of work that was required to bring it up to standard.
And, having run the numbers before, I knew that, at that price price, the return on investment for this property would be really quick.
My only worry this time was that he would, once again, fall behind on schedule. And that’s why I insisted to add a late fee clause on our agreement.
After a week late, I would deduct £20 from his remuneration for every additional late day.
After agreeing the terms, the work started almost immediately. And after 5 weeks, the refurbishment was completed but the total amount was closer to £11 000.
That is because, among other things, new double glazed windows were needed in most of the rooms.
Despite these costly additions, for the third time, the project was a success. I now had another 4-bed house, very close to Coventry University, with great potential.
On top of that, I already had 4 students lined-up, ready to sign the agreement.
The rent was £475 for each room, including all bills, internet, and a weekly cleaning service.
With £500 to pay to the owner every month, that gave me a £1400 gross income, £920 after expenses, and £820 after 2 years. Plus, with a 100% yield, I would only need a year to get my investment back.
And that’s how I made £2120 a month with only three student properties.
Although It often requires an important amount of money up front , Rent-To-Rent schemes can be a great way to increase your profits and have more control over the management of your properties.
As long as you negotiate a good deal with the property owner, and source a reliable contractor, this scheme is almost guaranteed to yield great returns and provide you with an income stream for several years.