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The reality of rent to rent - a looming crisis?

by ARPM

Subletting is an issue we have talked about frequently but listening to the lettings industry, the procedure is getting more sophisticated. The practice of a tenant becoming a landlord is taking on a more business twist and letting agents need to protect their landlords from deceitful approaches.

It is becoming clear that rent to rent is gaining traction in investment circles, with paid-for seminars and courses targeted at novices who want get a foot in property investment at a fraction of the cost. Those armed with a little knowledge and a convincing sales pitch are contacting landlords – sometimes using a script and a template letter – promising them guaranteed rent and the management of their property in exchange for them being made ‘head tenant’. 

The reality is many of these rent to rent schemes are dangerous and illegal. You may have read Vanessa Warwick from Property Tribes’ comments about stumbling across two 18 year olds with no jobs who had secured a rental property with the sole intention of creating a rent to rent HMO business. They are just two amoung hundreds of people who are being told rent to rent is a legitimate way of making money in property, operating without the guidance, skill or knowledge of a professional letting agent.

What is just as frightening as loosing property management business to dangerous amateurs is the reality that a head tenant can walk away from a rent to rent disaster, leaving the original landlord to pick up the pieces – perhaps unpaid rent, malicious damage, and increased wear and tear (or a combination of all three).

Industry news channel Property Eye also reported on mounting evidence showing that many recruitment companies are approaching landlords directly, professing to have would-be tenants with professional backgrounds looking for long-term rentals. In fact, the agency is looking for accommodation to house temp workers, creating a high turnover of tenants.  

One noted red flag concerning this practice is when agencies request four- and five-bedroom houses for lone or couple tenants when really, they want to rent out rooms to multiple temp workers to make a profit – turning the property into a HMO in the process (probably unlicensed and non-compliant too).

You may find your landlords are tempted by direct offers in times of dwindling income, especially if no voids, financial security and guaranteed rents are promised. Letting agents are in the best place to advise clients and educate them on how to spot unscrupulous offers. Agents can also use their industry knowledge to highlight how difficult it may be in the near future to remove tenants, thanks to eviction notice changes.

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