The words spoken by every aspiring or well learned property investor in the market today…
A property strategy which is becoming increasingly popular in the UK property market. It’s an attractive approach aimed at the potential investors who may not have sufficient capital to purchase investment properties outright or some experienced property investors who simply wish to creatively expand their property portfolio by providing them with: –
- A flow of rental income which builds up a nest egg for bigger investments.
- High returns on a minimal initial investment (compared to what you would spend on a traditional buy-to-let property).
- The opportunity to gain the experience of being a landlord without actually legally owing the property.
You might have some questions…
Why a rent-to-rent lease agreement and not a buy-to-let?
Well, there is a simple answer to that…
Buy to let – you require a hefty deposit and capital to purchase the property outright and generating rental income from the property can take some time.
Rent to rent lease agreements require less start-up capital (no deposit, no mortgage and no stamp duty land tax) and you are able to start making a rental income profit almost immediately.
What are the advantages for a Landlord?
- GUARANTEED rental income no matter what
- General property maintenance and emergencies are no longer their issue – to a certain extent
- No breaks between tenancies and no hassle in trying to find and replace tenants or deal with tenant disputes and a vacant investment property
What if the arrangement does not work out, am I stuck in a legal agreement?
There will be a clause in the lease agreement, which is called a Break Clause, that allows either party (if it’s mutual) or the tenant (if it’s unilateral) to terminate prior to the full term expires, without giving any reason.
Will I be able to use the property for any purpose I see fit?
The use of the property will be specifically set out in the lease agreement and if you wish to have a specific use for the property ensure that this is agreed with the Landlord and included in the lease agreement.
How long can the agreement be in place for?
The longer the better for you as an investor.
You will have an agreement with the landlord for a fixed lease term at a fixed rent. You are then certain as to your cost to the Landlord for the set term. Usually this is the case, however, be careful of any rent review clauses! This is where you need your specialist property solicitor to assist and negotiate.
In conclusion…
While rent to rent lease agreements can be a great property investment strategy, there is most definitely a legal element that needs to be addressed.
A well-structured rent-to-rent lease agreement will save you time and hassle as well as prevent any future pitfalls should they happen. You will require a specialist property solicitor who has expertise in dealing with these types of lease agreements to ensure that the lease agreement is compliant and legally sound.
If a rent-to-rent lease agreement sounds like something you would like to pursue, then please get in contact with the specialist property solicitor team at RSL Law who can advise you accordingly.
