Paul Shamplina, founder of Landlord Action, appeared on Radio 4’s You and Yours show yesterday to warn landlords of the risk of letting their property to rent-to-rent agents.
Rent-to-rent is a simple concept: Rent a house, then sub-let the rooms to sub- tenants and make as much profit as possible.
It is a mushrooming phenomenon which has seen hoards of “experts” writing blogs, books and seminars on how to get started and even running courses costing up to £500 on how to bring in tens of thousands of pounds with virtually no outlay.
One such “guru” includes Daniel Burton who claimed he earned £35,000 a month from the get-rich-quick scheme. Two weeks ago The Guardian revealed he had gone missing, leaving tenants and landlords across London hundreds of pounds out of pocket. He has since resurfaced, admitted wrong-doing and vowed to pay back all the money he owes.
Rent-to-rent involves a tenant (or “renter”) offering a landlord a guaranteed amount of rent for a set period, say three years.
“This amount is likely to be less than its actual market value but the landlord, in theory, is happy because the property is let and he does not need to worry about lost rent, void periods or tenant issues for the foreseeable future” says Shamplina. “The tenant agrees to look after the property, take care of maintenance issues and in some cases even carry out a refurbishment on the property. Then, the tenant sub-lets as many rooms as possible to willing sub-tenants who are happy to rent a converted lounge or dining room and live in a house shared with six other strangers.
“The “renter” then creams a profit on the difference between the rent he is paying the owner/landlord and the rent coming in from the sub-tenants as a result of the multi-let.”
You and Yours spoke to Rent To Rent practitioner Taiwo Orishayomi who claimed she was fulfilling a market need by offering tenants short flexible contracts. She said rent-to-rent could be done legally if both the landlord and their mortgage lender both gave their consent.
Next the programme heard from landlord Melissa Davies who rented out her four-bedroom house in Acton. She thought she had let it to a family, but it turned out the tenant had sublet it and 11 people were living in the house, and was deemed to be an HMO by the council.
Davies had to spend nearly £20,000 to get her property back into a decent condition as rooms had been sub-divided and damage had been done to the property.
Shamplina said: “I have several concerns over the legal practices of this process and how it affects the very landlords it claims to ‘support’. In my view, if it is not carried out diligently the landlord loses control of the property which is where the problems begin. I suppose I speak from being at the sharp end of dealing with evictions but I would advise any landlords entering into such an agreement to tread very carefully.”