If you’re looking to start your property investment journey but don’t have the capital for a traditional buy-to-let strategy, then a Rent-to-rent business might be the right investment strategy for you.
At Pluxa Property, we’ve helped hundreds of property investors in the UK build high-ROI rent-to-rent portfolios, and I am here to guide you through the process.
Rent to Rent, particularly when focused on Serviced Accommodation (R2SA), has become one of the most exciting and accessible property strategies in the UK.
With the potential to generate monthly cash flows of £1,000 or more from just a £10,000 investment— making it one of the most successful property investment strategies.
As the UK’s leading short-term let property investment company, with over 100 R2SA properties in our portfolio, we know what it takes to succeed in this market.
Whether you’re a complete beginner or an experienced investor looking to diversify, our team of experts is ready to help you build a profitable Rent-to-rent business.
In this guide, we’ll share 10 steps to start your own Rent to Rent business in the UK.
This includes from understanding the basics to scaling your portfolio to legal requirements to consider.
And the best part? With Pluxa Property’s VIP investor system, you can benefit from our expertise every step of the way.
What is Rent to Rent or Guaranteed Rent in the UK?
Rent-to-rent is a property investment method in which the investor rents a property from a homeowner for a certain period and puts it out for short-term rentals. The investors don’t reside there but have the freedom to sublet the property to others.
For landlords, Rent to Rent UK properties ensure guaranteed rental payment throughout the lease term.
The rent-to-rent model is quite simple. Investors (or the direct tenants) pay a fixed rent to landlords from their rental income from the sub-tenants payment, keeping the remaining yield in their pockets.
For example, A rents a property from Landowner B and guarantees them a monthly rent of £500. But, A puts out the property for rent and earns £800 per month. So, A keeps £300 per month as their rental income without much investment.
How does Rent to Rent business model works in the UK?
Here’s how the Rent to Rent business model in the UK works:
- Finding a suitable property for renting, usually for 3-5 years
- Negotiating terms with the landlord regarding rent and other conditions and then signing a contract
- The rent-to-rent landlord takes control of the property over the agreed lease term
- Look for property management agencies who can assist you with making the property ready for renting
- Pay the landowner or the letting agency a guaranteed rent throughout the lease period
- Set a higher rent than your rental payments to the owner while subletting to tenants
- The difference between your rental income and other associated costs and the rent you pay the owner is your profit margin
- At the end of the lease term, the investor returns the property as agreed while signing the contract
What are the key roles and responsibilities in the Rent to Rent Business ?
In a Rent to Rent property business model, landlords, property investors, and tenants, all have their unique roles and responsibilities.
1. Landlord
Landlords are the property owners who rent out their property for business.
Here are the roles of landlords in the rent to rent business:
- Ensure the property is in good condition and meets all the legal standards for safety and habitability, including fire safety, health, and safety inspections
- Provide Energy Performance Certificate for the property
- Draft clear lease agreements with Rent to Rent investors, outlining all the terms and conditions and the investor’s responsibilities.
- Protect tenant’s property deposits in a government-approved scheme
- Carry out major repairs and maintenance that fall outside the scope of the tenant’s or investor’s responsibility.
- Check if the tenant has the right to rent your property (if it’s in England)
- Buy and maintain appropriate insurance coverage for the property
- Stay compliant with the standard local housing laws and regulations
2. Rent to Rent Investor
Rent-to-rent investors are the ones who invest in renting a property and using it for short-term or long-term rentals.
Here are the roles of investors in the rent to rent business:
- Ensure compliance with deposit protection laws to protect themselves from legal repercussions
- Focus on the day-to-day property management process including tenant management, collecting rents, and solving tenant issues
- Pay a fixed rent to the landlord as agreed during the signing of the leasing contract
- Improve the property’s appeal, often by furnishing or renovating, to attract tenants and maximize rental income
- Obtain necessary licenses for HMO conversion and ensure compliance with safety and legal standards
- Budget properly to manage property maintenance, pay utility bills, and cover operational costs
- Make sure the property remains the same when renting and while returning it back to the landlord
3. Tenants
Property investors sublet the leased property to tenants.
Here are the roles of tenants in the rent to rent business:
- Pay proper rent and on time as mentioned in the contract
- Move Out from the property within the set period without intentionally damaging the property
- Follow the terms and conditions mentioned in the tenancy agreement
- Maintain the cleanliness and hygiene of the property and report any maintenance issues immediately
- Be considerate with other tenants in a multi-let or HMO property
How to start Rent-to-Rent Business in the UK?
To set up a rent-to-rent business in the UK, you need to go through certain steps.
1. Research the market
Conduct thorough market research to identify areas with maximum demand for rental properties and have higher rental yields. For this, you can use the Office of National Statistics portal that offers the housing and rental prices of different areas in England.
With this idea of the local rental market, rental yield, demographics, and market competition you can make better decisions about the property type to invest in and an idea of the potential rental income you can generate.
2. Business Plan
Your business plan must outline your Rent-to-Rent business objectives, strategies, target market, marketing strategies, operational procedures, and risk management. For example, you can target students and young professionals for short-term rentals or individuals and family tourists. Your business objectives may include the type of property you want to invest in.
Such as, an HMO investment can allow multiple tenants while a single-let property allows single tenants for a short-term stay, which type do you prefer for your Rent-to-Rent business?
You must also focus on the market analysis to choose the right area for your business, decide on the business structure and the licenses to apply, secure funding, decide on which insurance to buy, and discuss with solicitors on what legal contracts to prepare before leasing properties.
This will guide you in the initial stages of business and create a road map to achieve your long-term objectives.
👉 Download the free rent to rent business plan
3. Legal Structure
Choosing the right legal structure for your business is essential for tax purposes, liability, and compliance.
In the UK, the common legal business structure options include sole trader, limited company, partnership, and limited liability partnership.
Tenants need to pay a deposit to the landlord at the start of tenancy. If the total annual rent is less than £50,000 your maximum deposit will be 5 months’ rent, and for £50,000 or above annual rent, your maximum deposit will be 6 months’ rent which is refundable at the end of tenancy after all the rents are cleared and the property is returned in its original condition.
There are a few things that you must have handy like your identity documents, immigration status (if applicable), a good credit history, and employment status.
Landlords and rent-to-rent investors must know about the “Right to Rent” checks to ensure you are renting the property to right tenants.
You can enrol for accreditation scheme, it provides you training and support to landlords in fulfilling legal and ethical responsibilities.
4. Licenses and Compliance
Before you start your rent-to-rent business, make sure to inform the local planning authority in the area. In case of changes and improvements to the property, these authorities can help you first. Additionally, if you are setting up HMO properties you require a specific HMO license from respective local authorities.
Make sure you become a member of the Property Redress Scheme which protects the rights of the tenants and creates a sense of trust among property owners.
According to Housing Act 2004, before you rent out the property make sure you undertake a thorough risk assessment to ensure the property meets safety and health standards.
Also, such companies must have an ICO (Information Commissioner Office) registration to protect personal data.
5. Insurance
Arranging the right insurance for your business is essential. Landlords must buy the landlord insurance specially designed for rental properties. It protects property and covers the cost of legal disputes for unpaid rent and disturbed tenants. They also can get unoccupied property insurance that protects the landlord from theft and vandalism while the property is left vacant and covers any damage from gas oil leaks and natural disasters.
The other two coverages include property owners’ liability and professional indemnity insurance.
The professional indemnity insurance protects you against any claim made in case of financial loss.
The property owners’ liability protects you against all the claims made in case of damage or physical injury to tenants on the property or because of the property.
6. Secure funding
Though rent-to-rent property can get away with less capital than buying properties, you still require funds to take your business off the ground. This includes property deposits, legal fees, property refurbishment, and marketing costs.
You can invest £10k a year for refurbishing the property and earn £1k monthly from sublets. A part of your income goes to the landlord as a fixed rent as mentioned in the lease agreement.
You can get free legal advice on the laws affecting residential leaseholds in England and Wales from the Leasehold Advisory Service. However, if you are hiring private solicitors you may be required to pay £1,000.
Other kinds of fees include the rent, refundable tenancy deposit and holding deposit, utility bills, tenancy set-up fees, etc.
You can consider various funding options like personal savings, investment property loans, mortgages, crowdfunding, or partnerships. For short-term refurbishment projects, take out a bridge loan with a short tenure to pay back. You can also get longer-term bridging finance or commercial mortgages for large renovations. Some of the popular property finance options include commercial mortgages, auction finance, refurbishment bridge finance, and development finance.
7. Find profitable property deals in the UK
For efficient property management, you can hire Pluxa, one of the best property management agencies in the UK.
We assist you with everything related to rent-to-rent business, from property sourcing and negotiating terms to tenant sourcing and management, maintenance of the property, assisting with pricing strategy, and complying with necessary regulations. You can also purchase a property through Pluxa and get our expert help in creating better lease terms for putting out that property for rent.
👉 Find the best property deals in the UK
👉Find out best returns area for buy-to-let properties in 2024.
8. Marketing
You need to implement a good sales and marketing strategy to bring in attractive rent-to-rent deals. Use online and offline marketing channels, including social media platforms, local directories, property listing websites, newspapers, and word-of-mouth referrals.
Make sure you highlight the unique features of your property and the benefits to attract people.
9. Get the right contract in place
With such businesses, you must have proper contracts signed with landowners, like a tenancy agreement. It is an agreement where the landowner mentions the terms and conditions for leasing their property to a tenant and allows them to sublet it to a third party.
Under the Tenant Fees Act, if you are not satisfied with the tenancy agreement, you can walk out from unfair terms and conditions without losing your holding deposit.
It is better to hire a lawyer who can review your contract or agreement thoroughly before you sign it. The two other contracts landlords provide to the tenants are leases and management agreements.
The landlord needs to hand over a few documents, like a guide on “How to Rent: the checklist for renting in England”, a gas safety certificate, deposit paperwork, an energy performance certificate, a report showing the condition of the property’s electrical installations
10. Network and Partnerships
Networking improves your chances of finding a renter for your rent-to-rent properties, landowners, and property agents to source rental properties easily.
You can partner with property management agencies to assist you in sourcing top properties in the UK, make them ready for the market, and find authentic tenants.
Is Rent to Rent Legal in the UK?
Yes, Rent to Rent is legal in the UK, if done by following the proper laws and regulations in the country. For example, if the landlord rents out individual rooms it could mean that the property is classed by the council as an HMO, and this requires a valid license otherwise the landlord may need to pay strict penalties.
The increase in demand for rental properties due to the rise in house prices and the rate of increase in private rents have encouraged property investors to start a rent-to-rent business in the UK.
According to reports, the average private rent in the UK has increased by 9.2% in the last 12 months to March 2024, making renting properties a great earning opportunity for land owners and property investors. But, the only problem in such a business is to deal with scammers. The biggest sufferers in this business are the tenants in most cases.
As per BBC News, rental scams in the UK are on the rise. This news agency confirmed their data with Action Fraud and reported that there was a 23% jump in rental fraud from 2021 to 2022. These are majorly related to advance fee frauds where tenants are tricked into paying a higher upfront fee for renting a property that does not exist in reality.
Therefore, it is essential for rent-to-rent property landlords, business investors, and tenants to complete thorough due diligence before paying or renting a property. You can partner with a reputed property management company like ours, which ensures you connect with legitimate landlords, investors, and tenants.
Successful Model in Rent-to-Rent Property Investments
1. Guaranteeing Rent for Discounts
Guaranteeing Rent for Discounts is a Rent-to-Rent property investment model that secures long-term leases on property from landlords at a discounted price in exchange for guaranteed monthly rental payments. You can sublet these properties and adjust rents at market rates. This means that when the rental price rises, you can charge your tenants higher but pay the fixed monthly rent to landlords as agreed upon during the lease agreement.
This model benefits landlords by ensuring consistent rental income with minimal hassle, while investors profit from the rental margin difference.
Some key considerations include negotiating favorable terms with landlords, understanding local market trends, and efficiently managing the properties to maintain high occupancy rates and optimize profitability.
2. Converting Family Homes into HMOs
Converting family homes into Houses in Multiple Occupations (HMOs) is a great rent-to-own property investment model. An investor leases a property from the landowner and prepares it to accommodate multiple tenants at a time, usually on a room-by-room basis like hotels. By maximizing tenant occupancy, property investors can significantly increase their rental income compared to traditional single-let rentals.
HMO conversion requires strategic property selection, attention to room layout, availability of amenities, and efficient property management to maintain high occupancy rates and minimize tenant turnover
Key Considerations in Property Selection
While choosing a property you need to consider a few metrics, such as
1. Location
The location of a property has a huge impact on rental yields for rent-to-rent properties. Places in the city centers, near universities, hospitals and airports or railway stations, business and financial hubs, tourist spots, etc., offer better capital growth potential and maximize your investment returns. Make sure you avoid areas with higher crime rates as they can lead to longer vacancy periods and lower rental rates.
2. Market Demand
Another essential factor while investing in a rent-to-rent business is understanding the rental market demand of an area. Some cities like Manchester, Birmingham, and Leeds have a higher demand for rental properties for their proximity to major economic hubs, educational institutions, vibrant social life, availability of amenities, excellent transport links and connectivity, and shortage of affordable housing. Always look for a location with low property supply and high tenant demand.
3. Type of Property
There are different rent-to-rent models that you must know before investing in an ideal property type that suits your strategy. You can use the property as a single let where you accommodate a single renter or a family at a time. The most profitable rent-to-rent business model is converting a family house into an HMO and accommodating multiple renters at a time.
Rent-to-Rent Market Trends in the UK
The annual private rental price in the UK rose by 6.2% in the past 12 months to January 2024, which encourages landlords to rent out their property and make a passive income.
According to the English Private Landlord Survey 2021, the private rented sector is the second largest tenure in England providing a home to 19% of all households during 2020-21. It gives you maximum opportunities to start a rent-to-rent business if buying a property is difficult right now.
Bidwell’s report on The Productivity Engine says failure to provide high-quality housing is one of the factors affecting productivity in England.
This means the demand for rental properties in the country is still high. There is nearly a deficit of 2.5 million homes in England that might finish in 2031 to support future population growth. During this period, rent to rent property business is going to see huge profits.
Now, to make the best rental yields you need to find the top cities to invest in England. We have listed the top 10 cities where you can generate a good return on investment (ROI):
| City | Average monthly rent | Annual increase in rent |
| Manchester | £1228 | 12.3% |
| Glasgow | £1187 | 5.8% |
| Leeds | £1,102 | 7.2% |
| Birmingham | £994 | 11.4% |
| Newcastle upon Tyne | £981 | 4.6% |
| Dundee | £812 | 10.4% |
| Aberdeen | £811 | 7.5% |
| Liverpool | £781 | 8.9% |
| Sunderland | £620 | 6.2% |
| Burnley | £567 | 9.8% |
Why do landlords choose to use Guaranteed Rent rather than a traditional letting agent to rent their property?
Landlords choose to use Guaranteed Rent rather than a traditional letting agent to rent their property for the guaranteed flow of money every month with minimum involvement in day-to-day property management.
Here are key reasons why landlords choose guaranteed rent investment:
- Assured income: Fixed monthly payments regardless of occupancy.
- Reduced risk: No worries about market fluctuations or rental price decreases.
- Minimal involvement: Less stress in day-to-day property management.
- No tenant-related concerns: No need to find tenants or collect rent.
- Maintenance and damage: Tenants are responsible for property upkeep and returning it in original condition.
- Cost savings: No fees or commissions to letting agents.
- Compliance simplicity: Tenants handle regulatory compliance.
- No refurbishment costs: Tenants typically handle property improvements.
How Pluxa Property helps you find profitable Rent to Rent deals in the UK
Here’s how Pluxa Property helps investors find profitable Rent to Rent deals in the UK:
- Expertise in Rent to Serviced Accommodation (R2SA): Pluxa Property specializes in R2SA investments, which they present as a solid property strategy with minimum investment requirements. We are one of the largest exclusive rent to rent SA portfolio building property investment companies in the UK, with over 100 R2SA properties in their portfolio.
- Low capital entry: Pluxa Property advertises that investors can start with relatively low capital. With an investment of just £10,000, one can potentially achieve a monthly cash flow of £1,000. Based on our past results, a £30,000 investment could potentially yield over £100,000 in returns over three years.
- Property sourcing: As part of their VIP investor system, Pluxa Property sources properties in prime locations. We focus on finding the right property in the best location within a city, which is crucial for the success of a serviced accommodation business.
👉 Learn more about Pluxa Property, a leading property sourcing company in UK
- Property setup and management: Once a property is secured, Pluxa Property handles the entire setup process. This includes refurbishing and redecorating the property with modern fixtures and furnishings to make it attractive for short-term rentals.
- Marketing and booking management: We markets the property on various platforms to maximize bookings— for nearly 100% occupancy rates, which is key to generating consistent returns in the R2SA model.
- Industry connections: Our sister company, Pluxa Serviced Apartments, which manages bookings, enquiries, maintenance, and cleaning tasks. This connection potentially provides our investors with a ready-made system for operating their R2SA properties.
- Diverse location options: We operates in multiple UK cities, including Birmingham, Coventry, Nottingham, Manchester, London, and others. This allows investors to choose markets that align with their investment goals.
- Ongoing support: we are more than just a deal packaging service provider. We work closely with investors to build their portfolios, suggesting a level of ongoing support and guidance.
👉Discover comprehensive insights into the best practices for investing in residential properties in the UK and how to maximize your investment portfolio.
FAQs about Rent to Rent
1. How much profit can I expect in the UK with rent-to-rent properties?
You can expect a profit of 15-25% per property in the UK with rent-to-rent properties. However, the profit margin depends on location, property type, rental market demand, and property management efficiency. High-demand areas like Manchester, Birmingham, London, and Leeds often have higher rental yields. To maximize your returns, investment in better property management, effective marketing, and maintaining occupancy rate is essential.
2. Do I need a landlord’s permission for rent to rent?
Yes, you need a landlord’s permission for rent to rent property business. This involves signing a legal rental agreement that gives you the freedom to sublet the rental properties within a fixed tenure, pay the landlord an agreed rent, and return the property in its original condition at the end of the rental term.
Peter Juhasz is the founder of Pluxa Property, the biggest property investment company in UK and Group CEO of AIP Capital Group and a property investment expert with over a decade of experience in the UK market.
He built a successful property company using innovative cashflow strategies like Serviced Accommodation and HMOs, scaling to 200 units in four years.
Peter leads a team specializing in property and business acquisitions across various sectors. A former co-host of “Cashflow With Property,” he shares his expertise in real estate investing and business scaling.
He is committed to continuous learning and helping SME owners and investors maximize their returns, driven by his passion for empowering others to achieve their financial goals.
To learn how Pluxa Property can help you in UK property investment, contact our experts.
