The appeal of rent to rent
There are two parties involved in rent to rent: a landlord who owns the property, and rents it to a rent to rent operator. The operator manages and rents the property to end tenants. A rent to rent agreement can be advantageous to both parties.
The landlord will be spared the hassle of managing tenants, maintaining the property and dealing with void periods. They will gain guaranteed income and still realise the benefits of capital appreciation.
The rent to rent operator has the opportunity to capitalise on local demands and market conditions, and let a property without needing a mortgage or capital. Many rent to rent operators have good local knowledge, are able to spot supply shortages and see the potential in existing housing stock. Rent to rent operators can either enjoy the ongoing profit from rent to rent deals, or simply package them up and sell them to other operators, acting as a deal sourcer.
Rent to rent tax considerations
Rent to rent tax considerations for landlords are generally straightforward and follow similar rules as conventional buy to let properties (see here for more information).
As a rent to rent operator, it is imperative to have a good understanding of tax as this will influence your approach and ultimately your profitability. A key factor to understand is that not all of your outgoings can be deducted for tax purposes. Whilst day to day expenses (such as utilities, insurances and marketing costs) and spending on repairs, replacements and renewals can reduce your tax bill, larger costs may not. In particular, the capital costs of upgrading a property, such as upgrading a kitchen or appliances, or construction work to convert a property into a HMO cannot be deducted for tax purposes. This is an important aspect as many rent to rent strategies are based on improving properties, and this needs to be considered carefully.
Our accountancy service
How we help rent to rent landlords
If you are letting a property to a rent to rent operator, our team of accountants will ensure that your income is managed correctly and compliantly. We’ll take care of your personal or property company’s tax returns and we’re here to answer your questions, whenever you need us.
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How we help rent to rent operators
Our property accounting app makes operating rent to rent properties hassle-free. You can use our app to manage tenants and rent, record and claim expenses (including mileage), and track your rent payments to your landlords. It’s easy to use and ensures that you’re operating compliantly.
In addition, our accountants are here to file your tax returns and help answer your tax questions. As well as day to day support, we can help you to understand the business case and tax impact of improving rent to rent properties.
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