As the ‘guaranteed rent’ or ‘rent to rent’ model becomes increasingly popular among private rental investors, new analysis by London lettings and estate agent Benham and Reeves reveals that the South East offers the most significant opportunities for landlords looking to adopt this approach.
Understanding the ‘Rent to Rent’ model
The rent to rent model involves a company, local authority, or individual renting a property from a landlord and guaranteeing rent payments for an agreed term, regardless of occupancy. The landlord grants permission for the property to be sublet to other tenants, allowing the intermediary to potentially earn a profit by charging a higher rent than what is paid to the landlord.
This arrangement benefits landlords by providing a steady income without concerns over tenant defaults or vacant periods. Additionally, landlords are relieved of the responsibilities of property management and maintenance, as the property is returned in its original condition at the end of the term. For investors seeking a hands-off approach and consistent returns, this model is becoming an attractive option.
Regions with the greatest rent to rent potential
Benham and Reeves’ analysis identified 4,711 rental properties with at least two bedrooms that have been on the market for an extended period without securing tenants—properties that could potentially be suited to the rent to rent model. Of these, a significant 30.6% are located in the South East, suggesting landlords in this region stand to benefit the most from making the switch.
The East Midlands follows with 16.1%, and London accounts for 12.5% of these opportunities. The East of England also shows considerable potential, representing 11.4% of the national total. In contrast, the North East has the lowest level of potential, comprising just 2.4% of rent to rent investment opportunities, followed by the West Midlands at 7.0% and the North West at 7.2%.
Expert insights on the growing trend
Marc von Grundherr, Director of Benham and Reeves, commented: “Rent to rent is arguably a model that has flown under the radar within the buy-to-let sector, but it is growing in popularity amongst landlords and this is largely due to the benefits it can offer.
“Whilst the level of guaranteed rental income may be lower than the sums they might secure via the traditional route, many landlords don’t see this as a ‘loss’ once they consider the time and cost of managing a property themselves, not to mention the rental income lost to void periods and problem tenants.”
He added that in markets with extremely high demand, such as London, the rent to rent model is less prevalent. “This is due to the fact that landlords are rarely subject to void periods and, in fact, tenants are often queuing up in anticipation of a home re-entering the market and willing to pay market rents, if not more, in order to secure them.”
A new path for landlords seeking stability
For landlords like Sarah Thompson, who owns several properties in the South East, the rent to rent model offers peace of mind. “Managing properties can be stressful, especially when dealing with tenant issues or vacancies,” she said. “With a guaranteed rent arrangement, I receive steady income without the usual hassles.”
As more landlords seek reliable income streams and a hands-off investment approach, the rent to rent model is set to gain further traction, particularly in regions where properties are slower to let. This trend presents both opportunities and challenges for UK landlords, prompting them to consider alternative strategies to maximise returns.
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