Does rent to rent still have a place in the current property market? with Katrina Jones

Katrina Jones has been on the podcast several times in the past and she's joining me again today. This episode is from our IPI HMO summit that we hosted a couple of weeks ago, and Katrina joined us to talk through the Rent to rent strategy, specifically with regards to how it relates to today's market.

There's a lot of uncertainty, and people are wondering, is it the right time to invest?

Does rent to rent still work?

And Katrina goes through all of this in detail.

So, ahead of a free session that she's running in just over a week about the rent to rent strategy in more detail, I thought it'd be nice to share this with you just to see if it gets you excited... to see if it's the type of strategy that you want to learn more about.

And if you do, you can find out what she's got going on at insidepropertyinvesting.com/Katrina

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Transcript

00:00:00:08 - 00:00:23:08
Katrina
Thank you so much for having me. I'm incredible. Thank you. It's really, really great to be here. It's wonderful to meet all of you. I can only see a few faces and and a whole bunch of names, but. Yes. Really, really excited to chat with you, Mike. Thank you for the invite. And, you know, just give us a bit of an update on where you're at because you've been up to some exciting travels.

00:00:23:08 - 00:00:45:06
Mike
And yeah, I mean, I guess people probably heard you on the podcast in the past at least once, if not not twice. And, you know, I guess a secret maybe they'll they'll hear you again on an upcoming episode in the near future. But you know, what's what's going on with you? What's keeping you busy? Oh, goodness me. It's been it's been a phenomenal few years, Mike.

00:00:45:06 - 00:01:17:01
Katrina
I think just in a in a little nutshell for for those of the individuals here that have no idea who I am and I ventured into the world of property probably just over ten years ago now. And it I'm sure it was really similar for everybody else here. It was one of those moments where I started to hear what people were achieving and what was possible, and I was just like, Oh my God, where have I been?

00:01:17:03 - 00:01:42:16
Katrina
How can this be? It was so exciting. And so I founded my first rent to rent company, like I say, just over ten years ago, and and it's built from then. So it was around six years ago that it became completely hands free so that my partner and I were able to go and live in Dubai and travel around and just not have to be anywhere near the company, which was great.

00:01:42:18 - 00:02:05:20
Katrina
And the last year or two have been wonderful. I actually took a year out while everything was just running in the background to to just chill, because I think when we get excited about these things, it's just like mixing, mixing next thing. And we create these monsters sometimes and we just keep going and then it's okay, let's enjoy it, kind of celebrate it, that sort of thing.

00:02:05:20 - 00:02:29:13
Katrina
So during the year we took a look back and one of the favorite places that we traveled out of Dubai and all of these places abroad was actually Cornwall in the UK. And so about 12 weeks ago we moved down here to the coast and things have slowed down a bit in terms of just chilling and, you know, taking it all in.

00:02:29:13 - 00:02:52:17
Katrina
But yeah, it's been it's been an exciting couple of years. Well, thank you for sharing that. And I am I'm thrilled for you. You know, I think we're getting to that stage where you can you can choose that location, freedom, time, freedom. It's what a lot of us strive for. And, you know, I think to see what you have have created for yourself in your own life is is phenomenal.

00:02:52:17 - 00:03:10:12
Katrina
And I'm thrilled for you. And, you know, I'm thrilled to have you here and to get a chance to to have a bit of a discussion about what got you there. So this session will be, I guess, a little bit different from some of the previous ones. We're going to, I guess Katrina and I are going to have more of a discussion, a bit of an interview back and forwards.

00:03:10:14 - 00:03:30:10
Katrina
So if anyone's got any questions at any point throughout this one, feel free to to stick them in the chat and we'll still have a few minutes for for Q&A towards the end as well. But I mean, your your focus has really been on rent to rent. Has it been exclusively on rent to rent from an investment point of view?

00:03:30:10 - 00:03:49:01
Katrina
Have you done other bits and pieces alongside it or have you just focused on this one strategy? Mike I've tried so hard to stay focused on one strategy, but the beautiful thing about rent to rent, one of the things I love most about it is that there's always going to be landlords and deals that come up for purchase as well.

00:03:49:03 - 00:04:17:02
Katrina
So along the rent rent journey there's been a purchased perch is back in terms of the company, the main company it's been rent to rent but it's also a massive benefit because once the rent rent companies systemized in the team are in place of things being managed, every time you purge the property you just slot in. So there is no management or maintenance or tenants or anything to deal with the rental company can manage all of the purchases too.

00:04:17:03 - 00:04:39:03
Katrina
So yeah, so I veered off, I veered off with purchases, tried my best to only do rent, to rent, and I guess that passion for rent to rent must come from your, you know, your insights, your belief that it is a great investment strategy for for you. Like let's go back to basics. Right? People might have heard about it, but they'll be super familiar with what it is.

00:04:39:06 - 00:05:17:06
Katrina
How would you define it? What is what is rent to rent? Yeah. Good, good. That's a good question. So rent to rent is literally where you rent a property from a landlord and you guarantee that rent long term and then you rent it out to full time working professionals. So an ideal scenario would be usually a a student style property that you'd want to let from a landlord long term because it usually usually doesn't have to be an average type of property and being rented out for an average amount.

00:05:17:08 - 00:05:43:24
Katrina
And then if you wish to, you can invest a little, maybe say three K or something, full cages to bring it up to a much nicer spec. We call it a light refurb. So just paint carpet a few nice bits and pieces and then you rent out to full time work in professional. So the margin between what you guarantee the landlord and what you receive minus costs is a minimum of £600 a month that you'll make per property.

00:05:44:01 - 00:06:07:23
Katrina
But that's a minimum of a minimum. Most people tend to do somewhere between a hundred and a grand per property. So that's rent to rent in a nutshell. And there's so many great things about it. You don't need to invest. So the refurb is a choice. But if you say no, haven't got any cash, I don't want to pay any money in loans, just let it from the landlord and let it out as is, then you're completely welcome to do that.

00:06:07:23 - 00:06:31:01
Katrina
So my fiance actually built a rental business whilst being in the Royal Air Force and he built his entire company without putting a penny in her. I think we joked because he bought a canvas once and we were now pushing the boat out with his £12 and it had gone to John. Let me see how he went to the range.

00:06:31:03 - 00:06:51:14
Katrina
So it's no money down if you want it to be, and it's just something you can do really quickly, you know. So I did my first ten in ten months and so many people do similar. They they kind of put one out every 4 to 8 weeks. So you can run that cash flow really quickly if you want to.

00:06:51:16 - 00:07:15:03
Katrina
Yeah. That speed is is a massive when you know we've been talking about some larger projects this morning and I am all for them you know a lot of our projects are towards the larger end of the scale but time wise from finding the deal to actually being profitable, we could be talking about years, you know, it's a long runway.

00:07:15:05 - 00:07:37:18
Katrina
And, you know, I think that there are pros and cons to both. I'm not going to sit here and say I'm fully converted to rent to rent, although it does get me excited. You know, I still think we will be acquiring assets. But that prospect of introducing additional cash flow to the business and, you know, 4 to 6 weeks is difficult not to get excited about that.

00:07:37:20 - 00:08:03:04
Katrina
You said about the refurb you don't need to do refurb, but something, you know, I guess there's there's always going to be something at the back of your mind about invest getting into somebody else's property. So when you are taking on a project to do some works to it, is there a line that you draw? Is that based on the, you know, the return that you expect to make over the length of the guaranteed rental period?

00:08:03:04 - 00:08:31:18
Katrina
Or how do you justify doing work to somebody else's property? Where do you draw that line? Yeah, so there's always the return on investment. That's an important thing to calculate. However, with the monthly income always being a minimum of kind of 6 to 800 and the deal's always being around 3 to 5 years, if you put somewhere between three to walk in over the 3 to 5 years, it costs about £8 a month.

00:08:31:20 - 00:09:06:04
Katrina
And so the benefits of that, So rather than looking at it, is investing in someone else's property, I like to look at it as an investment into your increased cash flow speed of letting rooms, marketing, branding and all of that kind of thing. Because when you put rooms online that are, you know, fresh paying, you know, cushions, canvas and it looks sexy and swanky, it just it gives you so much more confidence because you're like, Oh my God, who's not going to stop throwing up in a heartbeat?

00:09:06:06 - 00:09:30:24
Katrina
You can then charge a little more as well. So I find that it's one of those things where if you don't put cash in, you charge a little less and make this much a month. But if you do cash in, you can charge a little more is kind of relative. You'll probably make a similar amount. You just you just get the the brand, the the speed of the letting.

00:09:30:24 - 00:09:50:23
Katrina
And I personally think it feels different when you show a house and you're like, the carpet's new, the paint's just dried, like the bed's just been put together and people are like, Oh my God, like, it really is brand new. So it's an investment into the whole thing, you know? Yeah, I get that. And, you know, I think as with anything, you kind of need to look at a spreadsheet.

00:09:50:23 - 00:10:08:12
Katrina
There's a bit of your heart involved for sure, you know, and you get that excited feeling. But if the numbers work, it doesn't really matter, you know, if you've got it for four, three years or five years and you're going to get a return on that investment, that mindset block of, oh, well, I don't want to spend money on somebody else's property.

00:10:08:14 - 00:10:29:01
Katrina
It doesn't need to be an issue for you. And Mike's just asked, you know, thinking about this process logically, Mike, she said he's really interested in and rents rent and interest and hear more about your strategy, which is great. But I suppose the first step, maybe this isn't the first step, maybe, you know, there's a bit of business admin and that sort of stuff to deal with.

00:10:29:01 - 00:10:51:23
Katrina
But I guess the first step that most people come to is sourcing deals. You know, how do I find landlords? What does that conversion process look like, finding motivated property owners, potentially looking at off market deals? What does that sourcing? I mean, especially when you're talking about getting ten and ten months, right? That's like a phenomenal, phenomenal rate of growth.

00:10:51:23 - 00:11:18:19
Katrina
So what does the process look like? Do you find the relatively easy to come across? I'm going to say yes. And a really good way to look at it is if you imagine your local high street in your local town or city, you know, they call it estate agents row where you've got all of the letting agents and you think, crikey, there's like ten in a row here.

00:11:18:21 - 00:11:39:19
Katrina
And then you consider that each one of those has probably somewhere between 100, 200, some of the big, big boys and girls, maybe like 500 properties on their books, or if you imagine getting in a helicopter and just going above and looking down at your town and city, there is a crazy amount of houses we only want ten in a year.

00:11:39:21 - 00:12:06:01
Katrina
So just as an example. So there's different ways to get to the landlord. So one of my favorite strategies is via the agents, and the way that we work with agents is what we do is kind of like a company level. So the agents have all of their properties, they're on the books and they've only got one job, which is to let them know.

00:12:06:03 - 00:12:27:16
Katrina
So when you come in and say, Oh, by the way, we've got six working professionals desperate for somewhere to live, they can move tomorrow. Have you got any properties? Can you help us out? Like Ohmygod? Yes, that's our job. We've got all of these properties and so you sign a slightly different agreement, but it's a massive benefit to the agent because you find the tenants for them.

00:12:27:18 - 00:12:50:09
Katrina
They technically will still get their fees because they've passed you the property and that's what they're getting paid to do. And it's just a win win win for everybody. Now, obviously there's the law of averages. It would be lovely if every agent you called was like, Oh, absolutely. You take them all. It tends to be about one in ten agents that you call will become what we like to call your best friend agent.

00:12:50:09 - 00:13:06:00
Katrina
So the kind of agent that you'll end up taken out of a coffee or they'll call you when they've got another one that's come on before it hits the market and things. So, you know, okay, if you want ten properties, you're probably going to have to make around about 100 calls that, like you say, it's just a numbers game.

00:13:06:02 - 00:13:38:11
Katrina
So you like ticking it off and every now you get you feel like it's one step closer. And then there's the whole other side of the game, which is direct to landlord. So we've got a few absolute incredible ways of obtaining the HMO list from your local council. So you literally have a list of everything go HMO landlords in your hometown or city, and then you can either do a nice letter or a sexy brochure and you just send out offering your services.

00:13:38:13 - 00:14:00:12
Katrina
And I'm very excited to say that in the last decade, we have never sent a batch of letters or newsletters or anything and not signed a property because the number of landlords and investors out there that buy these HMO that aren't like us. So we're all here as investors going, okay, how can we maximize the return on our investment?

00:14:00:18 - 00:14:22:21
Katrina
How can we do this in a really smart way? How can we be at the top of our game and do something different to the rest of the market? That's a really small chunk of investors because the average investor has just sat and gone, okay, I've worked forever. I may as well put my savings into a property. I don't really want to manage it, I just want the return.

00:14:22:23 - 00:14:41:05
Katrina
So when you knock on the door, send the letter and say, Well, we'll do it for free, by the way, because we don't charge fees, we just take a little margin. Because we do such a great job, we can charge more. The question that we get from landlords is, well, where's the catch? Like, this is such a good service, they almost don't believe it.

00:14:41:07 - 00:15:03:24
Katrina
Then you explain, right? Such good service shows in the contracts and they're like, I go, this is amazing. So you can go to agents, you can go to landlords, then you meet great landlords and and then it will come out of the woodwork. Well, actually, I do have an idea for HMRC or, you know, you'll work with an agent and, and they'll give you another deal or landlords recommend another landlord friend.

00:15:03:24 - 00:15:34:19
Katrina
So once you get the ball rolling, we've actually got ten different ways to find properties. They're my favorite too. But once you start hammering all the different ways, it just opened the floodgates and you kind of just close them a bit while you refurbish and a tenant and then you can open them till you catch the next one and then refurbish and tenant and you can kind of do that as fast or as slow as you want to, depending on what your goals are, how much time you have to put into the strategy and that kind of thing.

00:15:34:21 - 00:15:55:07
Katrina
Yeah, fantastic. And I mean, you've been doing this for a long time, right? So you've got experience, you know what works. And you have I've seen that the this can can grow up with regards to the current market. And again, it's something that's coming up quite a lot just now. There's a lot of uncertainty about mortgage interest rates.

00:15:55:07 - 00:16:20:02
Katrina
Utility costs are high. How is that impacting the rent to rent market? Is it impacting it at all? I was so hoping someone was going to ask this question is is the best news ever. So it really hasn't had an impact. So when it comes to mortgage rates, the great news is as a rent to rent operator, it's kind of none of your business.

00:16:20:02 - 00:16:52:11
Katrina
And I say that in the most polite way. They hate your are going to they're all out there. So if they're going to be owned by somebody and and there's a huge percentage of answers that are going to want a guaranteed rent and a hands free service, it is literally just a no brainer. So regardless of whether John or Bob panicking about their interest rates or might sell or might not, so they have a HMO sat there that needs to be tenanted and they need the rent to pay the mortgage.

00:16:52:11 - 00:17:13:18
Katrina
So your service, if anything, is going to be even more in demand, because those landlords that were like, Oh yeah, we can do this ourselves, or we'll just do this, I mean, God actually be really helpful to have someone just come in and do this. So it's one less thing we need to worry about. And when it comes to the utilities, utilities are capped.

00:17:13:18 - 00:17:46:21
Katrina
So in the assured tenancy that you signed with your tenants that you move in, We do. It's a generous cap. We're not tight with it, but depending on the size of the property will cap the utilities somewhere between maybe 250 and 350 a month. And then as the tenants move in, we say, listen, no tumble drying for now a41 pair of socks on a Friday night, no heating on windows wide open just because you like the kind of hot kind of cold like, let's do a solid for the planet and at the same time look after our back pocket.

00:17:46:21 - 00:18:11:05
Katrina
So if you guys go over the cap, we will have to split the remaining gas electricity equally between all the tenants. And when we tell the tenants, they're like, okay, good, the windows are closed, The radiator is a semi like this. Sensible. And the worst case scenario goes over. By the time you split it between four, six or eight people, you know is no, no one's breaking the bank.

00:18:11:05 - 00:18:33:04
Katrina
It might be the equivalent of a a swanky night out once a month or something, but their queue is chill like it hasn't it really hasn't had an impact. That's good to know. I thought it would be interesting to have a look at one of your projects just so we can get an idea of what the specific numbers and the breakdown where the costs come from and what the profit looks like.

00:18:33:04 - 00:18:55:12
Katrina
And then we can continue the discussion with a bit more context around a typical rent the rent deal, if that's okay. Sure. Yes, sure. So I know you have you've sent me the details of this property. Hopefully you can see this on my screen. I can share this one with you. I think I mentioned it when we were chatting.

00:18:55:14 - 00:19:18:16
Katrina
This is one of my favorite case studies because I feel like it kind of shows behind the scenes of how simple rent to rent can be in so many ways. So the reason that I chose this property to share is because it was actually the first deal I have assigned and I actually didn't really know what I was doing.

00:19:18:18 - 00:19:43:20
Katrina
I completely made up my own script and I was actually calling agents and saying, Oh, hi there, I'm calling from a local company. And we've got some some professionals that want to rent a student style house. I don't suppose there's any houses on your books that you don't want, are there? You don't have to be an expert protest.

00:19:43:20 - 00:20:01:21
Katrina
Probably quite a stupid pitch, but I didn't know what I was doing when I started rent to rent, so I was making it up as I went along and I remember I was sweating, my lips were shaking. I was so nervous. And on the day I kept distracting myself, I was like, Oh, just wash up and then I'll start calling agents.

00:20:01:23 - 00:20:22:03
Katrina
Oh, just. And then I called this agent and he literally said, Oh, yes, I do. And I mean, I wasn't you know, I knew I wanted to deal, but I wasn't actually expecting an agent. So, yes, we have a property that we don't want. He said there's one on the books and it's a nightmare. We can't let it out.

00:20:22:05 - 00:20:48:02
Katrina
Do you want to come stay? I was like, Yes, more than anything. So I went to see it. And the lady, the landlord's one of my favorite people, she she owned the shop downstairs and, and I was standing outside. And I think this is such an important story to share because there's so much depth to it. But she came out of the shop and she said, Are you here to view?

00:20:48:04 - 00:21:07:12
Katrina
And I was like, Yes. And she said, Oh, I'm the owner. You're the fourth person this month. This come to view, but the agents just don't turn out so well, even though they were saying like, this is the absurdity of what can happen with agents, even though they're saying we can't let it is because they weren't even showing up for the viewings.

00:21:07:12 - 00:21:25:19
Katrina
So she showed me around. We looked in all the rooms and in my head I could just picture this spreadsheet that I'd made at home on Excel was really basic one, and I was trying to figure out what should be my offer and how should I do it. And it's a seven bed HMO. So we went up to the very top.

00:21:25:19 - 00:21:46:23
Katrina
You can see the little attic windows up there. Up here? Yeah, yeah. And it was actually I think it was June or July, so it's really hot. And she took me into the attic and I stood in the seventh bedroom and it was fired on because it's high drama. So this door slammed behind her and she just said, So are you interested?

00:21:46:23 - 00:22:04:18
Katrina
And I said, Yes, I see. And she said, Well, how much are you going to offer me? And I thought, Oh, no, I really wish I had my spreadsheet. So I thought, I'll go in low. And if she says no, I would say, No worries. I'll go home and cool off and then I'll recalculate and start the negotiation.

00:22:04:20 - 00:22:31:15
Katrina
And I said, Well, usually on a property like this, if I'd ever done it before, and we offer around £50 per room per week. So that would work out around about I think it came to about 1500 and she just stood for a moment and she said, okay, great. And she just put her hand out and shook my hand.

00:22:31:17 - 00:23:03:01
Katrina
Everybody part. You try and stay calm, keep doing all these cartwheels. And so I went out to the car and I was and my car was parked round the corner and I like triple check. There was no one looking. And I was like, you know, done. And she ended up negotiating like an extra £70. So the reason I tell this story is because we assume that all the agents out there are doing an incredible job and they've got everything done to retain all their rooms.

00:23:03:01 - 00:23:27:04
Katrina
And that is not the reality. So many agents, whether they're struggling to let one face even the most absurd reasons or whether they've just they've taken on too many properties and actually they can't fulfill their promises to their landlords, whether them as an agent is scaling down like there's a million reasons why agents alone out of one of the ten ways you can find the properties will land you properties.

00:23:27:04 - 00:23:54:13
Katrina
So it was advertised for two, one, two, three. But once I spoke to the landlord and took off, the management fee that she was paying took into account the void period she was experiencing because they just were let in the rooms when I got home and worked out, I'd actually negotiated something ridiculous, like £30 from what she was already actually getting, which is why she shook my hand so quickly, because it was kind of the same sheet that she had received for years.

00:23:54:13 - 00:24:15:05
Katrina
So there's such a disparity between quite often what you see advertised is what a landlord would like to get for the rent versus what actually lands in their pocket. And once you deduct all of these things and and offer them the equivalent of what lands in their pocket, they're not making any less. But then you can pop in.

00:24:15:05 - 00:24:40:03
Katrina
I put three K into this one uplifted the rents. As you can see it and make your little mouse is just there. But what lifted rents to make like just over 3ka month and then after the rent utilities and some conservative kind of squirreling away for voids is still made over a grand a month and this property's still on our books literally like ten years later because they don't go anywhere.

00:24:40:05 - 00:25:08:23
Katrina
It's a no brainer What the the most that will happen every 3 to 5 years is we might chuck a couple of extra grand. You know, even the landlord might do it. We might increase the rent a little bit. Market rents increase anyway, so it still doesn't impact the actual net profit. So yes, one of my all time favorites and the reason why I can share one from ten years ago is because honestly, they don't change, but they're just copy paste, copy paste, copy paste.

00:25:08:23 - 00:25:30:21
Katrina
Like this is just the same thing the whole time. Yeah, No, I love that story. And you know, in particular the the reasoning behind that, you know, when you break down the numbers and you said you're you're actually not paying the landlord much less than they were receiving already. You can see why it's a win win and it can be a win win, right.

00:25:30:21 - 00:25:52:08
Katrina
Like a maybe maybe people have this this preconception that or rent to rent where? So somebody has got to be getting ripped off. So I don't want to be associated with that, but that the landlord is getting more or less what they were getting and they probably know the property is being looked after better because you're invested in it as well and you can still make a grand a month profit from a house that you don't own.

00:25:52:08 - 00:26:19:05
Katrina
You've only put £3,000 into the refurbishment and it was probably up and running in weeks rather than than months with, you know, a purchase. So it's a great story. And the fact that you see, you know, it's just it's copy paste, copy paste. I really love that. Totally. And also, Mike, another thing is it is amazing how we have these preconceptions and how the reality is always so different.

00:26:19:07 - 00:26:41:11
Katrina
We've had landlords that, you know, I love on landlords and I you probably can just get quite excited and I know some Oh my God, come around and have a look like you've got to see what we've done. And so we've had landlords that, you know, handwritten thank you letters and then, you know, they'll buy multiple bottles of champagne like they have really grateful like this is their investment.

00:26:41:13 - 00:27:03:11
Katrina
And the fact that we then go in and invest to they're like, oh my God, you you love this property as much as we do. We've had landlords that for whatever reason, if they are remortgaging to pull some cash out in the background, they ask for a copy of all the A-Z. And I remember the first time I was up, Oh no, this is going to be the moment where they're like, You're renting the rooms by how much?

00:27:03:13 - 00:27:24:22
Katrina
And then I and then I thought to myself, you've literally had this conversation when you signed the book. Do you told them what you do? It's not like big, dark, dirty secret. I think they understand. And and I sent the ace to his. And before she received them, she literally messaged and said, Yes, don't worry, I don't care how much you're renting the rooms for.

00:27:24:24 - 00:27:47:09
Katrina
I understand the model we just need to get the remortgage. And obviously then you realize, ah, like you said earlier, Mike, when you convert HMO, you increase the value. When you increase those gross rents, if they're being revalued commercially, you've you've just done a solid for the landlord too. So it is only as a win win win in this situation.

00:27:47:09 - 00:28:13:08
Katrina
We sell landlord's chocolates or flowers on their birthday, like we'll meet them for coffees they refer to friends they truly love the service, dude, that's great to hear. It's funny, we were in Morzine in the French Alps recently and the company that we were staying with. I got chatting because, you know, I'm a property person. Anybody who's got any involvement in property, particularly when it involves being in the French Alps and me thinking, maybe I could do this.

00:28:13:10 - 00:28:36:20
Katrina
I got chatting to them and a lot of their model is is rent to rent they will rent chalets off owners for a fee. And usually I think they were saying about 30 grand a season and then their rent in the might for some in some cases five grand a week. But it's exactly the same model. And you actually call it rental arbitrage because the Americans like to put fancy names on things.

00:28:36:20 - 00:29:04:08
Katrina
But it's it's simple. It exists in many different industries. It's not it's not new. But, you know, it's it's a great business that you can scale unbelievably quickly, as you've shown. I love it. So yeah, that was that was just my little anecdote. I have a question. I have a question here as well from from Chris. You were talking there about, you know, sometimes the landlord puts in some of the money towards the refurb.

00:29:04:08 - 00:29:21:19
Katrina
But, you know, you've mentioned this one. You've you've had it for ten years. Is that something that you'd agree upfront? Who's responsible for what he said? You know, fixing a top versus a big capital expenditure, Is it clearly defined or is there a chance that you get lumped with some, you know, a ten grand bill to fix the roof?

00:29:21:19 - 00:29:53:16
Katrina
How does that work out? Okay, that's a great question. So this has changed over the years and I learned the hard way. So I'm really glad you've asked this because we use have a little kind of add on thing that we do with landlords where we'd say anything under £50 will cover it, because it seemed and you know, on the previous case study I'd put £100 avoids, I used to just put by £100 a month per property for maintenance.

00:29:53:16 - 00:30:16:24
Katrina
And I used to think, well you know, usually they won't be more than two incidents and if there is another property you have less, it will balance out and then, and then the company grew and then it grew and then it grew. And one one day we sat down to look at the piano and annual expenses for maintenance under £50 was £30,000.

00:30:17:01 - 00:30:41:01
Katrina
But we said, okay, let's not do that anymore. Yeah, is their aspect. They own the property and let's be honest with it. There's no other tenant or agent on the planet that's going to say, Oh, don't worry, I'll pay for your maintenance. They get the, the uplift of the of their capital value. You know, they have all the benefits of owning the assets.

00:30:41:01 - 00:31:19:04
Katrina
So whilst we guarantee the rent and everything else, they pay for all of the maintenance and when we go the company to the size where we had an in-house maintenance person and any nifty bits that they could do, we just we just do it for free to be helpful and wouldn't make a big deal out of it. But I would always suggest when starting out that all maintenance is the landlord's responsibility because it was before whether they were self-managing or with an agent and with an authorized agent, they often just put a percentage on top to make even more.

00:31:19:06 - 00:31:42:00
Katrina
So you can even phrase it and say, you know, unlike High Street agents or some high Street agents, we don't put commissions on, you know, or maintenance teams and things like that. We work hard to find the lowest rates and the most reliable people, and we literally charge you what they charge us. We don't do anything sneaky, so we'll keep costs as low as we can for you and just charge them for all of it.

00:31:42:00 - 00:32:02:20
Katrina
You'll make a lot more money. Makes a lot of sense. Chris is just saying that he's got a number of HMO of his own and was that they rent out as rent to rent. So definitely win win on both sides. It's interesting to hear that from from his perspective as well. Just echoing what you have said, you also mentioned you mentioned the Girish and that some some of these agreements go on for.

00:32:02:22 - 00:32:28:18
Katrina
Is there any scope has ever come up where the landlord said, we're thinking to sell, Do you want to buy it? Do you get opportunities to go from being the rent to rent operator to actually growing your portfolio this way? Yes. Yes. It's one of my favorite traits. When a landlord goes to say they'll sell. And so we have a clause in our agreement that says if you're looking if you do decide to sell, please, can you sell it to us?

00:32:28:18 - 00:32:52:06
Katrina
Or at least give us the opportunity to purchase it before you put it on the market. Because if we don't want to buy it for whatever reason, if it's way too expensive or something like that, we can at least find another investor and and take percentage and still somehow make turn it into a deal and a profit. Yes, I've purchased a handful of them over the years.

00:32:52:08 - 00:33:19:09
Katrina
And like you say, Mike, it's just a great way. It's another string to the boat to expand the asset portfolio alongside the rent to rent company. I love it. And you know, it's something that can it can allow you to do both, get that cash flow coming in in the short term and think about adding to your portfolio and in the long term, which is is nice that there is something that goes along with that that we've been talking about more and more recently.

00:33:19:09 - 00:33:46:02
Katrina
I had a discussion with somebody on the podcast about it. We had a discussion at our Mastermind quarterly retreat a couple of weeks back, I think, and I don't know if you if you feel that there is maybe a bit of a misconception that rent to rent is like a beginner strategy and it absolutely can be like, don't get me wrong, I'm not saying that it's not is something that you can get into with little experience, but I think people think that that is where it begins and ends where it is.

00:33:46:02 - 00:34:14:04
Katrina
It can actually be a great tag on strategy alongside your acquisition. You know, you're buying HMO or any other type of investment properties and a long side acquiring assets which can be expensive and slow. There's no reason that you can't be looking at rent to rent deals at the same time. And I guess, you know, with all the people that you've worked with, have you seen examples of that where people are doing both in tandem?

00:34:14:06 - 00:34:45:13
Katrina
You know, it doesn't need to be, Well, I do rent the rent, so I can't buy properties, right? Yeah, absolutely. So I would probably put rent to rent operators and business owners in two categories. So there's either someone who's like cap it just want an extra 3 to 5 came up because actually I really want to be an artist or travel the world or have babies and not have to work full time and they really just want that extra three to 5ka month.

00:34:45:15 - 00:35:18:13
Katrina
But then you have the rest of us where we're like, okay, that's really far, but I'm here. I'm here to play the game for the long term and, and build an asset portfolio and maybe or keep or whatever you want to do. So it's kind of 5050 really, but so many clients and mentees will start off with rent to rent, and it kind of turns into a side hustle, as it were, and then off they go and start to buy homes and acquire properties.

00:35:18:15 - 00:35:44:01
Katrina
It's just a natural progression. But to do it the other way round, I mean, you guys would be laughing, obviously. I understand you're more on the long view, more on the purchasing side if you can purchase and renovate. Like for example, what Nicky showed me was mind blowing, like she'd be able to do a rent to rent while she's cooking dinner, you know, just put one out in a sleep because it would be so simple for you guys.

00:35:44:01 - 00:36:09:19
Katrina
So if you think you know what another three came out would be really helpful right now, you could give yourself 12 weeks, get it wrapped up, done. They probably in the background all your purchasing. So it's super complimentary. It's like gravy on the roast dinner. I love it. I love that analogy. And you've got Nicky thinking she's she's just left a comment there and that's Peter interest which is is great.

00:36:09:19 - 00:36:26:20
Katrina
And you know, I think it's I think it's really interesting. I don't think a lot of people talk about that you know that that crossover between the two but I think more people probably should explore it that we've had a bunch of questions in the chat. So I'm going to whiz through some of these and then we will.

00:36:26:22 - 00:36:49:04
Katrina
We will. We'll break for lunch. Some of these are getting into the weeds a little bit. And I guess if we we don't get because, you know, there's there's limited time and I guess there's some stuff that you could probably go into in more detail with a longer discussion. I know you've got another like a session that's focused specifically on this coming in a couple of weeks.

00:36:49:04 - 00:37:11:15
Katrina
So if there's anything that you're like, well, you know what, we'll answer that in that next session. I think you're going to send me a link for that, and I can share that with this group if they want to come and join and find out a bit more about red to it. Yeah, absolutely. We have them. We have a live webinar coming up soon, which will be a real deep dive into the nuts and bolts a little bit more.

00:37:11:15 - 00:37:30:11
Katrina
So yeah, I'll drop you the link for sure. Perfect. I'll send that as soon as I get that from from. KASELL For everyone is registered for this. If you're here or in the watching the replay, that would be worth checking out. If you are thinking about rent to rent, Henry said. Do you rent for a limited company? Let me come here personally.

00:37:30:11 - 00:37:50:11
Katrina
Name more and more of the the sort of acquisition side investing is pushing towards limited companies. Is it the same for for rent or rent? Yes. Always the limit to company 100%. Okay. Mike said, How do I get hold of Katrina's magic list? I guess he's talking about the ten different sources. I mean, she shared two with those two and you said they're your favorite.

00:37:50:11 - 00:38:28:14
Katrina
So I think Katrina. Right. And and I guess, is that is that a type of thing that you'll be looking at in more detail in this upcoming session? Yeah, absolutely. And yeah, 100%. I mean, we have we have all online course, which is the entire strategy from beginning to end. And so if you if you understand everything about HBO is obviously qualities like they don't need experience but if you you got HBO in the blood and all you need is literally a tweak to what you're currently doing, then yes, of course.

00:38:28:14 - 00:38:56:07
Katrina
I'd be so happy to literally just share script. If you're looking to set up a limited company and and actually build a rent to rent portfolio and you need everything from the correct agreement to the legals, the scripts to the negotiation, how to add it all up together, what type of properties to go for taking in licensing and planning to account and, and that whole side of things that's a bit more in-depth and we cover that on the course, but I'm super happy to share scripts for sure.

00:38:56:09 - 00:39:26:05
Katrina
Okay, cool. So if he's asked about the letting agents do they do you keep them in the deal? Do you cut them out? Do you pay them? Like, how do you keep relationships sweet without that becoming an extra cost for you? Yeah, I Good question. So there's two types of agents out there. There's the type of letting agent on a tenant find fee, which is where the landlord's gone to them and said, Look, you just find the tenants and then when you do will pay you a fee and then we'll do the rest.

00:39:26:07 - 00:39:55:20
Katrina
So where a landlord may self-manage, for example, or the type of agent where a landlord says, Please can you rent out? And then can you look after I don't want anything to do with it. So you've got tenant fined and fully managed. So both worked perfectly because if it's a tenant find, you're literally the tenant. So the agent says to you is a property, the landlord pays the fee, but then instead of the landlord self managing, you manage it for them.

00:39:55:24 - 00:40:13:15
Katrina
So it's the easiest thing in the world. The great thing about kind of becoming best friends with an agent that is on a tenant find fee with a lot of properties is that they can just keep giving you more and more and more. The, the p B we did was a hat trick. We did three in a day with one agent.

00:40:13:17 - 00:40:39:00
Katrina
And so that's the tenant find. And then with a managed, it's also a win win because if the agent has a contract to manage the property, you can put your tenants in and guarantee the rent for the agent. But they keep managing so they get their management fee guaranteed, which is a win for them. They do all of the maintenance, which is a win for you, but you find all the tenants and they don't have to do anything, which is also a win for them.

00:40:39:00 - 00:41:06:24
Katrina
So there really isn't a situation in this entire thing where everybody is a winning. Makes sense. As with everything, it makes a lot of sense. The next question that was just Chris in about him being the landlords and not that that working for him from that side of the equation as well at least options I mean it's not it's not dissimilar it's a different kettle of fish.

00:41:06:24 - 00:41:33:08
Katrina
But we spoke a little bit about, you know, potential purchases down the line. Do you do you consider lease options when discussing with landlords? Are you typically focused on on rent to rent because that's your strategy in your approach? Yes, we've purchased three lease options. So I think the best lease option we ever did and we flipped and I think that was profit was around.

00:41:33:10 - 00:41:59:09
Katrina
We kept it for a little while and then I think about 18 months later, we sold it and I think that made about 100. Okay, so lease options are a good way to go as well. Chris has asked about good properties. Are they generally existing families that are underperforming or single less which are subdivided? And I presume both can be great options?

00:41:59:11 - 00:42:34:20
Katrina
You know, both can be great options, obviously. Well, I shouldn't say obviously HMO is there readymade or the best because everything's in place. The licensing, the planning, the rooms are ready is literally a case of putting the tenants in. Whereas when you're looking at single sites or resident choose to kind of subdivide, they're just a whole bunch of things that you need to check that you wouldn't have to check with an existing HMO, like the mortgage regulations, the licensing, the planning, the room sizes and all that kind of stuff.

00:42:35:01 - 00:42:53:09
Katrina
So it can totally be done. And we do that too, just takes a little bit more effort. If you've got a ready made HMO that is just like super quick and easy. Okay. Well, Katrina, thank you so much for being with us and sharing that today. Like I say, if there are questions coming in, I see a few more still coming through.

00:42:53:11 - 00:43:05:16
Katrina
But yes, you've got a few minutes, too, to answer them. That would be fantastic for everybody else's benefit. We are going to take a 45 minute lunch break, so we'll be back here at 2 p.m. for our next session.