My First Rent-to-Rent HMO Property Investment Deal
With all the craziness happening in the world right now, and all the disruption, I think it's more important than ever to get your finances in order. Financial independence is about taking back control, not being a victim to the rat race.
How many rejections do you think I experienced before getting my first Rent-to-Rent deal?
I'm still new to this, I've made loads of mistakes, and I'm still learning every day. The journey I have been on for the last two years has been life-changing, and I'm now up to 30 properties.
I want to share how this all started, including my first ever Rent-to-Rent deal. This took a lot of hard work to achieve, many nos and a couple of deals that nearly crossed the line but failed, which almost left me wanting to give up. I want to break down the deal and the figures for you so you can see the power of Rent-to-Rent and the incredible returns it achieves.
So how did I discover Rent-to-Rent? It wasn't straight away. I've invested thousands in property education, which started with HMO and Mini HMOs. That strategy really works! It was the strategy I used to purchase my first investment property which I ran through in episode 3. The problem was purchasing requires a lot of funds which I didn't have. Next, I tried sourcing property deals for investors which can be lucrative. However, it is a slow process, and I was looking for speed. Finally, I found a course that blew my mind and that was the Rent-to-Rent strategy.
Now the fun really started! I want to run through my journey, the challenges, the mistakes in the hope that I can share some knowledge to help you on your journey too.
In this episode you will learn
How I discovered Rent-to-Rent and the other property investment strategies I have tried.
Why Rent-to-Rent has allowed me to scale at an incredible speed
My rejections, my mistakes and finally how I secured my first deal!
A breakdown of where I am at now after 18 months of investing
To learn more listen to my new podcast and subscribe! Available on iTunes, Google, Spotify and others or click “play” on the player below!
Podcast Transcript↓
[00:00:56] I'm Simon and welcome to another episode of the podcast where we talk about all things property, Creative Cashflow and how to be financially independent today, not in 25 years. And, just for the record, what exactly is financial independence? To me, it's being able to do what you want, when you want to, with whomever you want to.
[00:01:25] OK, it's about having that freedom and giving yourself more choices through not being a slave to the rat race and being able to stand on your own two feet. Because right about now, with the C word – I don't say it, I just call it the C word – and all the disruption and everything that's going on, I think it's even more important to make sure that you've got your financial house in order and you're not relying on things out of your control, because to me, financial independence is about taking back control. You know, covering your downside, don't be a victim and don't be a slave to the rat race. And by the way, guys, this is still very new. I'm still very new. I've made loads of mistakes. And, you know, I just want to share some of the bits and bobs I've been learning as I learn them, by the way. You know, as I learn. I'm still learning every single day. And I just thought, hey, let me document this and see if I can help or give some value. And, you know, the response so far has been amazing. So thank you for supporting. Please subscribe if you've not already. And stay tuned every single Monday. New episodes right here. So today I'm going to be sharing with you my first ever rent to rent deal, and I thought it'd be really cool. I don't hear a lot of people doing this I thought would be really cool for me to share the process, the discovery process of me finding rent to rent, but trying other things that didn't work and then sort of exploring the amount of Nos that I had to go through in order to get the first deal.
[00:03:12] And then what I'll do is I'll break down the deal and we'll look at the figures, because this property, one property, I invested around six thousand pounds in and it cashflows eight to nine hundred pounds every single month and has done since I first got it. So, amazing returns. I think I've already – well I know – I've already way sort of had all my money out of the deal and now it's an infinite return as they say. So a great place to start is me running out of money, OK. And that's the thing with investment. It doesn't matter how much money you've got, you will run out. And the traditional form of property investing with save up, save up, save up, buy a house, an investment property and then save up, save up, save up, save up, buy another house. And the thing with that is it's slow and I couldn't do slow. I needed this now. So for those of you that know my journey, I had enough money to do one property purchase, I break down the whole story of this in episode three of the podcast. So if you want to know more, please check it out. But in a nutshell, I purchased a property. We then went on to convert it into a three bed mini HMO and it was cashflowing five to six hundred pounds per month. So my mindset is, this is a game changer. I need more, but how can I do this? Because I don't want to have to save, save, save and buy. So I decided to go back to education and I went to some courses.
[00:04:53] And on some of these courses, they were talking about no money down deals.
[00:04:59] And I was thinking, this sounds a bit too good to be true, like really? No deposits? You know, no this no that, deals would just fall from the sky onto your lap and you will be financially independent.
[00:05:15] I don't believe it. But the thing is, I was in a similar course beforehand, learning about Mini-MOs, HMOs and refinancing and all that good stuff.
[00:05:28] And that worked. So I was more inclined to listen now. And I decided...a mate of mine, Ryan, said to me, look, go to the courses network, listen. But whatever you do, don't invest in the courses, because to be frank, in all these property courses, right, they will be an up-sell. There'll be a hard sell. They'll be a story, a sob story.
[00:05:54] There'll be this motivational whole journey. Then there'll be a course that's normally 20,000 pounds.
[00:06:01] But today you can get it for four, nine, seven, and they always end in a seven because apparently that, like, psychologically hooks people anyway. And then everybody runs to the back of the room and signs up because there's only 10 courses available. The first 10 people only. Anyway, my mate said, whatever you do, do not buy. And what did I do? Buy. I brought this course and it was basically a strategy where you find the deals.
[00:06:40] But you then sell the deals on to an investor that's got the money, so you go round viewing properties, you stack the numbers, you present them to an investor that's got the money that you so desperately need. And you sort of you partner them together. You broker the deal and you get a fee, which, by the way, can be quite decent. Sometimes two, three percent of the purchase price. So, property is worth a hundred grand, you can make three grand. And I was thinking, well, I only need like a good few of those. Well, I mean, what, five, six, seven of those. And I could be able to buy another house. And they're saying you should be able to do like two or three of these a week...a month easy.
[00:07:24] So anyway, come away from the course. I remember calling Lucy and saying, look, I want to spend like 2K on this course. What do you think? And you know what credit to Lucy. Lucy was like, look, if you want to do it. If it sounds good, go for it. So I did, and at the time, I had hardly any money, so I put it on a credit card.
[00:07:47] I had to, like, check my app on my phone to see if I had the money. Yeah, the struggle was real, guys. The struggle was real. Bought the course.
[00:07:58] A few weeks later I went over to the place and did the course.
[00:08:04] And, you know, I obviously went home and tried to sort of source these deals without any education because that's just the person I am. I want to figure this stuff out. You know, I want to figure it out, so I tried to do a couple deals in the interim and I fell flat on my face and I didn't have the legals and I didn't have this and I didn't have that. And I was guessing, didn't work. Went to the course, got educated on it, and I was hyped. First thing Monday morning. I was in, you know, calling agents, going viewing properties. I was posted online to attract investors that might be interested.
[00:08:45] And, it just didn't happen, it just didn't happen for me and there was three main reasons, I believe that it didn't work or that I didn't like it, for me.
[00:08:56] The first thing was it was not passive. I repeat, not passive. It was active. You had to view the properties, do the figures, video the properties, go back to the property, find the investors, communicate with the investors, sell the investors, babysit the whole purchase process. So that was the first problem, the second problem was...
[00:09:23] You was relying on other people, so once again, I'm not independent here because if somebody...if the wind blows and somebody changes their mind and decides they want to invest in Durham instead of Derby because the prices are cheaper, that's it, yeah. And the third thing was it took too long, it took too long because property purchases might take three months and you wouldn't get all your money until the end or that's what I was taught. I've since gone on to source deals and I sort of change the whole format of how I personally like to do it.
[00:10:03] And it's a great strategy. But at the time. It just didn't work for me, so I was like, no, that's not going to work. 2K down feeling, you know...
[00:10:14] Upset, to be honest with you, upset? And to be honest with you, another main problem with sourcing these deals is that, I didn't really know what I was doing.
[00:10:25] Because you can't really know what a deal is until you've done a few. So, you know, there was times I was present in deals, you know, I was doing an HMO as well, and there was no en suite going in that room. Or the room measurement wasn't quite right, or whatever it was, I just didn't quite know first hand.
[00:10:50] So anyway, I had to go back to school, had to go back to research, and I'll never forget it. It was at another course and I remember hearing about this strategy. And it just blew my mind. Crazy, there's just something about it that just resonated with me. Rent to rent.
[00:11:14] And basically, in a nutshell, rather than buying the property to rent it, you rent it to rent it, you almost lease it, but you control the property, you don't own it, but you're able to create the same effect as owning the property to create passive income. And I was like, yeah, this is it. This is more like it. So I've done my research again. I've done some courses. I couldn't spend the 2K again, so I had to be a little bit more resourceful and do a lot more online stuff. I couldn't really do another 2K at this point. And I just got out there. I set up a limited company, I sell my business. I did a little, you know, I had somebody do a logo for me on Fiverr. I then put together a little one page brochure of what we was doing based on stuff I'd read online. And I just went out viewing properties and I was just getting...
[00:12:16] No, no, no.
[00:12:20] What's your website?
[00:12:22] Actually, we've not got a website at the moment. No. You know, like, how long have you been trading for? Well, about two weeks, to be honest with you. But yeah, you're not going to trust me with their property if I just started. But never one to give up. I carried on going and, after a little while, I started to get a few breakthroughs. First one was a gentleman I met on Gumtree. He had property. He was interested. He wanted a quick let and he loved the idea of guaranteed rent. And I remember I got, you know, my brochure printed off. I was wearing a suit because, you know, that's what they said on the course. You know, you need to come across professional, which I absolutely agreed with.
[00:13:12] So I had a suit on. Mate, I'd not worn a suit in a while, let's put it like that But anyway, I rocked up in my suit.
[00:13:20] And when I got there, he actually came out of the property next door, and I said, oh, I've got the wrong number. He said, oh no, I own that one, too. And I'd heard it on a course, one landlord can make your business. So I was like, jackpot. And so I've gone around the property with him. And I noticed he was really picking my brain. And I was saying to him, look, you can get four lettable rooms here, you've got the uni there, you've got Rolls Royce there, you know, we'll guarantee your rent. We can move quickly. But I was just telling him too much information, oversharing. I even think I said what you want to do is, if you partition that wall, you'll be able to get a fifth bedroom, which means you can get a license. And before you know it, you're only asking for six hundred and fifty pounds. But I reckon we can get twenty-two hundred. Well, you never guess what happened. It sounded interesting. He insisted on taking my brochure with him, which explained a bit more about what we do, and he blocked my phone. And to this day, I am 99 percent sure I gave him the idea and he just did it himself.
[00:14:31] Gutted.
[00:14:34] So I went home, went home to Lucy like, look, you know, I think he's interested, but, you know, I've not heard from him, you know. She said, don't worry. Tried to call him, line just dead to me. Gutted. She said, well, don't worry, just carry on, you know, just carry on. If it's meant to be, it's meant to be. It wasn't meant to be, she'd say, always positive. So I pick myself back up. Next day, started doing some more. More viewings, more viewings.
[00:14:59] And then I had another bit of a lucky break. And this gentleman, he was ideal.
[00:15:08] He didn't have any money to invest in this property. It was already set up as a four bed. He'd traditionally been letting to students, but the condition of the property had demised and now students wouldn't touch it.
[00:15:22] And I literally remember explaining it and he loved the idea and he just gave me the keys there and then. I'll never, ever forget it. I had my first rent to rent keys and I remember calling, you know, Lucy up and saying, I think we've done it, I've got the keys, I've got the keys. And, you know, I showed a couple of the tradies round.
[00:15:45] I think I showed Ryan around. I showed Lucy around. I think I even might have shown my parents around. I was like, look, you see, this does work.
[00:15:51] He's given me the key and the property needed work. The kitchen was poor. You know, one of them cookers that's completely disconnected from the kitchen. Yeah, it was like that. And I never forget I had one of my tradies over and he come round and I really wanted to convince him that it was a deal.
[00:16:14] But it was like, look, Simon, I'm not going to lie, got a lot of work to do here. And, you know, we're going to need to do this, we're going to need to do that. That oven, I don't think that's legal. Those smoke alarms, they're not going to cut it.
[00:16:30] And I thought, well, yeah, but look, this isn't costing me much. It's going to cost me like five or six grand instead of 30 grand, so let's do it.
[00:16:41] And I got the agreement sorted, I sent it over to him. He was keen, we met up at a coffee shop, great. He showed his wife, she was keen. We changed a couple details. I sent it back over and then I'll never forget it. It was half eight on a Thursday night, and I think I'd not heard from him for a few days.
[00:17:02] And he said to me, look, Simon, good idea, just not for me right now. I've decided to go with my agent and the agent had basically sourced him a family. And I remember the family was on Universal Credit, I never ever forget this. Six months later, they just moved out, they stopped paying and they moved out.
[00:17:28] I was close to quitting at that point. I was absolutely gutted. I had to go and return the keys and I'd already start a planning the works and everything. And I just, you know, I was pretty much ready to give in. Now, interestingly, I actually have one of this gentlemen's properties now because he came back to me six months later and he even offered me the original property and he's offered me another property since then as well.
[00:17:58] But anyway, I carried on going. I was gutted, carried on going, carried on going. And then one day I saw a property on Rightmove. It popped back up and it'd gone from the...because basically there's this app that allows you to basically see when a property is put on to Rightmove, taken off, when the prices change, how long it's been on. So you can start to sort of weed out the motivated sellers and motivated landlords. And I found this property and it'd been on Rightmove for a year, but it had been it been on the sales market for ages and then it had been on the lettings market. Then it had gone back to the sales market and then it was on the lettings market again. And I was like, this could work. So I learned something from a course. Basically, what you could do is rather than going through the agent, you could land reg the details of the owner and get in touch.
[00:18:53] So I land reg'd him and it turns out it was owned by him and his wife. And I searched for them online trying to get in contact to see if there was any clues. And lo and behold, I found somebody that seemed to be...
[00:19:10] The landlord or a relative of the landlord.
[00:19:15] And they owned a business and I remember calling up the business and I said, you know, I'm after so-and-so, and he said, oh, no, that's my dad, I'll pass your details on. So he passed my details on and, I'll never forget, the landlord called me up and he said, how did you get my details? And I said, well, I did this and I did that and I did this, and I'm really sorry but I think I can help you. Your property has been on the market for a long time. I can guarantee your rent.
[00:19:42] And he said, well, bloody well done mate, fair play to you, well done. And I met him at the property. I had my brochure again, I had my suit on. My poor excuse for a suit at this point. And yeah, we just clicked and he had some questions to me. He asked me what the website was. I didn't have one.
[00:20:03] But I just kind of really listened and I felt passionate. He was an elderly chap. Him and his wife were retired and this property was a thorn in their side. And, you know, I took it on. I did a full refurb of the property and I've been guaranteeing their rent now ever since.
[00:20:25] And they don't have anything to do. Anything.
[00:20:30] Nothing to do whatsoever, and that's why rent to rent is powerful and rent to rent is great. And it went through and it was an amazing property right near the city centre. Brilliant four bedrooms. Modern kitchen. The bathroom was modern and I just changed a vinyl flooring. I had to do minimal works overall, couple of electrics and health and safety bits and bobs and fire stuff to do.
[00:20:56] But other than that, smooth. Rent the property out quickly and the property ended up cash flowing 725 pounds. And some months it was more. Because what I did was I would always do an allowance for the maintenance and stuff, but sometimes there would be no maintenance. And that's it, guys. So I've done twenty-six of those...twenty-seven of those deals since. And I've got three that I'm working on this week that I'm hopeful to close. So that's going to be thirty of these deals in eighteen months. And what I've started to do now is recycle that money to purchasing, but it's amazing because we've got a full business now.
[00:21:45] I've got a team of four plus the maintenance plus the cleaning team, plus all the trades that we're working with. I've managed to retire my wife, she works in the business. Now got mum on board as well to help out. You know, we've been through a few staff as well, and we're scaling a business and it's a game changer. So, yeah, that was my first deal and basically what we're going to start doing now on the podcast, on the show, is we're going to start doing a bit more of a deep dive into the rent to rent strategy, because I know a lot of people are asking me, they want to know more. So I'm going to go on a deep dive. If you've got any questions, anything you want to know, any topics, feel free to contact me on social media and we'll do some dedicated episodes. But yeah, thank you very much for tuning in. Make sure you subscribe, like, rate, all that good stuff. And of course, remember, don't wait 25 years. Get creative. Thanks for listening. Gor more information, check out Simon Smith online dot com. See you next time.