How to Generate Cashflow From Property You Don’t Own
In his book Rich Dad Poor Dad, American entrepreneur Robert Kiyosaki states that “In the world of money and financial education, cashflow is the single most important world.” My daughter and I have heeded this advice as we only control properties that give us cashflow each month. The magic word there is control. We control the properties that generate us cashflow, without necessarily owning them. If you like the idea of generating a cashflow from property that you do not actually own then please read on…
To Own or Not To Own
In our early years as novice buy-to-let investors we had a simple strategy, which was to buy properties, refurbish them and then rent them out. In fact, this is the route taken by 99% of landlords. There’s just one problem. Unless you have unlimited financial resources (which we certainly didn’t) you are quickly going to find that your money is tied up in the properties, which will severely limit the number of properties you can purchase.
The last property we purchased required over £20,000 of our own money and gave us a cashflow of just £200 per month. That just wasn’t going to cut it for us so we decided to think “outside the box”. How could we generate an income from property without actually having to own it? Eventually, we had a brainwave. Rather than purchase the property, why don’t we just find another landlord to rent from and then legally sub-let the property on a room-by-room basis. After much trial and error (and a few very irate lettings agents) we fine tuned our strategy and so our rent to rent system was born.
Our Strategy in a Nutshell
- We find a target area which fits our criteria.
- We use easyroommate.com to ascertain demand.
- We search rightmove.co.uk for suitable properties to rent.
- We contact the lettings agent and negotiate a corporate let, renting the whole property with permission to rent on a room by-room basis.
- We do a light refurbishment on the property, to bring it up to standard.
- We advertise the rooms, vet the tenants and then manage the property.
Wash, Rinse Repeat
The main advantage of this system is that you can very quickly start generating cashflow, without the need to find a hefty 25% deposit. In fact, we have been able to secure properties in as little as 3 days with the average refurbishment cost being around £3500. Each property generates us over £500 per month cashflow. This means that for the same deposit and refurbishment costs as the last property we purchased, which was earning us £200 per month, we could have acquired around 6 properties, which would generate around £3000 per month.
It is our intention to continue to grow our portfolio steadily until it generates £10,000 per month and continue use this money to re-invest (and perhaps the odd holiday!). People will always require somewhere to live and we sincerely feel that this is the best strategy anyone can use to become a landlord.
Francis Dolley is the UK authority on this rent to rent strategy and now runs courses teaching people how they can successfully build a portfolio of properties that they don’t own, yet generate substantial income.
Category: Real Estate
