The Property Unleashed Podcast

Rent-to-Rent Compliance

• Mark Fitzgerald • Episode 291

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Uncover the secrets to running a successful rent-to-rent business with Mark Fitzgerald as your guide. Ever wondered how to navigate the complexities of property compliance and financial management? This episode promises to equip you with the essentials, from registering with the Information Commissioner's Office for data protection to joining a property redress scheme like the PRS. Understand the critical importance of aligning with the National Residential Landlords Association and securing vital insurances such as professional indemnity and public liability. Mark shares expert insights on maintaining compliance and professional management, crucial for thriving in the property arena.

But there's more to success than just compliance. Mark delves into strategic financial management, teaching you how to allocate rental income into specific "pots" for maintenance, voids, marketing, and education. This approach not only ensures financial stability but also prepares you for unexpected expenses and growth opportunities. Discover the wealth of resources available through the Property Unleashed podcast and YouTube channel, and learn how personalized one-to-one coaching can help you achieve your investment goals. Tune in for practical advice and resources that will elevate your property business to new heights.

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Speaker 1:

How to set up your compliant rent-to-rent business. Hello, my name's Mark Fitzgerald. It's great to have you here today, so it's very, very important that you have the right compliances when you're doing rent-to-rent deals. After all, as I always like to say, rent-to-rent is a business. You need to be making sure that you're setting yourself up as a business and you need to make sure that you've got the relevant paperwork, documents and, of course, compliances in your business. Now, I've done other episodes and videos on compliances, but I will run through these. But there are also some fundamental elements that people oversee and do not set in stone when they're building a property business, and I want to help you with those a bit later on in this episode as well. So, firstly, as a property entrepreneur, if you like, as a property business owner, you need to make sure that you are registered and a member of the ICO for data protection. It's about £40 for the year, so it's not going to break the banks. But if you're holding anybody's personal data, you need to make sure that you are a member of this and you are storing and keeping people's personal data in a safe and secure and password protected manner. We do want to make sure that we get this right. Why? Because it is other people's information. So even if you're just dealing with estate agents, landlords, vendors any information that you have from them phone numbers and things like that if you do have it on a computer software or anything, you want to make sure that it's password protected. But you want to make sure that you are a member of the ICO, as you are a registered business, a limited company, as they say. You also want to make sure that you are a member of a redress scheme, a property redress scheme. So the PRS is who I am actually registered with, and the PRS are there for any disputes. So if I have a dispute with a landlord, with a vendor, with a tenant, basically if we cannot resolve that dispute ourselves, the PRS can step in and act as a medium to make sure that everybody is acting in the right way and also to try and help us resolve any of the differences that we have. So again, make sure you're a member of the PRS, and that's a yearly membership That'll set you back around £100, okay.

Speaker 1:

The next thing which is really nice to have is to make sure that you join the NRLA, the National Residential Landlords Association, even if you're not going to be doing rent-to-rent deals, even if you're not going to be managing it yourself. This is a great, great club membership, should I say, for landlords to join. That can help you in so many ways. They have a lot of AST agreements Section 21, section 8. They have all sorts of different licensed agreements as well. They also offer you discounts as a landlord on products and services, and they can also give you legal advice if you're struggling with anything particular when it comes to tenants and tenancies, and maybe even your letting agent or anything like that. So it really is a good one to join.

Speaker 1:

You will also need, for a rent-to-rent business, some insurances. So you're going to need professional indemnity insurance to make sure that your business is covered, and you will also need public liability insurance as well. You don't have to break the bank on that. It'll cost you around £35, maybe £40 a month to have both, but make sure you have those just in case anybody has any accidents in your properties or in and around you when you are there, and also if anybody wants to sue your business, you at least have some indemnity insurance about that.

Speaker 1:

Now, if you are running a successful rent to rent business, maybe you're doing serviced accommodation, you want to be making sure that you're using licensed agreements, you're set up with the right channel managers and things and, of course, if you're HMOs and you're taking deposits HMO managers you need to be a member of the DPS, which is the deposit protection scheme. So you want to make sure that you're storing anybody's deposits in a government protected scheme. There are a couple of them. I use the DPS doesn't cost you anything to do so and you've got within 28 days to make sure that those deposits are put in there. You'll get a notification saying that it's stored there. So will the tenant. So everybody is happy. It's all above board and that's great Service accommodation.

Speaker 1:

Obviously, what you would do for a deposit is potentially take a credit card payment, maybe a pound off of a credit card, and of course then if they do damage something, you can then charge their credit card for this. What I would also say on that just to get rid of any confusion, because when you're taking a pound, it can be difficult sometimes to get that pound back, particularly if you're using companies like Stripe to take payments and things, where they take a chunk out of it anyway and you end up actually losing a little bit of money for it. Just say it's one pound, non-refundable. Make it nice and clear. Nice and easy. It's done and dusted. Nobody's expecting to get that one pound back. You'd be surprised the amount of people that will come and knock in saying you still owe me a quid, unbelievable. So just make that non-refundable. Fit it into all of your figures, into your 90 rates, into the costs and everything like that, if you have to. But non-refundable pound. I haven't had anybody complain about that.

Speaker 1:

So what else do you want to be thinking about and looking at? Well, you want to be running your rent-to-rent business, your property business, as a business. So what I would say is if you're setting yourself up as a limited company which I always recommend you do for rent-to-rent in particular you want to make sure that you've got all of those compliances in place. And then you want to start making sure that you have a business bank account to be trading from. I see a lot of people will set the business up and then they wait to set their bank accounts up because maybe they don't want to set it up just yet. That's a mistake. Try and set your business bank account up as soon as you open your business, because it can take a few weeks, potentially even months, to get a business bank account open. They can be funny people in the financial institute. Sometimes they can open you a business bank account in two days. Sometimes it takes two weeks, who knows, who knows, I guess it's really just how busy they are, maybe somebody's on holiday or something like that. But make sure you open it as soon as possible. But the other thing that I would really recommend that you do is to open up other accounts in the bank account that you have. So you've got your business bank account set up.

Speaker 1:

What I like to do is have other accounts open that lead off of my main account. So potentially my rents and everything that come in each and every month might go into that main account. Ok, but then a percentage of those rents coming in that I get paid for my rent to rent business, I will have a small percentage going into another account which will be marked as maintenance. I will also have another account that will be marked as voids and I will have another account that is anything else OK. And the reason I have those is because at times I will have to sort stuff out, I will have to pay for maintenance changes. I will have to fix things, I will have voids, I will have times where I haven't got tenants in there all the time, and I like to have those separate pots Because when you're getting started and you see a lot of that money coming into your bank account, it's very easy to get carried away and start paying yourself some nice dividends or some monthly wages out of there and you soon see that main pot go down.

Speaker 1:

Something goes wrong and you cannot fix it because you haven't got that other account building up. Now what I have enjoyed is the fact that, because we've been trading now for so long, is those pots are pretty much maintained to a full standard, which means that I like to try and keep 5,000 pounds in each of those pots. But right here, right now, they're building up to be even bigger pots. Now we can transfer that money over. That is our money. We can use that money to invest, but we still have those pots to take it over in the background. So if anything happens and we have a major emergency and we need to spend that on anybody's properties to get things fixed quickly, we have the money there to be able to do so.

Speaker 1:

You don't need this right at the beginning, but just when you start making money, when you've got income coming through, have a pot for maintenance, have a pot for voids, have a pot for marketing, have a pot for education, if you like. I keep it simple when you begin, at least have one for maintenance and voids. But those are what I have now. So I actually have my property business building a pot of money up for me, for my education, so that if I see some training or I want to be coached or I want to be mentored and I want to better myself whether it's in property, whether it's in business, whether it's being a father, a husband or just want to get fitter I have a pot of money in my business that I can use to spend it. So I don't have to think, oh, I've got to put my hand in my own pocket and pay for that education. I actually have my business paying for me and you're allowed to do this. Why? Because you're the director of your own business.

Speaker 1:

So it's in the business's interest for you to make sure that you are in top health, for you to make sure that you're learning more, for you to make sure that you're being the best director to make sure that your business survives and flourishes as well. So do make sure that you build in little pots and you can have as little or as much money going into those sub pots as you like. Just don't expect that all of the money that's coming into your business account that you can have as a wage, because you will have systems. If you're doing SA, you'll have systems, channel managers you know you're going to have different systems there. If you're using your properties and you're doing HMO, you're going to have a tenant management software, among other things. You've got your insurances that you've got to pay. You've got your other legislations, your ICOs that we spoke about, your PRSs and things.

Speaker 1:

So have a little pot for everything that's there so you can sleep well at night and if something goes wrong or maybe you have a void for longer, you can start taking that void money back out and your main balance is fine. I hope this helps you. It's all about becoming savvy business people to a point. Whether you're just doing property as a hobby alongside your full-time job or whether you are going to go into property and do it 100%. Make sure that you set yourself up for success, that you set these little systems up there and it makes life very easy for you. It's easy to track where the money is, it's easy to track where money's going in and out and, of course, as I say, you can sleep well at night, knowing safe and full well that your business is in great financial health. It will come over time, it won't happen overnight, but set these things in stone as early as you possibly can to really help support you in your growth.

Speaker 1:

A caveat to that is, if you need any more help or any more assistance, do make sure that you check out the Property Unleashed podcast that has episodes coming out each week. Obviously, we have the YouTube channel as well, and do check out thepropertyunleashedcom for free tools, resources, trainings, ebooks and, of course, I do offer some one-to-one coaching as well. So if you're interested in taking your property investing to the next level and you need somebody to hold you accountable, to push you to the limits, to push you to the targets, to create the life that you desire, well, I can help you do that, and we have a lot of successful case studies to prove it as well. So all that leaves me to say is get out there, smash it, build the property business that you desire to change your life and come and join me in the next episode now.