Rent to Rent Profit Calculator

Rent-to-Rent (R2R) is a property business model where you lease a property from a landlord under a guaranteed rent agreement, then sublet it—typically as individual rooms in an HMO format—at a higher combined rent. The profit comes from the spread between what you pay the landlord and what you receive from tenants, minus operating costs.

How the R2R Model Works

The R2R strategy requires no property purchase. Instead, you enter a management agreement (Corporate Let or Rent-to-Rent agreement) with a property owner, guaranteeing them rent for 3-5 years. In exchange, you gain the right to sublet the property and pocket the difference.

For example, you might rent a 4-bedroom house from a landlord for £1,200/month, then let each room for £550 inclusive of bills. Your gross income would be £2,200/month against £1,200 rent and perhaps £400 in bills and operating costs, leaving £600 profit.

The Mathematics of R2R Profitability

Our calculator analyses your R2R deal using these key metrics:

Monthly Profit = (Rooms × Rent per Room × Occupancy) - Rent to Landlord - Operating Costs

Operating costs include utilities (gas, electric, water, council tax), WiFi, TV licence, cleaning, maintenance, insurance, and any management fees. These are typically £200-400/month for a 4-bed property.

Break-Even Occupancy shows the minimum occupancy needed to cover all costs. If your break-even is 75%, you can afford one empty room in a 4-bed and still break even. If it's 95%, even one void room means you're losing money.

ROI on Setup measures your annual return on the setup investment (furniture, refurb, deposit, legal fees). Strong R2R deals deliver 50-100%+ ROI, meaning you recoup your investment in 12-24 months.

Payback Period tells you how many months until your initial setup investment is recovered from profits.

Key Success Factors

The best R2R deals share common characteristics:

1. High rent differential: Ideally 40%+ spread between landlord rent and tenant income 2. Low break-even occupancy: Under 80% gives comfortable void buffer 3. Short payback: Under 12 months is excellent, under 18 acceptable 4. Strong profit margin: 25-40% of gross income retained as profit 5. Rent-free negotiation: 1-3 months rent-free helps with setup and early voids

Understanding Your Risk

R2R carries significant risk because you're contractually obligated to pay the landlord regardless of occupancy. If you can't fill rooms, you still owe rent. Key risks include:

- Void periods between tenants - Utility costs exceeding budget - Tenant damage and turnover costs - Landlord relationship breakdown - Regulatory changes affecting HMO licensing

Always maintain 3-6 months of expenses in reserve. Never do R2R deals with break-even occupancy above 85%—you're one void room away from losses.